Business Maverick

Business Maverick

American Executive Found Guilty of Helping Ghosn Hide Income

Greg Kelly on March 3. Photographer: Zhang Xiaoyu/Xinhua/Bloomberg

Former Nissan Motor Co. director Greg Kelly was found guilty of helping Carlos Ghosn underreport his compensation, with a Tokyo court giving him a six-month suspended sentence in a decision that draws a line under one of the most shocking corporate takedowns of the past decade. 

In a move welcomed by the U.S., Chief Judge Kenji Shimotsu suspended the American’s sentence for three years in his ruling Thursday, bringing to an end 17 months of trial proceedings that essentially served as a proxy for trying former Nissan leader Ghosn. The two auto executives were arrested in Tokyo on the same day in November 2018 and charged with various financial misconduct offenses.

The judge said Ghosn received paid and unpaid compensation, and the grand total should have been reported. In a rare partial victory in Japan, Kelly was acquitted of charges relating to Ghosn’s pay between fiscal 2010 and 2016, with Shimotsu saying he wasn’t aware of the unreported renumeration then. However, in fiscal 2017 Kelly was found to be aware that Ghosn’s total pay wasn’t reported. The auto titan that year received discounted stock options that created a difference in reported compensation of about 750 million yen ($6.5 million).

The failure to report Ghosn’s total pay amounted to “false” reporting in Nissan’s financial statements, the judge said. The court also found that Ghosn and Toshiaki Onuma — who ran the secretarial office for Nissan’s executives and testified for the prosecution in return for immunity — were aware their actions amounted to false reporting and they conspired together to carry out their actions.

Nissan, also a defendant in the case, was ordered to pay a 200 million-yen fine by the three-judge panel at the Tokyo District Court. Lawyers for Nissan, which didn’t dispute the charge of financial misconduct, outlined the harm done to the company, both financially and to its reputation, and sought leniency.

The Ghosn Saga and What It Says About Japan: QuickTake

Kelly, 65, was left alone to defend himself after Ghosn staged a spectacular escape from Japan at the end of 2019, making his way by private jet to Lebanon, where he now resides. Kelly, who formerly oversaw human resources and legal affairs at Nissan, argued that there was no case against him because there wasn’t an agreement to pay Ghosn, as well as no requirement to disclose any such compensation and that his former boss was never paid.

Wearing a dark suit and red striped tie, Kelly sat quietly in his usual seat between his lawyers and took notes as the judge read details of his decision. His wife was seated nearby.

Rahm Emanuel, the U.S. ambassador to Japan, welcomed the suspended sentence. “We are relieved that the legal process has concluded, and Mr. and Mrs. Kelly can return home,” he said in a statement.

Prosecutors had sought a sentence of two years in prison, arguing that Kelly had a central role in helping Ghosn hide remuneration of more than 9 billion yen, equal to about $78 million. They argued that Kelly had a critical and essential role in coming up with measures to avoid disclosure of income and finding other ways to pay Ghosn.

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Kelly and his team of lawyers argued that the former director had no motive to hide any compensation for Ghosn and no knowledge of any plans to repay Ghosn for reduced income. Kelly testified in May of last year that he considered Ghosn a flight risk but looked only at legal ways to keep him at Nissan.

The arrests of Ghosn and Kelly triggered shock waves that reverberated through Nissan and its global carmaking alliance with Renault SA and Mitsubishi Motors Corp. Nissan’s profits slumped to a decade low, and score-settling fueled an exodus of other top executives. The turmoil left the company in a weaker position as it seeks to navigate an industry that’s being disrupted by a shift toward new-energy vehicles and self-driving cars.

The two Americans who helped Ghosn flee from Japan were convicted and are now serving time in Japan. Nissan’s former global general counsel said he was dismissed from the company after questioning the subsequent internal investigation into Ghosn’s alleged conduct, the carmaker’s corporate governance and the conduct of others within the company.

Hari Nada, the Nissan senior vice president who was promoted by Kelly and eventually took on parts of his job, was one of the key insiders who orchestrated Ghosn and Kelly’s downfall, reporting by Bloomberg News has shown. Prosecutors had implicated Nada in the alleged financial misconduct, but granted him immunity in exchange for his cooperation.

It was Nada who sent a private jet to bring Kelly to Japan on the same day as Ghosn, and they were arrested shortly after arrival.

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