Carlos Ghosn vs. Japan's Legal System

(Bloomberg) -- For months, Carlos Ghosn, the deposed chairman of Nissan Motor Co., has been caught up in the peculiarities of Japan’s criminal justice system. A suspect can be held for questioning for up to 20 days without charge after the initial arrest -- far longer than in most other developed countries. The suspect is allowed to seek bail only after being indicted, and even then, the person can be immediately re-arrested for questioning on suspicion of new charges. That restarts the 20-day clock, in what is a very common practice. A judge has to approve every extension, but almost always does, and the cycle can go on indefinitely. Legal experts say this is all a strategy to secure a confession and make a trial easier. In 2017, less than 1 percent of cases in Japan’s district and county courts resulted in an acquittal or the defendant’s release. Critics question whether the system has sufficient safeguards to protect human rights.

1. Why was Ghosn arrested?

Initially, it was on suspicion of falsifying his salary from Nissan by tens of millions of dollars in company filings to regulators. He was later indicted on that charge for the five fiscal years through March 2015. A subsequent indictment covered the three subsequent years, bringing the total allegedly unreported to $80 million. Those charges were related to a relatively arcane accounting point: whether retirement payments were properly booked. Under Japanese law, listed companies must disclose directors’ compensation if they make more than 100 million yen ($900,000), said Kenichi Kinukawa, a former Tokyo prosecuting attorney who’s now a lawyer in the London office of TMI Associates. 

2. Is there more coming?

Ghosn is being investigated on a potentially more serious charge of aggravated breach of trust for allegedly trying to transfer millions of dollars in personal trading losses to Nissan from 2008-2012. Nissan also has accused Ghosn of misusing company funds, including over the purchase of homes from Brazil to Lebanon and hiring his sister on an advisory contract. It said Jan. 8 that its probe continued to broaden. Those allegations aren’t part of the criminal case but could be added if prosecutors decide it’s warranted.  

3. What does Ghosn say?

“I have been wrongly accused and unfairly detained based on merit-less and unsubstantiated accusations,” Ghosn told a Tokyo court on Jan. 8. He rejected charges that he failed to disclose income from Nissan and said the company took on his swap contracts temporarily, with board approval, and without incurring a loss. His lawyers have said the Securities and Exchange Surveillance Commission looked into the case in 2008 and didn’t file criminal charges. A Saudi partner of Nissan has also come to Ghosn’s defense. The length of his detention (he was arrested Nov. 19) and the lack of clarity surrounding the case have drawn criticism from abroad. (Ghosn, 64, holds French, Lebanese and Brazilian passports.)

4. What’s so unusual about Japan’s legal system?

Japan’s postwar criminal justice system is based largely on continental European law, with some characteristics of the Anglo-American system. Some researchers see it as focused more on a just result than due process. Prosecutors in Japan routinely arrest suspects on suspicion of relatively minor charges, hold them for questioning and add charges as they go. Critics say lengthy detentions and interrogations with limited access to an attorney can lead to false confessions, such as the recent case of a woman released after 20 years in jail. The UN Committee Against Torture has expressed concerns. Amnesty International said in 2017 that it had “raised concerns about the lack of rules or regulations regarding interrogations” during pre-trial detentions. The Japan Federation of Bar Associations has called for reforms, including recording of interrogations. In response, the Japanese government has noted its system requires “strict judicial reviews at each stage” to balance the human rights of suspects with the needs of investigators.

5. Could Ghosn be released on bail?

Presiding Judge Yuichi Tada said Jan. 8 that Ghosn is being detained because of flight risk and the risk of witness tampering. He can apply for bail once his detention period ends, but only about 30 percent of such applications succeed, lawyers say. If he doesn’t get bail just after the indictment, he may get it after the first day of the trial or after important witnesses are heard. Often, defendants who fight the charges are refused bail on the grounds that they may destroy evidence, said Yuichi Kaido, part of a group at the Japan Federation of Bar Associations working on the issue. Ghosn’s chief lawyer, Motonari Otsuru, said it might take at least six months for the case to go to trial, assuming it does, and that Ghosn could be held without bail during that time. If bail is denied, the defense would appeal to a higher court, he said.

6. What punishment could Ghosn face?

Both filing a false statement to regulators and breach of trust carry a potential sentence of 10 years of imprisonment and a maximum 10 million yen fine. Prosecutors could combine some of the charges into one or keep them separate. Ghosn’s case will likely be handled by a panel of three judges because juries are convened only for certain types of cases such as murder or manslaughter. The average duration for three-judge trials is a little over 13 months, and the judges will likely announce their verdict and any sentence on the final day of trial.

7. Who else is charged?

Nissan also has been indicted for under-reporting Ghosn’s income. The maximum penalty for the company is a fine of 700 million yen, according to TMI Associates’ Kinukawa. The company said it would strengthen its corporate governance and compliance and file amended financial statements once it has finalized the corrections. Former Nissan executive Greg Kelly -- known as Ghosn’s gatekeeper and confidante -- was indicted for allegedly helping him under-report income but released on bail Dec. 25. Kelly has denied the allegations through a lawyer.

8. Where’s Ghosn been?

He’s been held at a 12-story detention house in northern Tokyo where daily life for detainees begins at 7 a.m. and lights go out at 9 p.m., according to an archived and undated pamphlet from the ministry. There are three meals a day, including rice, sides of meat and vegetables, and soup. Lawyer Otsuru said Jan. 8 that Ghosn was moved to a larger room with a Western-style bed, compared to when he was initially incarcerated. He said his client had been interrogated by an English-speaking prosecutor and also has a translator, with recordings made on Blu-ray. The Tokyo site began operations in the early 1900s and moved to its current location in 1971. The detention house is also where Japan executes some of its prisoners on death row. In July 2018, the leader of the Aum Shinrikyo doomsday cult -- the group that carried out a deadly sarin gas attack on the Tokyo metro in 1995 -- was executed, various media reported.

The Reference Shelf

• Japan’s Supreme Court outlines the criminal justice system.
• A statement by Carlos Ghosn: “I am innocent.”
• France starts to shift position on Ghosn, says Bloomberg Opinion’s Lionel Laurent.
• Bloomberg Opinion’s Joe Nocera says Nissan and Japanese prosecutors may come out of this looking a lot worse than Ghosn.
• Nissan CEO turns on mentor out of “despair.”
• A legal essay in the Japan Times about what Ghosn’s arrest says.
• An archived Ministry of Justice document shows the Tokyo detention house (the document’s no longer displayed on the MOJ website).
• Some photos of the prison festival on the Japan Visitor website.
• An MOJ document in Japanese about the country’s correctional facilities.

To contact the reporters on this story: Lisa Du in Tokyo at ldu31@bloomberg.net;Kaye Wiggins in London at kwiggins4@bloomberg.net;Isabel Reynolds in Tokyo at ireynolds1@bloomberg.net

To contact the editors responsible for this story: Kazunori Takada at ktakada17@bloomberg.net, ;Heather Smith at hsmith26@bloomberg.net, Paul Geitner, Grant Clark

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