Japan prosecutors close case against American in Ghosn pay

Japanese prosecutors demanded two years in prison for former Nissan executive Greg Kelly and accused him of joining a “conspiracy” to pay his former boss Carlos Ghosn illicitly in closing arguments Wednesday in a yearlong trial.

“That unpaid compensation existed is clear,” prosecutor Yukio Kawasaki told the Tokyo District Court, reading briskly from a thick document.

Kelly, a 30-year veteran at the Japanese automaker, was living in the U.S. when he was arrested in November 2018 upon returning to Japan to attend a meeting.

The first American to be appointed to Nissan’s board, Kelly says he is innocent. He sat calmly in the courtroom, wearing his usual red tie and dark suit, alongside defense lawyers. Everyone in the courthouse was wearing a mask because of the pandemic.

Kelly told The Associated Press in an interview last month he did not know all the details of Ghosn’s pay. He was determined to retain Ghosn, Nissan’s former chairman, because of his extraordinary management skills and wanted to pay him in a legal way, he said.

Ghosn was arrested at the same time as Kelly and also maintains he is innocent. He skipped bail in late 2019 and fled to Lebanon, the country of his ancestry. It has no extradition treaty with Japan.

The charges center around a pay cut of about 1 billion yen ($10 million) a year that Ghosn voluntarily started taking from 2010, halving his pay after disclosure of high executive pay became mandatory in Japan.

Neither side is contesting that cut. The contention is over whether that money should have been reported as compensation as a de facto promised sum under a binding contract, or didn’t need to be disclosed until it was finalized.

Nissan Motor Co. officials considered various ways to make up for the money Ghosn gave up, such as paying him consulting fees after retirement. They also mulled other methods such as payments through subsidiaries and stock options. Nothing had been paid at the time of the arrests.

Ghosn has said a group at Nissan engineered his arrest because they feared that French automaker Renault, which owns 43% of Nissan, would gain more control over the company. Other Nissan officials made similar comments during Kelly’s trial.

Renault sent Ghosn to Nissan in 1999 to lead its rescue from the brink of bankruptcy. He successfully steered the maker of the Leaf electric car and Infiniti luxury models for nearly two decades.

Ghosn has also been charged with breach of trust allegations centered around using Nissan money for personal gain, ranging from housing, tuition payments for his children, use of a corporate jet and purchases such as a chandelier. Ghosn has said they were needed for work.

Yokohama-based Nissan, as a company and legal entity, has also been charged, and has pleaded guilty. The prosecutors on Wednesday asked that Nissan be fined 200 million yen ($1.8 million).

Nissan is struggling to revert to profitability after racking up two straight years of red ink, with the damage from the coronavirus pandemic coming on top of the Ghosn scandal.

Egor Matveyev, who teaches at the MIT Sloan School of Management, calls the Ghosn case “a clear example of corporate governance failure.”

“Nissan did overhaul their board in 2018-2019, including instituting separate nomination, compensation, and audit committees, but questions still remain whether Nissan got fully rid of all its governance problems and whether the current board is poised to let Nissan compete on the global scale,” he said.

The company has declined comment on a class-action lawsuit filed by investors in Tennessee over how the automaker’s share price has dropped.

A small group of Kelly’s supporters, including Jamie Wareham, Kelly’s attorney in the U.S., held a protest late last week at the White House and the Japanese Embassy, demanding Kelly be released. The protest was timed to coincide with a visit to Washington by Japanese Prime Minister Yoshihide Suga.

“The entire case against Greg Kelly and Carlos Ghosn is a sham,” Wareham said.

The maximum penalty for violating the Financial Instrument and Exchange Ac is 15 years in prison. The verdict from a panel of three judges is not expected until March 2022.