TOKYO – Court hearings began Tuesday morning in the trial of former Nissan executive Greg Kelly for alleged underreporting of compensation paid to Carlos Ghosn, the 66-year-old former chairman of the automaker.
Kelly, 64, has been charged with violating the Financial Instruments and Exchange Act by making false statements in Nissan’s annual securities reports.
At the Tokyo District Court hearing – the opening salvo of the case against Ghosn – Kelly pleaded not guilty.
The case has gained worldwide attention, although Ghosn did not attend the trial after fleeing to Lebanon last year. The amount paid to Ghosn was reportedly understated by 9.1 billion yen ($ 85.8 million) over eight years.
Nissan has also been indicted as a company for violating the Financial Instruments and Exchange Act, to which the automaker pleaded guilty during Tuesday’s hearing.
The bigger question in the lawsuit is whether the money classified as “unpaid earnings” actually exists.
Kelly’s defense team, a former representative director, says the pay in question was not executive pay, as Ghosn was expected to be rewarded for his service at Nissan after his retirement.
Kelly’s defense argues that even if there was an obligation to report the alleged compensation, he cannot be held criminally responsible simply for not reporting the payment.
Two Nissan whistleblowers – a former head of the company secretary’s office and a former company executive who is a foreign national – have previously entered into plea negotiations with the special investigations department of the district attorney’s office from Tokyo.
But Kelly’s defense team are set to question the deals, saying the circumstances under which it was negotiated are unclear.
Prosecutors point out that the system for disclosing information regarding executive compensation of 100 million yen or more, set up from the fiscal year ended in March 2010, triggered an investigation leading to the scandal.
Ghosn had received more than a billion yen in annual compensation, an amount he wanted to keep private, which led him to order Kelly and other collaborators to find ways to avoid declaring a part money.
According to the indictment, Kelly conspired with Ghosn to underestimate Ghosn executive compensation by a total of 9.1 billion yen in Nissan’s annual securities reports for the fiscal year ended. March 2011 to March 2018.
The Tokyo District Court is planning 76 hearings through July 2021, the first of which is Tuesday.
More than 10 people – including former Nissan chairman Hiroto Saikawa, as well as the two Nissan executives who reached a plea bargain – are expected to testify. No date has yet been set for final argument or a ruling.
The first hearing takes place in the largest room of the Tokyo District Court. It begins with Kelly’s arraignment, in which the presiding judge questions the defendant.
Kelly, who is a Chartered U.S. Attorney, joined Nissan through the company’s North America unit and became Managing Director in 2008. As Ghosn’s assistant, Kelly was in charge of the CEO’s office, the secretariat and the legal affairs office. He was promoted to Representative Director in 2012.
Kelly retained this post after returning to the United States in 2015 until his arrest in November 2018.
Since his release on bail at the end of December 2018, Kelly has been preparing for his trial in the hopes of completing it as soon as possible due to a chronic health problem involving his neck.
He has already appeared for the pre-trial arrangement proceedings, which were held behind closed doors. Reports say he has become visibly irritated by the slowness of the procedure.
Ghosn, whom prosecutors claim to be the leading figure in the case, fled Japan hiding in a box which was then loaded onto a private jet and transported to Lebanon via Turkey. According to sources familiar with the situation, Kelly appeared surprised at the news of Ghosn’s escape, saying he was not aware of it.
At a press conference in Beirut he called in early January, Ghosn said Kelly had been criminally indicted for refusing to participate in what Ghosn described as a “suspect” plea bargaining deal, unlike to the other two Nissan executives who did.
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