International Credit

Ghosn Affair Places Spotlight on Japan

Image Group
Getty Images
Former Nissan and Renault CEO Carlos Ghosn held a press conference in Lebanon just days after his dramatic escape from Japan.

The Carlos Ghosn affair raises questions about justice and corporate governance in Japan.  "I escaped because I had zero chance of a fair trial."

Carlos Ghosn, the car-industry titan who served as the CEO of two major car companies, held a dramatic press conference in his home country of Lebanon on Wednesday to proclaim his innocence and set the record straight just nine days after pulling off an elaborate escape from house arrest in Japan in which he was apparently hidden away in a music box and flown to Lebanon by way of Turkey. 

Ghosn, who holds citizenship in France, Brazil and Lebanon, was arrested in Tokyo on November 20, 2018 on charges that he incorrectly reported his pay while CEO of Nissan, Japan's third largest car maker.  On Wednesday, in a bizarre press conference held in the Lebanese capital of Beirut -- an area of the world not accustomed to high business drama -- Ghosn gave a captivating presentation on what happened and why during his 13 months in Japan.

"I'm here to clear my name and to pronounce emphatically something that was interpreted as heresy in the Japanese judicial system: These alligations are untrue and I should have never been arrested," said Ghosn. "I didn't escape because I'm guilty, I escaped because I had zero chance of a fair trail."

The Ghosn affair is significant because it raises questions about the fairness and sophistication of the legal system and corporate governance practices in Japan, a country that is widely considered to be one of the world's most advanced democracies, established economies and home to one of the world's permier capital markets. 

In his two hour long press conference, taking and answering questions in English, French, Portuguese and Arabic, Ghosn gave a scathing indictment of the criminal justice system in Japan calling it "a corrupt and hostile system that presumed my guilt from day one and was designed to break my spirit and coerce my confession."

Mr. Ghosn was arrested on charges that he understated his compensation on eight years of Nissan financial reports.  Both Nissan Motor Company and Mitsubishi Motors claim that Ghosn improperly received $9 million from  a Dutch entity the car makers jointly owned, according to a statement issued by both companies in January 2019.

Mr. Ghosn claims he was made a scapegoat by top company and government officials when things started to go bad at Nissan.  "I was the foreigner so it was very easy to say this guy has exceeded the limits, he has hidden compensation he didn't receive, he has asked for this, etc.," said Ghosn.

For it's part, the Tokyo Prosecutor's office issued a strong response to Mr. Ghosn's accusations saying "his [Ghosn's] statements during his press conference today failed to justify his acts...his one-sided criticism of the Japanese criminal justice system is totally unacceptable."

Backing up Ghosn's fear of receiving a fair trial is the fact that Japan's conviction rate is 99.4 percent similar to China and Russia, two of the world's most oppressive countries.  "Obviously, there's something wrong with a judicial system in which the prosecutor always wins the case," said Jeffrey Sonnonfeld, a professor in the Yale School of Management, in an interview on MSNBC.

Over the past 20 years, Ghosn made a name for himself in the auto industry by forming an alliance between Renault SA, France's second largest car company, Japan's Nissan, which resulted in his becoming Nissan's CEO in 1999, a time in which the Japanese car maker was struggling financially.  He later added Mitsubishi Motor Company turning three relatively small players into the world's second largest automobile manufacturing group.

In 2016, he stepped down as CEO of Nissan to devote more time to Mitsubishi, Ghosn said in his press conference.  It was around that time or shortly thereafter the performance of Nissan started to falter as the company's market value went from 43.8 billion in June of 2015 to 37.7 billion in June of 2016, a 17 percent decline (see accompanying chart).  Nissan's stock has faired much worse since the arrest of Mr. Ghosn, something he noted in his press conference.

When asked if the Renault-Nissan-Mitsubishi alliance would succeed, Mr. Ghosn responded that it would take more than consensual decision making.  "When I look at everything that has happened in the last 13 months, I'm not reassured about the future of the alliance," Ghosn said. 

Mr. Ghosn stressed that he is willing to stand trial in order to clear his name and that he will provide more information in the "next weeks" as to how that will happen.  "I'm used to mission impossible," Ghosn said.  "When I went to Japan in 1999 everybody thought it's impossible, you're not going to make it. I want to clear my name and I want to find a way to make sure that the truth is going to come out."