TOKYO — The star witness for Japanese prosecutors finished testifying against Nissan Motor Co. and its former U.S. human resources executive Greg Kelly this month, portraying a dysfunctional corporate culture in which company boss Carlos Ghosn signed his own paychecks and top brass were afraid to challenge him.
But testimony to date has shown only a tenuous link between Kelly and the alleged scheme to hide more than $80 million in deferred compensation to the former chairman.
The trial continues this week, with Kelly, 64, sitting in hearings scheduled on Christmas Day, which is not a public holiday in Japan, where Buddhism and the native Shinto religions are the main faiths.
Kelly’s wife, Dee, who came from their Tennessee home to be with her husband for the trial, said rescheduling the Christmas trial date was a nonstarter with Japanese authorities.
In his testimony so far, Toshiaki Ohnuma, Nissan’s general manager of the Secretariat division, which handles executive pay, said he worked closely with Ghosn on various pay plans that Ohnuma considered illegal.
He said he worked on the proposals with several Nissan executives, including Kelly, and two other people in his Secretariat division. But when cross-examined about Kelly’s role, Ohnuma recalled sometimes fuzzy memories and conceded Kelly often wasn’t involved.
Ohnuma testified that he couldn’t remember whether some documents outlining the postponed remuneration were actually shown to Kelly. Other times, Ohnuma said they were.
Ohnuma seemed to offer conflicting accounts as to whether Kelly had been shown other documents only in their draft state, or shown them after they had been signed by Ghosn.
When executive compensation was being finalized at the end of a fiscal year, Kelly was usually not involved in the process, Ohnuma said. Kelly was shown the final amount to be paid only in cases when Ghosn said it was OK to show him, the witness said.
When Kelly was arrested along with Ghosn on Nov. 19, 2018, Nissan branded the American executive as the “mastermind” behind efforts to pay Ghosn secretly without public disclosure.
In more than two months of testimony, however, Ohnuma depicted himself as working directly with Ghosn on most of the planning. He considered several ways to pay Ghosn without reporting it in the financial filings, including making payments under a long-term cash incentive plan. But by 2018, they narrowed the plans down to post-retirement advisory fees and deeply discounted stock options.
Ohnuma, who received legal protection under a plea bargain in exchange for cooperating with prosecutors, said he often felt the arrangements, meant to skirt disclosure laws, were illegal.
“There was understanding we were not disclosing what should have been disclosed. Fixed remuneration had to be disclosed, so there was awareness we were not disclosing what needed to be,” Ohnuma said.
But he never spoke up about it. Ohnuma also admitted he feared being removed from his post if he objected. Ohnuma claimed a manager from Nissan’s legal department had been sidelined after raising questions about other financial dealings that involved Ghosn.
Kelly’s defense lawyer asked Ohnuma why, if the compensation matter was illegal, he didn’t take it to the board of directors or company auditors. Ohnuma replied that doing so would have been pointless in a corporate hierarchy where few were brazen enough to challenge Ghosn.
“I could not expect them to take any action on the matter,” Ohnuma told the court. “The atmosphere was not conducive for directors or auditors to say things to Ghosn.”
Ghosn, for instance, signed his own annual compensation agreements, according to documents shown in court. And he signed his own agreements on postponed compensation. Ohnuma said Ghosn was signing the agreements as CEO of the company to himself as an individual.
The right to do so was granted to Ghosn by the board of directors, Ohnuma said.
Kelly is accused of conspiring with Ghosn to conceal more than $80 million in deferred compensation to the former Nissan chairman and CEO. Both Kelly and Ghosn deny the charges.
But Ghosn fled Japan in December 2019 to seek refuge in Beirut, beyond the reach of Japanese law. Kelly could face 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 greater than ¥100 million ($962,000) a year — to disclose individual compensation. Ghosn, long under fire for pulling down one of Japan’s highest salaries, wanted to avoid public criticism, prosecutors say.