TOKYO -- The clash between Carlos Ghosn and Tokyo prosecutors is heating up as investigators question the former Nissan Motor chairman about evidence that allegedly shows he failed to report deferred compensation in financial reports.
Ghosn and Greg Kelly, a former representative director, had their detention in a facility here extended by 10 days to Dec. 10. The two have denied the allegations in recorded interviews with investigators and argued their innocence, according to sources familiar with the probe.
Much of the investigation is based on a set of documents outlining deferred, undisclosed payments to Ghosn of about 1 billion yen ($8.8 million) per year. There are also thought to be several documents detailing his compensation after retirement. Prosecutors claim that these documents prove that the payments were guaranteed, at which point Ghosn was legally obligated to list them in securities reports.
The documents were held with strict secrecy in Nissan's secretarial office, with only Kelly and a few others close to Ghosn aware of their existence, sources said. They were apparently submitted to investigators by some of those associates as part of a plea bargain.
Nissan's board of directors was not consulted about the documents, but Ghosn is believed to have had the power to determine director compensation, including his own. "As long as Ghosn had the authority [to determine director compensation], the validity of the documents is unquestionable," said a lead investigator.
But Ghosn has refuted that the payments were set in stone, though he had hoped to receive them in the future. The significance of the documents depends on such factors as when they were created, who signed them, and what the payments were listed as.
"The documents are more likely to be considered a binding contract if they include details like future payment dates and conditions for canceling the payments," said an accounting expert. "It is not as simple as saying that the documents exist, therefore the payments were settled."
Ghosn said that Kelly assured him the reporting procedures were legal. Kelly, for his part, says that he sought advice from outside lawyers and Japan's Financial Services Agency, which responded in writing that no disclosure was required.
Defending Ghosn is Motonari Otsuru, the former head of special investigations at the Tokyo Prosecutors' Office. Otsuru has a wealth of experience leading probes into white-collar crimes and is an expert on Japanese financial law. He will now face off against his old employer in a battle that will likely center around Ghosn's intentions and whether he was aware of any wrongdoing.
The former chairman is suspected of earning about 8 billion yen in deferred compensation in the eight years through fiscal 2017. Prosecutors are going after Ghosn not for deferring income but for failing to report it.
Internal investigations by Nissan also uncovered other alleged misconduct, such as the purchase of luxury homes with money funneled from an overseas subsidiary and family vacations taken on the automaker's dime.
"Prosecutors must have expected international attention and blowback from arresting a global figure like Ghosn," said a lawyer and former investigator. "They likely aim to prove that he breached trust as chairman by treating the company as his personal property."