TOKYO — Japan’s criminal justice system once again was on trial in a Tokyo courtroom this past week, as former Nissan Motor Co. executive Greg Kelly sought to clear his name and overturn his conviction for allegedly conspiring with ex-CEO Carlos Ghosn to underreport future income in violation of Japan’s Financial Instruments and Exchange Act.
Kelly, who wasn’t in Japan for the ruling, claims he didn’t do it, and the appeals court, like the lower court before it, found that to be the case regarding the first seven of eight years mentioned in the indictment against him — fiscal 2010 to fiscal 2016.
But the Tokyo High Court upheld the lower court’s guilty verdict regarding the eighth year, fiscal 2017. The court’s decision was based on a seven-to-eight-minute meeting in June 2018 at which the head of Nissan’s secretariat, Toshiaki Ohnuma, claims to have shown Kelly a spreadsheet adding up undisclosed compensation for Ghosn dating back to the end of fiscal 2009, when Ghosn took a nearly 50% pay cut.
Kelly has appealed again, to the country’s Supreme Court.
The original guilty verdict on the eighth charge was handed down in March 2022. Under pressure from the US government and with support from the US ambassador, Rahm Emanuel, the court suspended Kelly’s sentence — six months in prison — for three years.
There are many problems with the Japanese criminal justice system’s handling of the case, including Nissan’s and the Tokyo prosecutor’s office’s withholding of exculpatory evidence from Kelly’s lawyers. There are clear anti-foreign overtones. Of four top lieutenants working on post-retirement employment plans to retain Ghosn when he retired, only Kelly, a non-Japanese, was charged.
Kelly acknowledged having attended a meeting with Ohnuma at Nissan headquarters in June 2018, but denied having seen the document. Thus was lined up a classic “he said, he said” situation.
But one “he,” namely Ohnuma, was onside with the Japanese system, having entered into an immunity agreement with the Tokyo prosecutor’s office in October 2018, three weeks before Ghosn and Kelly were arrested. There was no evidence definitively putting the document in the room where Kelly and Ohnuma met.
A bigger miss by the judges at both levels is that they chose to ignore available evidence showing that two Japanese executives – not Kelly – proposed the March 2011 post-retirement plan that is at the heart of the case against Kelly.
Toshiyuki Shiga, Nissan’s chief operating officer and a representative director, together with Itaru Koeda, Nissan’s former co-chairman, proposed the agreement in a March 28, 2011, document titled “Remuneration Payment Plan.” Moreover, Shiga was a representative director in March 2011. Kelly was not.
Documents reveal that Shiga and Koeda worked with Ohnuma to come up with the plan. Two weeks later on April 14, Ohnuma prepared a spreadsheet for Ghosn, which Ghosn signed off on and which Ohnuma then backdated to March 24.
Specifically, the spreadsheet was not proposed by Kelly, but by two Japanese executives (Shiga and Koeda) who were not indicted. We have asked the Tokyo prosecutor’s office to comment about why they targeted only a non-Japanese. There’s been no response yet.
Kelly would be involved with preparing three later proposals, the latter two signed by himself and Hiroto Saikawa, Ghosn’s hand-picked successor. All three proposals were for post-retirement employment contingent on board approval. There was no evidence of a plan to conceal future income from Japanese financial regulators.
Ghosn’s position all along has been that there was no “undisclosed compensation.” As he he told this writer:
There was no compensation package. There were proposals for after retirement that were not decided and not defined and should have gone to the board after my retirement.
Whether Ghosn, who is living in Lebanon as a fugitive from Japanese justice, might have used those proposals to pressure a future Nissan board for a future contract is speculation, although it wouldn’t have been unthinkable.
Because of Japan’s secretive court rules, it is difficult to gather and publish court documents. However, a Nissan internal document, the Kali 10 Compensation Investigation Report, provides proof that Shiga, Koeda and Ohnuma – not Kelly and Ohnuma – came up with the plan Kelly’s guilty verdict was based on.
The Kali 10 report was discussed in court by one of the lawyers from Latham & Watkins LLP, a firm that had advised and assisted the anti-Ghosn clique at Nissan as it planned and carrried out its coup against Ghosn.
During cross examimation, however, when Kelly’s lawyers tried to press the Latham lawyer on that report and another document, the prosecution objected on the basis that both documents had come by way of whistle-blower sources – journalists. Thus, the prosecutors claimed, the information was hearsay. The judges disallowed introducing the two documents into evidence.
Here are excerpts from the Kali 10 report that would have placed the matter in quite a different light if admitted into evidence.:
Internal documents confirm that there was a discussion between Ohnuma, Shiga and Koeda in March 2011 concerning payment of the haircut to Ghosn. A proposal by Shiga and Koeda dated March 16, 2011 titled ‘Payment for CEO (Proposal by SK)’ lists three options for payment of the haircut: (a) as incentive compensation paid after retirement (without disclosure), (b) as a retirement allowance (with disclosure) and (c) as an advisor fee paid 1-2 years after retirement (without disclosure).
Shiga told us that he preferred option (b), but Ghosn preferred option (c) [working as an advisor]. On March 18, 2011, Ohnuma prepared a memorandum for Shiga and Koeda to present to Ghosn based on option (c), and on March 23, 2011, Koeda instructed Ohnuma to revise the memorandum.
The memorandum, titled “Remuneration Payment (Plan),” proposed to pay the haircut [Ghosn’s deferred or unpaid remuneration] as an advisor or consultant fee after Ghosn’s retirement. The amount of the fee is blank. The memorandum states that board approval would be required for payment of the fee.
Shiga told us that he insisted on this requirement because he thought that board approval would cure any potential impropriety with the arrangement. The email correspondence indicates that Shiga and Koeda presented the “Remuneration Payment (Plan)” to Ghosn on March 28, 2011. See Exhibit 4.5.20.
Among the Exhibit A.4.5.20 points:
- “Payment after retirement of XXX yen as contribution rewards, conditions will be fixed by written documents every year [and] GM of the Secretariat [Ohnuma] will make a calculation, the amount [to] be informed to the person who receives payment [Ghosn].”
- “To make a contract with Nissan as an executive advisor or executive consultant for 1-2 years after retirement. Before making a contract, it needs approval at BoD. Remuneration is handled at secretariat. Remuneration amount does not need to be disclosed [and] there is no legal problem.”
Ohnuma is quoted in the Kali 10 report as telling Nissan’s internal investigators that he had not shown the draft agreement to Koeda or Shiga and that the only people who’d seen the final signed agreement were Ohnuma and Ghosn.
Kelly’s legal team filed an appeal with the Japanese Supreme Court on February 5. It is a long shot to imagine that Japan’s top court will overturn the lower and appeals court rulings, but Kelly’s attorneys felt they had to try in view of the conflicting evidence regarding the spreadsheet.
Read: Disclosures show Nissan Kelly charges are fabricated
Read: Kelly ‘guilty’ in Ghosn case, sentence suspended
Read: Former Nissan executive Greg Kelly sums up ordeal
Roger Schreffler is a veteran correspondent for Ward’s Automotive and a former president of the Foreign Correspondents’ Club of Japan.
