After learning about the Nissan incident, Carlos Ghosn went from being a well-known leader in the automotive industry to becoming a wanted man.
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The Tokyo District Court has ruled that the principal offender in the controversy involving the Japanese automaker is fugitive former Nissan Motor chairman Carlos Ghosn. The court has attributed the high-profile scandal that shook the global car industry to Ghosn’s greed and the automaker’s poor governance. Ghosn has been charged with omitting his profits from important stock market disclosures. He was charged with underreporting Carlos Ghosn’s compensation by over $79 million in the financial reports between the fiscal years 2010 and 2017, along with former Nissan executive Greg Kelly. According to Nikkei, Nissan has been penalized 200 million yen by the court for the fraud.
After learning about the Nissan incident, Carlos Ghosn went from being a well-known leader in the automotive industry to becoming a wanted man. The crisis was also heightened when Ghosn left Japan in 2019 following his arrest alongside Kelly in November 2018. In December 2019, Ghosn managed to leave Japan while under house arrest and enter Lebanon. But he keeps insisting that he did nothing wrong.
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José Ghosn
Carlos Ghosn is a Lebanese businessman who was born in Brazil (/goUn/; French: [kaRlos gon]; Arabic: krlws GSn; Lebanese Arabic pronunciation: [‘ka:rlos ‘gos?n], born 9 March 1954). Ghosn is also a citizen of France. He is an internationally sought-after fugitive as of January 2020. Ghosn served as the CEO of Michelin North America as well as the chairman and CEO of Renault, AvtoVAZ, Nissan, and Mitsubishi Motors. In addition, Ghosn served as the chairman and CEO of the Renault-Nissan-Mitsubishi Alliance, an alliance formed by these three automakers through a complicated cross-shareholding contract. Since 2010, the partnership has held a 10% share of the global market, and as of 2017, it was thought to be the biggest vehicle group globally.
Ghosn was appointed as Louis Schweitzer’s deputy at Renault in 1996 and given the responsibility of rescuing the firm from the brink of bankruptcy. Ghosn developed a cost-cutting strategy for the years 1998 to 2000 that included a personnel reduction, changes to the production process, standardization of car parts, and a push for the introduction of new models. Major organizational changes were also made by the company, including the introduction of a lean production system with delegated responsibilities (the “Renault Production Way”), a reform of work practices, and the centralization of research and development at its Technocentre to lower the costs of vehicle conception while accelerating such conception. Ghosn earned the moniker “Le Cost Killer.” He gained the moniker “Mr. Fix It” in the early 2000s for planning one of the auto industry’s most aggressive downsizing initiatives and leading Nissan out of its financial crisis in 1999.
After Nissan’s financial turnaround, he was named Asia Businessman of the Year by Fortune in 2002. He was named one of the top ten business leaders outside of the United States by Fortune in 2003, and the Asian version of Fortune named him Man of the Year. He was ranked third most recognized business leader in 2004, and fourth most respected in 2003, according to surveys conducted by PricewaterhouseCoopers and the Financial Times. His life has been depicted in Japanese comic books, and he swiftly rose to fame in Japan and the corporate world.
On April 1, 2017, Ghosn resigned as CEO of Nissan, but he remained the company’s chairman. On November 19, 2018, he was detained at Tokyo International Airport on suspicion of underreporting his pay and flagrantly misusing business resources. Nissan’s board unanimously decided to remove Ghosn as chairman of the company on November 22, 2018, with immediate effect. On November 26, 2018, the executive board of Mitsubishi Motors made a similar decision. At first, Renault and the French government stood by him and assumed he was innocent until proven guilty. Ghosn was forced to step down as chairman and CEO of Renault on January 24, 2019, when they ultimately decided that the situation was intolerable. Ghosn was re-arrested in Tokyo on April 4, 2019, while he was still free on bail that had been granted in early March, on fresh charges of stealing money from Nissan. Nissan shareholders decided to remove Ghosn from the board of directors on April 8th. On April 25, he was once more given a bail release. Renault discovered 11 million euros in dubious expenditures by him in June, which prompted a French probe and raids.
On December 30, 2019, Ghosn violated the terms of his release by taking a private jet from Japan to Lebanon through Turkey, with the assistance of an American private security contractor who was concealed inside a musical instrument box. Interpol sent a red alert to Lebanon on January 2, 2020, requesting the arrest of Ghosn. Since his escape, he has been the topic of numerous interviews with the media, books, a European TV series, and a BBC documentary called Storyville.
How Carlos Ghosn Became A Corporate Superstar Before Getting Away
In Japan, Carlos Ghosn made his debut as a daring young auto executive. He rose to the position of CEO of two automakers and became a corporate legend. Now he is on the run. Carlos Ghosn speaks to us about his ascent and decline.
HOST AILSA CHANG
BYLINE: CURT NICKISCH Everything began in 2018, when Carlos Ghosn was detained by Japanese authorities and accused of concealing his compensation and squandering corporate funds. Ghosn was accustomed to traveling the world in a private plane and lodging in luxurious mansions while working as the CEO of Nissan. He was currently imprisoned in a cell.
NICKISCH: Yann Rousseau of the French business publication Les Echos paid Ghosn a visit while he was incarcerated in Tokyo.
ROUSSEAU: He was that way because of his grayer and messier hair. He was still quite classy, though.
Ghosn was likely the best-known CEO in Japan, according to NICKISCH. He was so effective in turning around Nissan’s financial situation that he accepted a second position as CEO of French automaker Renault. Both employers paid him highly because they didn’t want to lose him. Rousseau, though, claims that Ghosn’s hefty salary was unpopular in France.
It’s a scandal for the French, says Roussel. The workers, the unions, and the politicians in France are all grumbling. It’s excessive.
NICKISCH: Ghosn’s salary in Japan may have contributed to his downfall. There, executives typically don’t receive huge compensation packages. Former ambassador Sadaaki Numata is shown here.
SADAAKI NUMATA: It has been reported that in Japanese culture, a protruding nail is immediately driven in. Someone does stand out if they have too much money.
NICKISCH: A new law requiring the disclosure of executive pay is introduced in Japan in 2010. Carlos Ghosn earned $10 million at Nissan that year, it turns out. The top automaker in Japan, Toyota, didn’t even pay its CEO $1 million. Ghosn has thus been defending his compensation to press and Nissan shareholders for years. The arrest of Carlos Ghosn follows in 2018. Japanese prosecutors portray Ghosn as a rapacious executive who planned to pay himself millions of dollars secretly. However, the case is never tried. Ghosn runs away. He sneaks onto a private jet in a music equipment box and takes off for Lebanon, where the Japanese government is powerless to stop him. When we spoke with him, he bragged about it.
It was successful because it was incredibly daring, says Carlos Ghosn. That you would dare to do something like this would not have been suspected.
NICKISCH: According to Ghosn, who maintains his innocence, he left Japan because he believed he wouldn’t receive a fair trial. He acknowledges that as CEO, he violated Japanese customs but not laws, and that he deserved big remuneration since he produced outcomes.
GHOSN: There is a demand for CEOs. What the market is willing to pay for CEOs also constitutes what is fair. Therefore, I agree far more with American compensatory theory than I do with Japanese or French philosophy.
CHANG: The host of the “HBR IdeaCast” podcast, Curt Nickisch, collaborated with Planet Money to produce this piece.
Why the hell is Carlos Ghosn having this situation?
He was a hero in the corporate world and in control of Nissan, Renault, and Mitsubishi. He is currently wanted on a global level. This is how it all happened.
Carlos Ghosn resigned from his position as CEO of Nissan in the spring of 2017, but since then, he has continued to make headlines due to a weird array of legal issues that now include multiple countries. He is currently at the center of a scandal that resulted in his arrest, termination as CEO, and subsequent position as an international fugitive following an alleged escape that seems like it belongs in a movie. He was accused of financial malfeasance while serving as Nissan’s chairman and CEO.
Let’s take a look back at the main moments in the developing story of Carlos Ghosn to explain how all of this came to be.
WHO OR WHAT ACCUSES GHOSN?
Nissan CEO Hiroto Saikawa said to a crowded press conference on Monday night that the business had discovered that Ghosn had been underreporting his pay in official company filings during the Tokyo Stock Exchange for years.
Greg Kelly, a different board member, was also heavily involved in the misbehavior, according to Nissan. Prosecutors are looking into the incidents, therefore Saikawa said he couldn’t go into further detail because they had declined to say anything.
According to the prosecution, Ghosn and Kelly planned to falsely represent Ghosn’s pay for a five-year period beginning in fiscal 2010 as being less than half of the actual amount of 9.998 billion yen ($88.9 million).
Citing unnamed sources, public broadcaster NHK reported Nissan spent billions of dollars to purchase and remodel houses for Ghosn in Rio, Beirut, Paris, and Amsterdam. According to NHK, the assets served no commercial use and were not disclosed as benefits in TSE filings.
The 64-year-old Ghosn is not formally accused. He and Kelly reportedly answered inquiries from the prosecution on Monday afternoon at Tokyo’s Haneda Airport, according to the Asahi newspaper. Saikawa attested to their arrest.
Since then, Ghosn and Kelly have not been seen, and it is unknown where they are right now. The Tokyo Detention Center, which is connected to the Tokyo District Public Prosecutors Office, is usually where suspects are taken.
Carlos Ghosn was smuggled by whom?
For the first time, Carlos Ghosn has shared information on his audacious escape from Japan when he was detained on suspicion of financial impropriety.
The former Nissan chairman claimed in a BBC interview that he was smuggled out of Japan in December 2019 while on bail inside a box designed to hold musical instruments before traveling through Turkey to Lebanon.
Ghosn, who has passports from Brazil, France, and Lebanon, had previously declined to explain how he got away in public remarks.
Ghosn recalled the time he spent in the box at an airport in western Japan waiting to board a private jet and escape a legal system he has maintained would have incorrectly judged him guilty of hiding income and squandering corporate finances. “The plane was due to take off at 11pm,” Ghosn added.
The longest wait he had ever endured, he claimed, was the thirty minutes he spent waiting in the plane’s box before takeoff. He claimed that he was hidden within the box for approximately one and a half hours in total, adding that it felt longer.
The fugitive also talked about how happy he was to return to Lebanon, where Japan and Lebanon do not have an extradition agreement. The excitement was that I would finally be able to relate the narrative, he continued.
Following his dramatic arrest in late 2018, Ghosn’s criticism of his treatment in Japan sparked unprecedented scrutiny of the nation’s criminal justice system, where prosecutors can hold defendants for protracted periods of time and more than 99% of criminal cases result in guilty convictions.
Before being released on bail a second time a few months before his escape, Ghosn was held for protracted lengths of time at a detention facility in Tokyo. If found guilty, he would have spent 15 years in jail.
He recalled the day of his escape by saying, “The strategy was I could not show my face thus I had to be hidden somewhere.” And the only way I could have remained undetected was if I had been concealed inside a box or piece of baggage. Only then would the scheme have been successful.
Ghosn has come under fire for his decision to forgo a legal defense while one of his former coworkers, along with two other individuals, is on trial in Japan for orchestrating his evasion of justice.
If Greg Kelly, a former Nissan executive who was close to Ghosn, is found guilty of aiding his former boss in underreporting his income by tens of millions of dollars, he might receive a prison sentence.
The American father and son team of Michael and Peter Taylor, who drove Ghosn on the day of his escape from a hotel to the airport, might spend roughly three years in prison.
The Taylors apologized to the Japanese authorities for their suspected involvement in Ghosn’s escape after being extradited from the US earlier this year.
Michael Taylor expressed regret and apology in court earlier this month in Tokyo. “I sincerely regret my action and apologize to the people of Japan,” his son stated.