Carlos Ghosn’s Downfall at Nissan and the Aftermath

Carlos Ghosn was a jet-setting captain of industry, the C-suite superhero who helped save struggling automakers in France and Japan. That’s why his arrest in Tokyo on allegations of financial misconduct on Nov. 19, 2018, while he was chief executive officer of Renault SA and chairman of Nissan Motor Co., came as such a shock. Ghosn served two lengthy stints in jail before being released on bail, all the while professing his innocence and saying the deck had been stacked against him. Then, at the end of 2019, Ghosn slipped out of Japan and fled to Lebanon, where he found sanctuary. The fallout has been seismic for Nissan, which has struggled to move beyond the saga -- especially after it emerged that executives opposed to greater integration with Renault had started working to unseat Ghosn almost a year before his arrest.

1. What were the allegations?

Ghosn, 67, was indicted on charges of under-reporting about $80 million in compensation and income during the fiscal years 2010 to 2014 at Nissan. (Ghosn’s pay had been called out before in Japan, where executive compensation is a touchy topic.) He also faced three counts of breach of trust, two of which alleged that he used foreign corporate entities in 2017 and 2018 to funnel $5 million from Nissan into accounts that he controlled and used to purchase a yacht and support a technology investment fund started by his son, Anthony. The charges carried a maximum sentence of 10 years in prison.

Carlos Ghosn’s Downfall at Nissan and the Aftermath

2. How did he escape?

Although free on bail, Ghosn’s movements were supposed to be closely monitored. An extraction team assembled by Michael Taylor, a former U.S. Army Green Beret, found weaknesses that helped them devise an audacious plan to smuggle Ghosn out of Japan. On the morning of Dec. 29, 2019, Ghosn left his rented house in Tokyo, changed clothes at a hotel, and then boarded a bullet train to Osaka. Waiting at a hotel near Kansai International Airport was a big box on wheels used for musical gear. Ghosn got into the box, was transported to the private jet terminal and onto a Bombardier Global Express plane that took him to Turkey. There, he switched planes and flew to Beirut. Only then did the rest of the world, and stunned Japanese authorities, learn about his escape. (Taylor and his son Peter were extradited to Japan from the U.S. in March and face trial on charges of harboring or enabling the escape of a criminal.)

3. Will he ever be put on trial?

Lebanon could technically try him on the allegations from Japan, though Ghosn is regarded by many Lebanese as a national hero. (Ghosn has citizenship in Brazil, where he was born, as well as in Lebanon and in France.) Japan doesn’t have an extradition treaty with Lebanon — which, in any case, doesn’t extradite its citizens. Ghosn had pleaded not guilty to all charges in Japan, and his trial was supposed to have begun in the first half of 2020.

4. Who else was charged?

Nissan itself was indicted for under-reporting Ghosn’s income and that case is under way in Japan. The company faces around $6 million in potential fines if convicted. After Ghosn’s arrest, Nissan vowed to strengthen its corporate governance, but the role of some Nissan managers in Ghosn’s demise, and allegations of conflicts of interest in the handling of the internal probe, have raised questions about their motive and the integrity of that investigation. The trial of American Greg Kelly -- a former Nissan director who was indicted in Japan for allegedly helping Ghosn under-report income -- is also ongoing. Kelly has pleaded not guilty.

5. What does Ghosn say?

“I have not fled justice — I have escaped injustice and political persecution,” he said soon after arriving in Lebanon. Ghosn called the Japanese justice system “rigged” and said he had been deprived of “basic human rights,” including the presumption of innocence. Ghosn has also claimed that forces within Nissan conspired against him because they feared their autonomy was under threat. A Paris-based spokeswoman for the Ghosn family has said the reports of payments through intermediaries were part of a smear campaign. In a Tokyo court in early 2019, Ghosn said the agreements for deferred pay were non-binding “draft proposals” and so didn’t need to be disclosed. His French lawyer said Ghosn didn’t get the deferred pay and there is no certainty he ever would have.

Carlos Ghosn’s Downfall at Nissan and the Aftermath

6. What’s his history with Nissan?

Ghosn made his name in France reviving Renault as executive vice president from 1996 to 1999. When the Nissan-Renault alliance was set up in 1999, Nissan was on the verge of bankruptcy, and Renault became its financial savior. Ghosn was sent to turn the company around. He cut purchasing costs, shut factories, eliminated 21,000 jobs and invested the savings into 22 car and truck models in three years.

7. What explains Ghosn’s tensions with the carmaker?

Carlos Ghosn’s Downfall at Nissan and the Aftermath

Over the decades the partnership had become strained. Nissan’s then-CEO, Hiroto Saikawa, was trying to rebalance what he and others at the Japanese company viewed as a relationship increasingly tilted in favor of Renault and its most powerful shareholder, the French state. (As the alliance’s senior partner, Renault had a 43% voting stake in Nissan, while Nissan owned just 15% of its French counterpart, without voting rights. That looked increasingly out of whack as Nissan’s financial performance outpaced Renault’s.) Ghosn had been pushing for closer integration, which Saikawa and others opposed. Nissan ousted Ghosn as chairman just three days after his initial arrest, and the alliance’s other Japanese partner, Mitsubishi Motors Corp., removed Ghosn soon after.

8. And behind the scenes?

It later emerged that a small group of insiders, led by the head of the CEO’s office, Hari Nada, began to see potentially prosecutable crimes related to Ghosn’s compensation and spending. They calculated that Ghosn’s removal would not only prevent closer integration, but re-balance the relationship with Renault. Nissan has denied this, saying that the sole cause of Ghosn’s arrest and downfall was his misconduct.

9. Who is Hari Nada?

Carlos Ghosn’s Downfall at Nissan and the Aftermath

Nada, who remains at Nissan as a senior vice president and adviser, is a corporate lawyer by training. Starting in early 2018, he began gathering information on Ghosn, even going so far as to arrange a hack into the chairman’s email, according to reporting by Bloomberg. After Ghosn’s arrest, it became clear that Nada had secured a cooperation agreement with prosecutors in exchange for immunity from prosecution for allegedly helping Kelly find ways to compensate Ghosn after retirement.

10. And the conflicts of interest?

Nada oversaw the internal investigation after Ghosn and Kelly were arrested and removed from Nissan, as well as probes into other compensation issues involving himself and Saikawa. When Global General Counsel Ravinder Passi raised concerns about Nada’s involvement and how that could compromise Nissan’s ability to defend itself in other lawsuits, he says he was demoted, harassed and ultimately ousted from the carmaker in 2020. Passi, who says that his family was followed and his house raided in retaliation for questioning Nada, is now in the U.K. and is suing Nissan for wrongful termination.

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