A back­lash is com­ing to Car­los Ghosn’s ar­rest

The Star Malaysia - StarBiz - - Viewpoint - By JOE NOCERA

A pre­dic­tion: l’af­faire Car­los Ghosn is not go­ing to end well for the Ja­panese.

Yes, that’s right: I’m con­vinced that Ghosn, the for­mer chair­man of Nis­san Mo­tor Co who was ar­rested on Nov 19 on sus­pi­cion of un­der-re­port­ing his com­pen­sa­tion, is go­ing to come out of this look­ing a lot bet­ter than ei­ther the Ja­panese pros­e­cu­tors who ar­rested him or the Ja­panese au­tomaker that so plainly turned on him.

Let’s start with the pros­e­cu­tors. Sev­en­teen days af­ter his ar­rest, Ghosn re­mains con­fined to a small cell. Pros­e­cu­tors in­ter­ro­gate for hours at a time, urg­ing him to con­fess his crimes. Oc­ca­sion­ally, his Ja­panese lawyer is al­lowed a short visit, as are diplo­mats from France and Le­banon, where Ghosn has ci­ti­zen­ship. But his Amer­i­can lawyers have no ac­cess to him, nor does his fam­ily. He has asked for ad­di­tional food, as well as a blan­ket. It is un­known whether those wishes have been granted.

As has been well-doc­u­mented since Ghosn’s ar­rest, his treat­ment would not be un­usual in Japan. Un­der the coun­try’s crim­i­nal jus­tice sys­tem, pros­e­cu­tors can de­tain a sus­pect for up to 23 days be­fore charg­ing him, let­ting him go or de­tain­ing him again on a dif­fer­ent al­le­ga­tion. Ghosn will hit the 23-day mark on Dec 10, but the Ja­panese news­pa­per Sankei re­ported Mon­day that the pros­e­cu­tors plan to ac­cuse him of a se­cond crime so they can start the clock again. Mean­ing that Ghosn will very likely re­main in pri­son un­til at least early 2019.

The pur­pose of this harsh ap­proach is to break a sus­pect down, to force a con­fes­sion out of him. The cen­tre­piece of most Ja­panese crim­i­nal tri­als is not the in­tro­duc­tion of ev­i­dence or the ex­am­i­na­tion of wit­nesses; it’s the con­fes­sion by the ac­cused. As a re­sult, when Ja­panese pros­e­cu­tors take a case to trial, they win 99% of the time, a suc­cess rate that ranks with Rus­sia and China.

So far, Ghosn has adamantly in­sisted on his in­no­cence, which is why the pros­e­cu­tors have not let up in their treat­ment of him. So has Greg Kelly, his long­time con­sigliere who was also ar­rested on Nov 19, ac­cused of mas­ter­mind­ing the un­der-re­port­ing as well as other sup­posed fi­nan­cial crimes com­mit­ted by Ghosn.

Nor­mally, when a Ja­panese sus­pect con­fesses, even if it’s the re­sult of duress, no one much cares be­sides the sus­pect’s fam­ily. But this is go­ing to be very dif­fer­ent. Sup­pose pros­e­cu­tors fail to break the 64-year-old Ghosn, and he con­tin­ues to as­sert his in­no­cence. Will they hold him for a third 23-day pe­riod? A fourth? At some point, there will sim­ply be too much out­side pres­sure, es­pe­cially from France, where Ghosn is the chief ex­ec­u­tive of Re­nault. Japan can’t hold him for­ever.

Or sup­pose he does con­fess – as many peo­ple do un­der such dire cir­cum­stances – and then, once he’s freed, tells the world that his con­fes­sion was co­erced. Will the pros­e­cu­tors re-ar­rest him as they might a Ja­panese ci­ti­zen? Again, I doubt it. The scru­tiny from the rest of the world will be too in­tense.

Most im­por­tant, think for a mo­ment what it’s go­ing to be like when Ghosn fi­nally gets out. He’s go­ing to look hag­gard, thin, ut­terly de­pleted, more like a pris­oner of war than a cap­tain of in­dus­try. He might need to spend some time in a hospi­tal to re­cover. Once his face is shown in the news, once peo­ple see his con­di­tion, there is go­ing to be an up­roar.

Peo­ple who know noth­ing about the Ja­panese jus­tice sys­tem are go­ing to start ask­ing aloud how Ghosn’s or­deal can pos­si­bly be jus­ti­fied. They’ll ask why Ja­panese ex­ec­u­tives who have been em­broiled in far big­ger scan­dals – the ones who cooked the books at Olym­pus Corp., say, or over­saw the faulty airbags at Takata Corp – weren’t treated as harshly as Ghosn. They’ll ask, fi­nally, whether the whole thing was a ruse, de­signed to get Ghosn out of the way so that Nis­san’s Ja­panese ex­ec­u­tives could re­assert con­trol of the com­pany.

Be­cause there’s a pretty good chance that’s what’s re­ally hap­pened here. Ac­cord­ing to the Ja­panese news me­dia, a Nis­san whistle­blower in­formed pros­e­cu­tors of Ghosn’s al­leged crimes. If so, the tim­ing was aw­fully con­ve­nient. As Bloomberg re­ported ear­lier this year, Ghosn was push­ing for Re­nault and Nis­san – which had been part of a Ghosn-led al­liance since 1999 – to merge into a sin­gle com­pany. Most Nis­san ex­ec­u­tives, start­ing with CEO Hiroto Saikawa, ve­he­mently op­posed the merger.

Two decades ear­lier, Ghosn cre­ated the al­liance to help Nis­san avoid bank­ruptcy; he had Re­nault in­vest US$5bil in the Ja­panese com­pany in re­turn for a one-third stake. (Re­nault cur­rently owns 43% of Nis­san, while Nis­san owns 15% of Re­nault.) With Nis­san now big­ger and more prof­itable than Re­nault, the Ja­panese ex­ec­u­tives bris­tle at the al­liance. And they deeply re­sent hav­ing to take orders from the of­ten high-handed Ghosn.

My the­ory – and I’m hardly the only one who be­lieves this – is that Nis­san’s ex­ec­u­tives, un­able to fire their chair­man, had him ar­rested in­stead, along with Kelly. Saikawa, who had been Ghosn’s pro­tege, wasted no time throw­ing his for­mer men­tor un­der the bus. At a news con­fer­ence held within hours of the ar­rest, Saikawa de­scribed him­self as “in­dig­nant” at Ghosn’s sup­posed crimes, and added that Ghosn’s reign as chair­man had had a “neg­a­tive im­pact” on the com­pany’s oper­a­tions. Saikawa is now the favourite to be­come Nis­san’s new chair­man. Imag­ine that. (Nis­san has de­clined to com­ment on sug­ges­tions that al­le­ga­tions against Ghosn were in­tended to push him out of the com­pany.)

It is pos­si­ble, of course, that Ghosn and Kelly did what they’re be­ing ac­cused of in the me­dia. In Japan, Ghosn’s com­pen­sa­tion (US$16.9mil in 2017, of which US$6.5mil came from Nis­san) was crit­i­cised as ex­or­bi­tant; maybe he re­ally did feel the need to hide some of it. But it doesn’t make any sense. How ex­actly does a com­pany chair­man sneak part of his com­pen­sa­tion past the board that must vote on it, and the fi­nance de­part­ment that has to al­lo­cate the money?

And what would be the point? Kelly’s ex­pla­na­tion that he and Ghosn were de­vis­ing a de­ferred com­pre­hen­sive plan that they planned to take to the board strikes me as a far more likely sce­nario.

A fi­nal thought: Saikawa might think his com­pany’s “whistle­blow­ing” has got­ten Ghosn out of his – and Nis­san’s – hair, but that’s not quite true. With France’s back­ing, Re­nault has re­fused to cut him loose, and Ghosn re­mains the com­pany’s tit­u­lar chief ex­ec­u­tive. And Nis­san’s al­liance with Re­nault re­mains in force.

So con­sider one last sce­nario. Ghosn is fi­nally freed by the pros­e­cu­tors, and makes his way back to France. He re­takes the helm at Re­nault, and calls for an im­me­di­ate meet­ing of the al­liance mem­bers. In France. I won­der if Saikawa will dare show up. — Bloomberg

What could hap­pen if the for­mer Nis­san chair­man is re­leased, and his story doesn’t match the pros­e­cu­tors’ claims?

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