Nissan Insider Key to Ghosn’s Downfall Speaks for First Time

(Bloomberg) -- More than two years after the arrest of auto titan Carlos Ghosn on charges of financial crimes, the Nissan Motor Co. executive said to be key to the downfall of the carmaker’s former chairman is set to break his silence.

Hari Nada, a senior vice president at the Yokohama-based company, is scheduled to appear in the Tokyo District Court on Thursday, taking the stand in the trial of Greg Kelly, the former Nissan director who was arrested on the same day as Ghosn in November 2018.

Nada, who worked for both, was the central driver of a campaign to unseat the ex-chairman amid concern over his plans to further integrate Nissan and its alliance partner Renault SA, Bloomberg News has reported. Nada later cooperated with prosecutors on their cases against Ghosn and Kelly, who is charged with helping his high-flying former boss understate his income.

The proceedings against Kelly, which began in September and are on track to wrap up in the middle of 2021, may be the only forum where the accusations against Ghosn ever get a legal airing. The former leader of an auto-making alliance that included Mitsubishi Motors Corp. is unlikely to ever face trial in Japan after his stunning escape to Lebanon a year ago, smuggled inside a music-equipment box on a private jet.

Nada, 56, who received immunity in exchange for his cooperation with Japanese prosecutors, was privy to the inner workings of Nissan’s top management in his role running the chief executive’s office.

A U.K.-trained lawyer, Nada essentially served as chief of staff to Ghosn when he was CEO of Nissan and then to his successor Hiroto Saikawa, who took over in 2017. Nada has kept a low profile through the twists and turns of the Ghosn saga, refusing multiple requests to be interviewed by Bloomberg. He hasn’t been quoted in the media since the arrests of Ghosn and Kelly, and there are just a few official photos of him on Nissan’s website. Nada remains at Nissan as a senior adviser.

“We do not comment on pending litigation,” Lavanya Wadgaonkar, a spokeswoman for Nissan, said in response to questions about Nada’s appearance at the trial.

Pay Disclosures

Prosecutors are set to question Nada over his involvement in efforts to find ways to under-report Ghosn’s income. The activity at the center of the trial began about a decade ago when new disclosure rules in Japan called on companies to disclose annual executive compensation of more than 1 billion yen ($9.7 million), triggering an effort to find alternative ways to pay Ghosn, according to the proceedings.

The first few months of the trial were taken up by testimony of Toshiaki Onuma, a colleague of Nada who ran the secretarial office for Nissan’s executives. Onuma described in detail conversations he had with Ghosn about his remuneration, and how decisions were made at the executive level at the automaker.

Ghosn was initially charged in Japan with underreporting about $80 million in income. Kelly, who ran human resources at Nissan before he became a director, and Nissan itself were also charged and are standing trial. While Kelly has denied allegations that he helped Ghosn hide his compensation over eight years, Nissan has effectively pleaded no contest.

Kelly, 64, is seeking to exonerate himself and return to the U.S., but his family and attorneys have questioned his ability to get a fair trial without the former chairman’s testimony, and criticized the slow pace of judicial proceedings in Japan.

Read more: With Ghosn Gone, Alleged Accomplice Faces Tokyo Trial

Nissan and Japanese prosecutors have long maintained that the decision to oust Ghosn was based on the allegations of under-reported income and the other financial crimes he’s been accused of, including funneling money from the company into accounts he controlled. But Bloomberg’s reporting shows a powerful group of insiders led by Nada also saw the arrest and prosecution of the powerful executive as an opportunity to revamp Nissan’s relationship with partner and top shareholder Renault.

Closer Ties

In early 2018, Ghosn was laying the groundwork for a new alliance structure that would bring Nissan, Renault and Mitsubishi Motors under one holding company, paving the way for the potential creation of a global automaking empire that could surpass Toyota Motor Corp. and Volkswagen AG. But there has long been resistance within Nissan to the control exerted by Renault, which saved the Japanese automaker from insolvency in 1999. Renault ended up with a 43% stake in Nissan, while the Japanese company only held 15% of Renault without voting rights, making it a junior partner even though it sells more cars.

As Ghosn pursued a more closely integrated alliance, Nada and other Nissan insiders began collecting information about his compensation in early 2018. They started working with prosecutors later that year, seeing Ghosn’s detention and prosecution as an potential opportunity to seek more favorable terms for Nissan’s relationship with Renault.

Nissan should act to “neutralize his initiatives before it’s too late,” Nada wrote to another executive in mid-2018 in an email seen by Bloomberg News. The day before Ghosn was seized on a private jet at Tokyo’s Haneda Airport, Nada wrote and circulated a memo to Nissan’s then-CEO Saikawa calling for the termination of the agreement governing the alliance and the restoration of the Japanese company’s right to buy shares in Renault, or even take it over, according to people familiar with the document.

Nissan has denied that Ghosn’s ouster had anything to do with the alliance. “Any argument that the discovery of Carlos Ghosn’s misconduct formed part of a conspiracy to undercut or terminate Nissan’s alliance with Renault is entirely false,” the company said in a statement last year. The carmaker’s position since the arrests has remained steadfast, with the company saying “the cause of this chain of events is the misconduct led by Ghosn and Kelly,” for which it found “substantial and convincing evidence.”

Nada will get an opportunity to give his side of the story in his testimony at Kelly’s trial. Born in Malaysia as Hemant Kumar Nadanasabapathy, he prefers to go by the shortened version of his surname and has been an employee of Nissan since 1990.

It’s unclear whether other issues surrounding Nada will come up at trial, such as the disclosure that he received inflated stock-linked awards, which ensnared several other senior managers including Saikawa, who was ousted as CEO in late 2019. Nada also oversaw Nissan’s internal investigation into Ghosn’s alleged wrongdoing, which Nissan’s former global general counsel Ravinder Passi flagged as a potential conflict of interest before he was demoted, based on documents seen by Bloomberg.