Carlos Ghosn: the contrast between severity in Japan and impunity in France

TheThe anger behind the continuing ‘yellow vest’ protests in France is not only over the question of living standards. It includes the demand for a radical reform of the democratic process, for which the movement’s call for Citizens’ Initiative Referendums (whereby policy proposals that attract 700,000 online signatures would prompt a referendum on a given issue) could be one integral element. But the anger is also fuelled by the sentiment that the powerful elite in France enjoy preferential treatment, emoluments and a certain immunity, at a time when significant sacrifices are asked of ordinary citizens.

That is illustrated in the latest developments in the case concerning Carlos Ghosn, chairman and CEO of French carmaker Renault and formerly also, until his arrest in Japan last November, chairman of its Japanese partner Nissan. The events reveal a startling contrast. In Japan, Ghosn is confronted by a severe and rigid justice system, while in France he is treated by the authorities with an equally remarkable indulgence, one that has lasted for years and which has now taken on such a spectacular form that to talk of impunity is hardly an exaggeration. Despite the increasingly grave accusations levelled against Ghosn, the French authorities have until now done their utmost to protect him and avoid his forced departure from Renault.

Since a number of years, the French state, which is Renault’s principal shareholder (even though its stake is now 15%), had many good reasons to evict Ghosn from his post. But instead, the finance ministry has consistently covered over the mounting criticism against him, and now, when the carmaker is seriously shaken – and in turn also its industrial alliance with Nissan – the French government is again rushing to the rescue of the detained CEO, even to the point of being itself tarnished by some aspects of the case.     

In appraising the crisis in which Renault now finds itself, it is important to weigh both the Japanese side of events, which everyone is focussed on, and those in France, which many fewer appear concerned about.

In Japan, the case has gathered speed over recent weeks. Ghosn, 64, was arrested on November 19th inside his Gulfstream 650 private jet shortly after it landed at Tokyo’s Haneda airport, when he was immediately placed in detention. Shortly afterwards, it was announced that Ghosn, often described as one of the world’s most powerful businessmen, and who until then was widely feted in Japan, was suspected of having failed to report almost half of his income between 2011 and 2015 as head of Nissan, totalling 38 million euros. Among the slew of charges levelled against him is that of aggravated breach of trust, for which he faces a ten-year jail sentence if found guilty.

The Japanese prosecution services will release more details on the case against him over the coming days. Meanwhile, French daily Le Monde reported on January 8th: “The prosecution services accuse Carlos Ghosn of having transferred to Nissan in 2008 losses of 1.85 billion yen (14.8 million euros) from personal investments in currency derivatives. According to the prosecution services, Carlos Ghosn made Nissan a party to the currency derivatives contracts “requiring it to accept an obligation of responsibility in the losses incurred in the framework of the contract”. Also, according to the prosecutors, 14.7 million dollars (12.8 million euros) were transferred by a Nissan subsidiary to Nissan Gulf, a joint company created with the Saudi [businessman] Khaled Al-Juffali in thanks to the latter for having helped Carlos Ghosn to resolve financial problems with the freeing up of 3 billion yen (24 million euros).” 

On January 11th, three days after Ghosn first appeared before a judge in Tokyo when he insisted he was innocent of the accusations against him, he was the subject of two new charges for breach of trust and for having underreported his income from Nissan over the period 2015-2018. Despite a request by his lawyers for his release on bail, Ghosn, who has now spent almost two months in detention, may well remain in detention until his trial, which could be as much as six months away.

While the details of the case illustrate the downfall of a leading industrial boss, it raises numerous questions on practices in Japan, both regarding the country’s justice system and the governance of Nissan. Concerning the justice process, one hardly needs to be a specialist of Japanese law to understand that the rights of the accused are particularly weak, even worthy of medieval society.

While not reducing the gravity of the charges against Ghosn, it cannot be excluded that the senior management of Nissan, which is keen to gain a more powerful role in the carmaker’s alliance with Renault, played a secret and major part in Ghosn’s arrest and which now threatens to deal him a fatal blow.

Last Friday, French daily Le Figaro published an op-ed article which summed up the situation as follows: “That Carlos Ghosn crossed the red line of Japanese law by obtaining from Nissan the promise of delayed remunerations, to be paid after he took retirement, is not obvious. Of course, the sums involved – almost 70 million euros – are dizzying. Should this remuneration, to be paid at a later date, of which the calculations are uncertain and which was required to be the subject of future validation, have been made public? It is that single question that the magistrates must answer […] That Carlos Ghosn had, in 2008, demonstrated cavalier behaviour with his Japanese employer is also a reality, which the CEO recognises. The group temporarily made itself guarantor for his personal financial operations aimed at covering the risks of the exchange rate upon his remuneration in yens. Was that illegal? The board gave its agreement, on condition that the group was to make no losses. But this green light was of a general nature, and not personal. It is therefore uncertain whether the board members signed it off in all full knowledge. There again, the appraisal of its legality will be complex.”

“That Carlos Ghosn’s management was profitable for his directors is also true,” added Le Figaro. “Mouna Sepehri, executive vice-president for the Renault CEO’s office, has earned, since 2013, 500,000 euros [in board attendance fees] from RNBV, the company jointly owned by Renault and Nissan. In the battle against Ghosn, and between Renault and Nissan, there are also stray bullets. That these attendance fees were unknown to the public or the Renault board is however not necessarily reprehensible. Mouna Sepehri is not an executive director. And, however strange it may appear, Renault is not required by statutes to be made aware of what happens at RNBV. The Ghosn case is perhaps the moral downfall of a man. It is certainly that of a system tainted by secrecy and the absence of counter powers. The board of Renault, shareholder in Nissan, is blind to what is decided there. As for the governance of Nissan, it respects none of the principles of the disassociation of responsibilities. Japan should also engage in the trial of the functioning process at its large corporations.”

French finance minister 'economical with the truth'

It is no doubt accurate to conclude that the Japanese justice system is employing against Ghosn the most energetic procedures it disposes of, and also that the senior management at Nissan are certainly not driven by a sense of virtue alone. 

But there remains, in contrast, a quite amazing complacency on the part of the French authorities. For as soon as the scandal broke, they rushed to Ghosn’s defence, keeping him in his post at Renault, rather than helping to establish the truth. The most blatant illustration of this complicity, for that is what is at work, is the behaviour of French economy and finance minister Bruno Le Maire. Just 24 hours after the arrest of Ghosn, he gave an interview to radio station France Info in which he insisted that, after verifications in France, the Renault boss was involved in no irregular behaviour and was perfectly innocent.

The words he used are worthy of close attention(click on the France Info Twitter post below).

For Bruno Le Maire’s declarations now appear to have been, to coin a phrase, "economical with the truth". Speaking at 8.45 am on November 20th, he said that “as soon as I learnt the news” (of Ghosn’s arrest) he and his junior minister Gérald Darmanin “asked our services to verify the tax situation of Carlos Ghosn in France”, and that “there is nothing in particular to report on the tax situation in France of Mr Ghosn”. When the journalist interviewing Le Maire insisted with his question on whether Ghosn paid his taxes in France, the minister dodged the question by repeating that there was nothing in particular to report.  

However, thanks to a report by French daily Libération, we now know that Ghosn’s tax situation in France is worthy of much closer attention. Libération, intrigued by the fact that the finance ministry could report back within hours with a clear answer about the tax affairs of such a wealthy businessman (Ghosn earned 15 million euros in 2017, made up of 8 million euros as chairman of Nissan and 7 million euros as CEO and chairman of Renault), investigated further and discovered that in fact Ghosn has no longer been a tax resident of France since 2012.

“That year he chose to domicile himself in the Netherlands,” reported the daily, “the location of Renault-Nissan BV, the Dutch holding company which, since 2002, crowns the alliance between the two carmakers. At first sight, the choice might appear surprising in that Carlos Ghosn, while travelling a great deal, rather more shares his time between Paris, Tokyo and the group’s industrial plants. Amsterdam is home to what is just a modest headquarters with a small staff.

“On the other hand, [an equivalent to] the [French] ISF wealth tax does not exist in the Dutch tax system,” noted Libération. “But up until 2012, Carlos Ghosn was subject to that tax in France. He would also have been required to pay the exceptional contribution payment on high revenues (CEHR) which was put in place when [socialist president] François Hollande was at the Elysée. Furthermore, 2012, when the Left came back to power, was when there was an increase in ISF rates […] Yet in the Netherlands, as in France, the regulations demand that to be tax domiciled there it is necessary to stay in the country for a minimum of 183 days per year. Does the widely travelling Renault CEO respect that quota? Or is it that, as a French finance ministry manager supposed, the Dutch administration, rather satisfied to be able to count [Carlos Ghosn] as a tax payer, didn’t show any particular energy to check up on him?”

As that report suspects, it is without doubt not because of income tax that Ghosn set himself up as domiciled in the Netherlands, a country which has broadly the same rates, if slightly lower, in that domain as those of France. It would not justify the risk of appearing to commit fraud.  

“Whatever, his French income, in the form of [a yearly] 7 million euros received as chairman and CEO of Renault, continues to be taxed in France,” continued Libération. “Because he is no longer a resident, each year Renault takes off 20% of the stable income in his renumeration (1.2 million euros in 2017) as a sort of provision. The remaining tax due on all his French income is then settled by Carlos Ghosn after he completes a [tax] declaration just like any ordinary tax payer.”

However, after François Hollande was elected president in 2012, he introduced a slight increase in France’s then “solidarity tax on wealth”, or ISF, and the neutralisation of the so called “tax shield” (bouclier fiscal) created by his predecessor Nicolas Sarkozy which placed a lower ceiling on tax contributions demanded of the rich (all of which the socialist administration would eventually go back on). Taxes were also increased on income from capital and savings interests. Meanwhile, in the Netherlands there was no equivalent to the ISF and tax on capital income was comparatively low. Interviewed by France Info radio earlier this month about the revelations that Ghosn was tax domiciled in the Netherlands, Belgian Green party MEP Philippe Lamberts, a specialist on European financial affairs, declared that, “the Netherlands is one of the worst tax havens in Europe”, and a “significant money laundry”.

Orange boss Stéphane Richard slams media 'lynching'

Why did French economy and finance minister Bruno Le Maire claim that there was “nothing in particular to report on the tax situation in France of Mr Ghosn”? Had he, during the night following Ghosn’s arrest in Japan, received an assurance from his public finances department that the Renault boss, whose activities are essentially based in France and Japan, spent at least 183 days per year in the Netherlands?

In truth, Le Maire’s affirmation was a case of either saying too much, given that by law, he is bound to respect the confidentiality of Ghosn’s tax situation, or too little in that he should have made clear if the French tax authorities were convinced of Ghosn’s rightful residence in the Netherlands, where he is supposed to spend half the year.  

But the minister is no doubt incapable of giving such an assurance, and the aim of his statement was not to contribute to the truth of the matter but rather to save Ghosn from his predicament, despite the moral discredit of the affair and the criminal charges he faces in Japan.

The striking thing about the whole affair is that a culture of impunity is a constant element of public life in France. Even before the recent events, Ghosn has been the focus of criticism but ignoring advice and instructions from the government notably concerning his vast renumerations which made him one of the world’s highest-paid corporate bosses. But despite this, the state has never taken him to task. It is worth noting that since 2015, one of the French state’s representatives on the Renault board is Martin Vial, head of the agency that manages state interests in companies, the APE, part of the economy and finance ministry. Vial is the husband of French defence minister Florence Parly.

Ghosn was allowed to escape the consequences of the fiasco over the 2011 “spying” scandal at Renault, when three of its senior executives were sacked after they were wrongly accused of selling the carmaker’s secret plans for the development of electric vehicles, accusations which Ghosn had publicly repeated after a summary inquiry. But Ghosn was never brought to account and it was his deputy, Patrick Pelata, who was to pay the price with his forced resignation over the scandal. Similarly, Ghosn has been allowed a free hand in shaping the industrial and employment strategies of the group, which has become a symbol in France of the capitalist methods adopted in anglophone societies, with a highly paid boss and almost half of its workforce on temporary contracts.

While the government has recurrently allowed Ghosn to do just how and what he wants, it is quite extraordinary that Bruno Le Maire now continues with this same approach following the Renault boss’s arrest in Japan.        

Some while ago, a new principle for those holding public office in France emerged whereby it became accepted practice that if a person was placed under investigation in a criminal probe (which is a step just short of being charged), they should stand down from their post, for ethical reasons but also to prevent the exercise of their responsibilities from being clouded by their personal problems. But that systematic approach was later abandoned, and for years successive governments have often leant support to those who are the object of a judicial investigation, sometimes into serious suspected offences.

There are numerous examples, such as the case of Stéphane Richard, a senior civil servant and chairman and CEO of French telecommunications giant Orange (the former France Télécom), in which the French state is the main shareholder. He has been sent for trial (which will open on March 11th) along with five other people on charges of “fraud” and “misappropriation of public funds” in connection with the fraudulent award in 2008 of 404 million euros from the public purse to the controversial French tycoon Bernard Tapie (see more here and here) when he was cabinet director to then economy and finance minister Christine Lagarde. Yet however grave the charges against Richard, the state has consistently leant him support, with Bruno Le Maire publicly applauding Richard’s “good work at the helm of Orange”. The state has not only never questioned Richard’s position at Orange, but even did its utmost to see his mandate renewed, which was confirmed, for a further four years, in May 2018.

Just days after the arrest of Carlos Ghosn, Stéphane Richard took to Twitter (see below) with a message in support of the Renault boss, in which he denounced a “media lynching” which he said was “a national sport” in France. Coming from him, that was a bit rich.

On the same theme, one could cite the support given by the 2012-2017 socialist government to Christine Lagarde. In 2011, she succeeded Dominique Strauss-Kahn as International Monetary Fund (IMF) managing director, and in early 2016 ran for a second successive five-year mandate as IMF chief. The move was calculated to protect her from the consequences of a long-running investigation into her role, when she was economy and finance minister, in launching the private arbitration process that led to the fraudulent award of 404 million euros from public funds to Bernard Tapie. Lagarde was eventually sent for trial in late 2016 before France’s “Court of Justice of the Republic”, the CJR, a special court dedicated to investigating and eventually trying members of government accused of wrongdoing in the exercise of their duties. But during her bid earlier that year for another term as IMF chief, shortly before she was summoned to appear before the CJR, the then French foreign affairs minister Laurent Fabius told BFMTV: “I want to confirm that our candidate for the IMF is indeed Christine Lagarde. She has performed excellent work and we will be very happy if she is re-appointed.”

At the end of her trial by the CJR in December 2016, she was found guilty of “negligence” but was handed no sentence and escaped being given a criminal record, the presiding judge justifying the decision on the basis of what she said were Lagarde’s “personality” and “international reputation” and because at the time of the events she was occupied with “an international financial crisis”.

What double standards! It is hardly surprising that the ‘yellow vest’ protestors can feel that those in power, whether in business or political office, are given protection and advantages that are denied to ordinary citizens, as once again demonstrated with the government’s indulgence towards Carlos Ghosn. But in these days of turmoil and unrest across France, one can find so many other examples that confirm the reality of the impunity allowed to some; because of actions that were no doubt very similar, the former professional boxer Christophe Dettinger, who was filmed punching and kicking police during a yellow vest gathering in Paris was immediately placed in detention after giving himself up, whereas President Emmanuel Macron’s security aide and deputy cabinet chief Alexandre Benalla, who was filmed assaulting individuals on the margins of May Day marches this year in the capital has, since being forced to leave his job, been allowed to travel the world in grand style and flaunt his powerful contacts. As the 17th-century French poet Jean de la Fontaine wrote in his fable The Animals Sick of the Plague, “According to whether you are powerful or poor, the court’s judgments will see you as white or black”.

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• The original French version of this op-ed article can be found here.