Ex-Nissan exec Greg Kelly speaks up in his defense

TOKYO — Some two and a half years after being arrested in Tokyo for allegedly scheming to help Carlos Ghosn hide more than $80 million in deferred compensation, former Nissan director Greg Kelly finally took the stand last week to tell his side of the story.

In his first days of testimony before the Tokyo District Court, the indicted American human resources executive and attorney slowly pieced together the defense he hopes will keep him out of a Japanese prison.

Kelly, who turned 64 the day his trial began last Sept. 15, offered high praise of his former boss Ghosn, who led Nissan as its chairman before his 2018 arrest and subsequent ouster. Kelly described Ghosn as one of the world's top automotive CEOs and said Nissan was lucky to have him.

Kelly, who had been Nissan's top HR executive globally, said he was simply working in the best interests of the company to keep Ghosn from defecting to a competitor. This was especially true from 2010, Kelly said, when Ghosn took a big pay cut to avoid public scrutiny of his compensation.

"We were fortunate to have a CEO as talented as Carlos Ghosn," Kelly said, describing Ghosn as a retention risk. "I was feeling the risk because, especially at that time, he was one of the top one or two automotive executives in the world, but he was making much less money."

Kelly told the court that he did not conspire with Ghosn to pay the high-flying executive tens of millions of dollars in postponed compensation as payback for the pay cut. Instead, Kelly said his efforts were aimed at keeping Ghosn on board after retirement with a generous package for such work as consulting, which Ghosn would continue to render after stepping down.

But Japanese prosecutors allege that Kelly plotted with Ghosn to effectively hide more than half his compensation in a scheme that would have the payouts deferred until after he retired.

The prosecution alleges the executives did so beginning in 2010, the year Japan changed its corporate reporting rules to require executives with big pay packages — those totaling more than ¥100 million ($907,000) a year — to disclose their individual compensation. Prosecutors allege that Ghosn, long under fire for pulling down one of the highest salaries in Japan, wanted to hide his full pay to avoid additional public scrutiny.

Kelly and Ghosn were arrested in a coordinated swoop after they landed in Japan for a meeting on Nov. 19, 2018. Both men deny any wrongdoing, but after Ghosn jumped bail and fled to Lebanon in 2019, Kelly was left to stand trial alone. He faces up to 15 years in prison if convicted. Testimony is expected to end in July, but a verdict could take until early next year.

Ghosn contends that a cabal of Nissan insiders targeted him with concocted allegations in an effort to block his plans to integrate Nissan and its alliance partner Renault under a holding company.

The case has drawn international support for Kelly, who spent the last few years of his career working in Japan for the automaker. Three U.S. senators published a letter last year in support of Kelly, a resident of Tennessee, calling his predicament a "cautionary tale" for Americans working in Japan.

The day-to-day trial is proceeding at a snail's pace, partly because all the testimony is translated consecutively, doubling the amount of time needed. Kelly's wife, Dee, is a daily fixture at the hearings, sitting in the front row and busily transcribing the proceedings on yellow pads.

The white-haired Kelly, who currently lives with his wife in a cramped central Tokyo apartment, took the witness seat in his signature look — a charcoal suit, red tie and white shirt. He was the portrait of Middle American mild manners as he answered questions in a soft-spoken voice, always quick with an apology and reiteration during not-so-seldom interpretation mix-ups.

Before Kelly took the stand, one of his defense lawyers spent an entire day at trial reading a statement that Ghosn made to prosecutors while he was jailed in late 2018 and early 2019.

Ghosn said that between 2003 and 2008, his compensation was between ¥1.5 billion and ¥1.7 billion ($13.6 million and $15.4 million) a year. But when the 2010 disclosure rule took effect, Ghosn said he took a pay cut to keep his remuneration around the ¥1 billion ($9 million) level.

"The reason why I reduced my compensation was due to public opinion, and to keep up the motivation of Nissan employees," Ghosn said in the statement.

Over the years, Ghosn had a manager in the CEO office keep track of the gap between his paid-out salary and the total amount he would have been paid had he not taken that reduction. But Ghosn said this was simply a "reference figure," not an amount he expected to receive later.

Kelly's backers describe him as collateral damage in a corporate coup against Ghosn.

His defense leans on several arguments. First, his lawyers argue that Kelly was not involved in many of the specific compensation dealings being targeted by prosecutors.

Additionally, they maintain, Kelly pursued only legal means to increase Ghosn's compensation as a way to retain him. Moreover, since the compensation packages being discussed were for post-retirement plans, they therefore did not require disclosure.

Finally, Kelly's defense team argues that none of the compensation proposals now under scrutiny were ever even finalized or decided. So there was no monetary amount that even could be disclosed.

Even though he was left behind in Japan to face the trial of his life, Kelly sang Ghosn's praises.

"His ability to make Nissan quickly recover, sustain profits but also refresh our position in the alliance, made him invaluable to Nissan," Kelly said. "I and other executives wanted to retain Mr. Ghosn."

Meanwhile, two other Americans embroiled in the Ghosn scandal are now making their way through Japan's justice system.

Michael and Peter Taylor, the father-son private security team charged with allegedly helping spirit Ghosn out of Japan in a box aboard a chartered jet, are set to start their Tokyo trial June 14.