Kelly's lawyers say Nissan set a trap

TOKYO — Lawyers defending former Nissan director Greg Kelly, the American accused of conspiring to conceal Carlos Ghosn's big paychecks from the public, took their first crack at cross-examining a key state witness last week and argued that prosecutors had violated Japan-U.S. extradition laws by setting a trap to arrest the Tennessee executive on Japanese soil.

Kelly's legal team tried to poke holes in the case by showing the witness to have a faulty memory and by casting doubt on the level of Kelly's involvement in alleged schemes to hide Ghosn's pay.

Meanwhile, as that trial continued in Tokyo, a separate case kicked off just south of the capital in Yokohama, where Nissan Motor Co. is suing Ghosn for nearly $100 million in damages over allegations of financial misconduct and misappropriation of funds. As the second case began, Ghosn issued a statement from Lebanon, where he is living in self-imposed exile, denouncing the claims as having "absolutely no foundation."

The separate trials underscore how Nissan is still struggling to put the Ghosn scandal into the rearview mirror nearly two years after the Nov. 19, 2018, arrest of its hard-charging chairman.

On that day, Ghosn and Kelly were nabbed by Japanese authorities within hours of each other after landing in Japan for business meetings. Kelly's U.S. lawyer said prosecutors lured Kelly to Japan under false pretenses instead of going through proper channels.

At the time, Nissan executive Hari Nada, working with Japanese prosecutors under a plea-bargain deal, called Kelly at his home near Nashville, telling him he was needed in Japan for urgent business. Nada even had Nissan hire a charter jet to fetch him.

"This is a violation of the U.S.-Japanese extradition treaty," Kelly attorney James Wareham said. "He was lied to by a private actor who was acting on the direction of the state of Japan."

Wareham contrasted that with the handling of two Americans currently fighting extradition to Japan, where they are accused of helping Ghosn escape from house arrest in Tokyo to flee to Lebanon at the end of 2019. Those individuals were first picked up by U.S. authorities and fought extradition in court. Even though the U.S. State Department has ruled they can be sent to Japan, the matter is under continued review.

"Kelly never got that," Wareham said. "He never got the State Department's examination. He never got his day in court.

"International law has been violated, and there might be remedies."

Kelly is accused of conspiring with Ghosn to conceal more than $80 million in deferred compensation when Ghosn was Nissan chairman and CEO. At Kelly's criminal trial, his Japanese attorney took aim at Toshiaki Ohnuma, another plea bargainer and witness for the state.

Ohnuma, who took the stand in September and is expected to keep testifying into December, says he was personally involved in exploring various payment schemes for Ghosn and ultimately helped set up a deferred compensation arrangement that prosecutors say broke the law.

But the courtroom testimony so far has not shown that any of Ghosn's underlings settled on a way to disburse the funds because they couldn't seem to find a legal way that wouldn't require disclosure.

Aside from Kelly, who was a senior human resources executive with Nissan, a small army of other executives and managers was wrapped up in the work, according to court testimony.

That emerging picture has opened an as-yet-unanswered question as to why the American executive was singled out for Japanese prosecution.

Ohnuma's testimony last week revealed a less than bulletproof memory about several details, including such matters as how much Kelly really knew about the payment schemes, specifics of Ghosn's pay and what exactly Kelly's role was behind the scenes. Ohnuma said he followed Kelly's orders to explore various routes of paying Ghosn part of his remuneration so it would not have to be disclosed.

Ohnuma said he felt some of the avenues explored were illegal but that he couldn't object.

"He was my superior," Ohnuma said of Kelly. "I had to follow his instruction. Now, I regret it."

Ohnuma testified that Kelly told him Ghosn was concerned about disclosing the full sum of his remuneration, seeking to avoid public scrutiny not only in Japan, but also in France. Ghosn, who was simultaneously head of Nissan and alliance partner Renault, was sensitive about the size of his pay in both countries, where more modest executive compensation is the norm, even for very top-tier business leaders.

Both Kelly and Ghosn deny the charges. But whereas Ghosn fled Japan for Beirut, beyond the reach of Japanese extradition law, Kelly remains in Japan to stand trial. The proceedings are expected to run through July, and Kelly, now 64, could be sentenced to up to 15 years in prison if found guilty.

Prosecutors allege Ghosn's underlings began scrambling to hide his pay in 2010, the year Japan changed its corporate reporting rules to require executives with big pay packages — those higher than ¥100 million ($950,000) a year — to disclose individual compensation. Ghosn had been the object of some public criticism for pulling one of Japan's highest salaries and wanted to avoid public criticism, they say.

By Ohnuma's telling, Ghosn was receiving around $15.2 million a year at the time, and the initial goal, he testified, was to bring the publicly disclosed sum down to around $8.6 million, in the belief that figure would be more palatable to Japanese sensibilities.

From then on, Nissan officials investigated different ways to pay Ghosn less in the public's eye, while sending him the balance through other channels, Ohnuma said. Whether any such plans were ever actually fixed and finalized is likely to be a pivotal point of contention in Kelly's trial, as will the extent of the executive's personal involvement.

Ghosn faces two additional breach-of-trust charges for which only he is indicted. He is accused of improperly siphoning millions of dollars from Nissan for his own private use. The Nissan civil trial that opened last week is an attempt to claim damages.

Nissan filed in February after Ghosn fled Japan before his criminal trial could start.

"The legal actions form part of Nissan's policy of holding Ghosn accountable for the harm and financial losses incurred by the company as a result of his misconduct," the automaker said at the time. It noted that it was stepping up its claims against Ghosn following his "illegal flight from justice."

Ghosn's defense lawyer said last week that Nissan is stalling on providing evidence to prove its case. Because the court is still waiting for Nissan to provide more documentation, and because the defense needs to translate the documents into English for Ghosn's review, the next hearing won't be until March 19.

Nissan is seeking $95 million in damages, an amount that covers the roughly $87.4 million the company acknowledges owing Ghosn in deferred compensation, said Ghosn's lawyer Nobuo Gohara. That compensation, which was never paid out, is the crux of the first set of allegations leveled against both Ghosn and Kelly two years ago.

"Unfortunately, there is no prospect that Ghosn's criminal trial will be held in Japan," Gohara said. "So this civil suit is the place where we can only find out about the truth of this case.

"This civil suit revolves around exactly the criminal cases against Ghosn that Nissan is trying to prove," he said. "This suit contains many overlaps with matters that should have been discussed in a criminal trial."