Nissan, Kelly and Japan itself

The reality is more complicated.

Ghosn was indicted on two additional charges of breach of trust, accused of diverting company money for his private use. Kelly has nothing to do with those charges, and since Ghosn has fled Japan, they likely will never be hashed out in court.

But Kelly will still likely be seen as Ghosn’s surrogate.

As the trial began, Nissan issued a statement expressing confidence in a guilty decision.

“Based on substantial and convincing evidence found in the investigation, Nissan established that Carlos Ghosn and Greg Kelly intentionally committed serious misconduct and significant violations of corporate ethics,” Nissan said.

“The company contends that the facts surrounding the misconduct will be shown during the court proceedings and the law will take its course.”

Japanese prosecutors have a lot riding on the Kelly case as well.

It is reportedly the first time anyone in Japan has been prosecuted on charges of filing false compensation reports. It is also a test run for the plea bargaining system that Japan has only recently adopted.

Two other Nissan executives were able to avoid prosecution by cooperating with investigators. They were accused of helping Kelly and Ghosn conceal deferred compensation.

Other flashpoints of criticism: the Japanese system’s penchant for jailing suspects at length without bail; not allowing defense attorneys to be present when suspects are interrogated; and the practice of keeping suspects waiting long periods for trial — in Kelly’s case, some 22 months.

Japanese prosecutors wield substantial power. Days before trial, Kelly’s defense team said it was still waiting for the government to share some 70 boxes of evidence. And the prosecutor’s office also won’t even publicly disclose the names of the attorneys prosecuting Kelly in court.

Jeffrey Sonnenfeld, senior associate dean at Yale School of Management, said Japan’s legal system and its handling of the Ghosn and Kelly affair make it a less appealing place to do business.

“Who won’t think twice before taking an assignment in Japan, now that their justice system has been revealed to be so unfair to foreigners?” Sonnenfeld wrote this year in Chief Executive magazine after Ghosn fled to Lebanon. “What are the next paths countries such as China and Japan and other nations may take in holding business leaders in harsh conditions without charges or counsel, in systems far more reminiscent of kidnappers or pirates than modern states?”

Three U.S. senators also published a letter in support of Kelly, calling his predicament a “cautionary tale” for Americans working in Japan.

“If Americans and other non-Japanese executives question their ability to be treated fairly in Japan, then that most important bilateral relationship in the world is at risk,” Sens. Roger Wicker of Mississippi and Lamar Alexander and Marsha Blackburn of Tennessee said in the March letter published with RealClearPolitics.

Executive search firms in Japan say those concerns are overblown, though the saga is sometimes a topic in recruiting foreign talent.

“Ghosn’s issue comes up, but it’s not the decisive factor,” said one headhunter in Tokyo. “But it makes us all want to never have to deal with the authorities. You want to cooperate.”

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