JST-By Kiyoshi Takenaka and Tim Kelly
Nissan Motor Co Ltd’s ousted Chairman Carlos Ghosn declared he was innocent on Tuesday in his first public appearance since his arrest in November, telling a Tokyo court that he was wrongly accused of financial misconduct.
“I have been wrongly accused and unfairly detained based on meritless and unsubstantiated accusations,” he told the Tokyo District Court, according to a prepared statement which was obtained by Reuters.
“Contrary to the accusations made by the prosecutors, I never received any compensation from Nissan that was not disclosed, nor did I ever enter into any binding contract with Nissan to be paid a fixed amount that was not disclosed.”
Ghosn, credited with rescuing Nissan from near-bankruptcy two decades ago, appeared thinner than before his arrest as he entered a court in handcuffs and a rope around his waist. He wore a suit without a tie, slippers, and his dark hair showed gray roots.
People hoping to get a seat in the gallery to hear ousted Nissan Carlos Ghosn speak gather around a board to see if their numbers were selected outside the Tokyo District Court on Tuesday. Photo: REUTERS/Kim Kyung-Hoon
A crowd of journalists and television crew gathered outside the court house while earlier, 1,122 people lined up for 14 court seats assigned by lottery, highlighting the level of public interest in the case of the once-feted executive.
The hearing, requested by his lawyers, was held to explain the reasons for his prolonged detention since his Nov 19 arrest. Presiding Judge Yuichi Tada read out the charges and said Ghosn was being detained due to flight risk and the possibility that he may conceal evidence.
Ghosn’s Japanese lawyers are also expected to speak in his defense at a news conference scheduled later in the day. The legal team is headed by former prosecutor Motonari Otsuru.
Ghosn has been formally charged with under-reporting his income. The 64-year-old executive has also been arrested, but not yet indicted, on allegations of aggravated breach of trust in shifting personal investment losses worth 1.85 billion yen to the carmaker.
Regarding allegations that he transferred losses to Nissan, Ghosn said he had asked the company to temporarily take on collateral for his foreign exchange contracts. He said he did this to avoid the only other choice he had, which was to resign and use his retirement allowance for collateral.
“But my moral commitment to Nissan would not allow me to step down during that crucial time,” he said. “A captain doesn’t jump ship in the middle of a storm.”
Ghosn also said the contracts were transferred back to him, and that Nissan had not incurred any loss.
Ghosn is also accused of making $14.7 million in payments to Saudi businessman Khaled Al-Juffali using Nissan funds in exchange for arranging a letter of credit to help with his investment losses.
Ghosn said in his prepared remarks that Juffali’s company was compensated for “critical services that substantially benefited Nissan”, including soliciting financing and solving problems involving a local distributor.
The Khaled Juffali Company also issued a statement on Tuesday saying it had received the payments for legitimate business purposes.
The case has rattled Nissan’s alliance with French automaker Renault SA, where Ghosn still remains chairman and chief executive. He had been pushing for a deeper tie-up between the pair, including potentially a full merger at the French government’s urging, despite strong reservations at Nissan.
His arrest has also put Japan’s criminal justice system under international scrutiny and sparked criticism for some of its practices, including keeping suspects in detention for long periods and prohibiting defense lawyers from being present during interrogations that can last eight hours a day.
Ghosn, who was arrested first on Nov 19, has been re-arrested twice on different charges since then, a tactic often used by Japanese prosecutors to keep suspects in detention.
He has been held at the Tokyo Detention Center, a spartan facility where small rooms have a toilet in the corner and no heater – a far cry from the jet-setting lifestyle Ghosn was accustomed to. His son, Anthony Ghosn, said his father had lost 10 kgs during his detention, according to France’s weekly Journal du Dimanche.
Under Japanese law, suspects can be detained without charges for up to 23 days, and then re-arrested on separate allegations.
On Dec 31, the Tokyo District Court granted prosecutors’ request to extend Ghosn’s detention by 10 days until Jan 11.
Nissan, which has ousted Ghosn from its board, has said a whistleblower investigation also uncovered personal use of company funds and other misconduct.
The following are prepared remarks by Carlos Ghosn for his court appearance in Tokyo on Tuesday regarding allegations against him of aggravated breach of trust. The statement was released by Ghosn’s lawyers in the United States.
I am grateful to finally have the opportunity to speak publicly. I look forward to beginning the process of defending myself against the accusations that have been made against me.
First, let me say that I have a genuine love and appreciation for Nissan. I believe strongly that in all of my efforts on behalf of the company, I have acted honorably, legally, and with the knowledge and approval of the appropriate executives inside the company — with the sole purpose of supporting and strengthening Nissan, and helping to restore its place as one of Japan’s finest and most respected companies.
Now I would like to address the allegations.
- The FX Forward contracts
When I first joined Nissan and moved to Japan almost 20 years ago, I wanted to be paid in U.S. dollars, but was told that that was not possible and was given an employment contract that required me to be paid in Japanese yen. I have long been concerned about the volatility of the yen relative to the U.S. dollar. I am a U.S. dollar-based individual – my children live in the U.S. and I have strong ties to Lebanon, whose currency has a fixed exchange rate against the U.S. dollar. I wanted predictability in my income in order to help me take care of my family.
To deal with this issue, I entered into foreign exchange contracts throughout my tenure at Nissan, beginning in 2002. Two such contracts are at issue in this proceeding. One was signed in 2006, when the Nissan stock price was around 1,500 yen and the yen/dollar rate was around 118. The other was signed in 2007, when the Nissan stock price was around 1,400 yen and the yen/dollar exchange rate was around 114.
The 2008–2009 financial crisis caused Nissan’s shares to plummet to 400 yen in October 2008 and to 250 yen in February 2009 (down more than 80% from its peak) and the yen/dollar exchange rate dropped below 80. It was a perfect storm that no one predicted. The entire banking system was frozen, and the bank asked for an immediate increase in my collateral on the contracts, which I could not satisfy on my own.
I was faced with two stark choices:
- Resign from Nissan, so that I could receive my retirement allowance, which I could then use to provide the necessary collateral. But my moral commitment to Nissan would not allow me to step down during that crucial time; a captain doesn’t jump ship in the middle of a storm.
- Ask Nissan to temporarily take on the collateral, so long as it came to no cost to the company, while I gathered collateral from my other sources.
I chose option 2. The FX contracts were then transferred back to me without Nissan incurring any loss.
- Khaled Juffali
Khaled Juffali has been a long-time supporter and partner of Nissan. During a very difficult period, Khaled Juffali Company helped Nissan solicit financing and helped Nissan solve a complicated problem involving a local distributor – indeed, Juffali helped Nissan restructure struggling distributors throughout the Gulf region, enabling Nissan to better compete with rivals like Toyota, which was outperforming Nissan.
Juffali also assisted Nissan in negotiating the development of a manufacturing plant in Saudi Arabia, organizing high-level meetings with Saudi officials.
Khaled Juffali Company was appropriately compensated – an amount disclosed to and approved by the appropriate officers at Nissan – in exchange for these critical services that substantially benefited Nissan.
- The FIEL Allegations
Four major companies sought to recruit me while I was CEO of Nissan, including Ford (by Bill Ford) and General Motors (by Steve Rattner, the then-Car Czar under President Barack Obama). Even though their proposals were very attractive, I could not in good conscience abandon Nissan while we were in the midst of our turnaround. Nissan is an iconic Japanese company that I care about deeply. Although I chose not to pursue the other opportunities, I did keep a record of the market compensation for my role, which those companies offered me if I had taken these jobs. This was an internal benchmark that I kept for my own future reference – it had no legal effect; it was never shared with the directors; and it never represented any kind of binding commitment.
In fact, the various proposals for non-compete and advisory services post-retirement made by some members of the board did not reflect or reference my internal calculations, underscoring their hypothetical, non-binding nature.
Contrary to the accusations made by the prosecutors, I never received any compensation from Nissan that was not disclosed, nor did I ever enter into any binding contract with Nissan to be paid a fixed amount that was not disclosed.
Moreover, I understood that any draft proposals for post-retirement compensation were reviewed by internal and external lawyers, showing I had no intent to violate the law. For me, the test is the “death test”: if I died today, could my heirs require Nissan to pay anything other than my retirement allowance? The answer is an unequivocal “No.”
- Contribution to Nissan
I have dedicated two decades of my life to reviving Nissan and building the Alliance. I worked toward these goals day and night, on the earth and in the air, standing shoulder to shoulder with hardworking Nissan employees around the globe, to create value. The fruits of our labors have been extraordinary.
We transformed Nissan, moving it from a position of a debt of 2 trillion yen in 1999 to cash of 1.8 trillion yen at the end of 2006, from 2.5 million cars sold in 1999 at a significant loss to 5.8 million cars sold profitably in 2016. Nissan’s asset base tripled during the period.
We saw the revival of icons like the Fairlady Z and Nissan G-TR; Nissan’s industrial entry into Wuhon, China, St. Petersburg, Russia, Chennai, India, and Resende, Brazil; the pioneering of a mass market for electric cars with the Leaf; the jumpstarting of autonomous cars; the introduction of Mitsubishi Motors to the Alliance; and the Alliance becoming the number one auto group in the world in 2017, producing more than 10 million cars annually. We created, directly and indirectly, countless jobs in Japan and re-established Nissan as a pillar of the Japanese economy.
These accomplishments – secured alongside the peerless team of Nissan employees worldwide – are the greatest joy of my life, next to my family.
© Thomson Reuters 2019