The lawyers who helped to build, and bring down, Carlos Ghosn

In the three years since Carlos Ghosn was detained on a Tokyo airport tarmac, much has emerged about how forces within Nissan worked to remove him. Yet a key group has avoided close scrutiny of their role in the once-powerful car executive’s downfall: the lawyers.

A small clutch of lawyers from Latham & Watkins, one of the world’s largest law firms, advised Nissan for years on how to compensate its then chairman and CEO. That included the remuneration package that would become the basis of the first charges against Ghosn, for concealing the full extent of his income.

Then, as Ghosn’s pay became the subject of a criminal investigation in 2018, Latham & Watkins was enlisted to investigate his alleged wrongdoing, despite warnings to Nissan’s board that it posed a serious conflict of interest.

“I was concerned right from the get-go about their involvement” in the company-ordered probe, said Ravinder Passi, Nissan’s former global general counsel.

Passi sued the carmaker last year for wrongful termination, saying that he was dismissed after questioning whether the law firm acted in Nissan’s best interests. “I was incredibly surprised, and shocked. How is this going to appear when you’ve got the same lawyers investigating things, including their own work? The situation was ripe for misbehavior,” he said.

Ghosn’s arrest by Tokyo prosecutors on Nov. 19, 2018, stunned the business world, shock that was compounded just over a year later when the executive — a legend in the cutthroat automotive industry — escaped from Japan while out on bail. He is now in Lebanon and will probably never face trial for his alleged crimes.

A powerful force at Nissan since engineering its rescue with a bailout from Renault in 1999, Ghosn had made enemies in his almost two decades at the helm of what became the world’s biggest carmaking alliance.

From early 2018, there was a campaign within Nissan led by Senior Vice President Hari Nada and a small group of insiders to oust Ghosn, Bloomberg News revealed last year. They feared that Ghosn’s plans to more closely integrate Nissan and Renault would threaten their positions and curb the Japanese company’s independence. But the insiders didn’t pull it off on their own.

Latham & Watkins, Nissan’s law firm since the 1980s, was there at many key junctures, according to a subsequent Bloomberg investigation based on hundreds of documents, interviews and testimony from the trial of Greg Kelly, a former Nissan executive arrested alongside Ghosn. Both have denied the charges.

Despite what Passi, who reported to Nada, calls its deeply conflicted position, Latham & Watkins remains Nissan’s top legal adviser, as the carmaker continues to grapple with the fallout from Ghosn’s undoing — including in court.

Nissan is facing a raft of lawsuits across the globe from disgruntled shareholders, business partners and former employees. Though Ghosn’s made-for-Hollywood story may have faded from the headlines, for Nissan it has had a long tail, hampering the company’s efforts to return to profitability and contend with the changes sweeping through the automotive world.

‘Robust’ probe

Azusa Momose, a Nissan spokeswoman, said that Latham & Watkins’s probe into Ghosn and Kelly was “robust, thorough and appropriate,” and that its findings were corroborated by multiple government agencies in their own “thorough, independent investigations.”

“Latham & Watkins were not at any time conflicted in assisting Nissan to carry out its investigation,” Momose said. “Their client is, and always was, Nissan. Any suggestion that Latham & Watkins were conflicted, or that any potential conflict prevented them from assisting in the conduct of a robust investigation, is not supported by any facts.”

In a statement provided to Bloomberg, Latham & Watkins said it “regularly discussed the firm’s engagement on the internal investigation with Nissan and its executives and employees — including Nissan’s former general counsel, Ravinder Passi — all of whom approved of and agreed to continue with the firm’s engagement.”

“Latham strongly disagrees with any suggestion that the internal investigation was biased, and notes that numerous independent agencies and law enforcement authorities from Japan and the U.S. conducted their own thorough and independent investigations and reached conclusions consistent with those of the internal investigation,” the firm said.

Testifying in March at Kelly’s trial — where the former board director faces charges of helping Ghosn conceal his income — Hiroki Kobayashi, a partner at Latham & Watkins in Tokyo, described the firm’s relationship with the carmaker in detail.

He and others, including Michael Yoshii, another senior partner at the law firm, counseled Nissan on everything from its contract with its biggest shareholder, Renault, to the establishment of subsidiaries and commercial contracts. The firm also advised on compensation for directors, Kobayashi said.

It was typical legal work by an outside law firm for its long-time corporate client. But it began to evolve into a more complex relationship in the months before Ghosn and Kelly’s arrests.

In early 2018, Ghosn was seeking ways to recoup some of the income he had given up voluntarily after Japan tightened reporting rules for executives’ remuneration in 2010. Companies were told to disclose pay above the relatively low benchmark of 100 million yen ($1.1 million) for CEOs and other senior managers.

On July 3, 2018, Kobayashi advised Nada — who was in charge of legal matters at Nissan at the time — on the disclosure requirements in Japan if Nissan sought to pay Ghosn from his pension before he retired, according to an email seen by Bloomberg. This was done in response to questions from Ghosn relayed to the firm via Nada and Kelly.

Kobayashi also gave Nada advice on the possibility of selling back to Ghosn properties the company had bought for him in Brazil, France and Lebanon. Nada and Kelly were told by Latham & Watkins that if shareholders were to approve early pension payments to Ghosn, that would “not trigger a requirement to redo disclosure of director compensation,” Kobayashi wrote in the email.

Yet, since as early as April of that year, the law firm had already been separately advising Nada — who was seeking information to use against Ghosn, according to people with knowledge of the matter and documents seen by Bloomberg — on the potential criminality of arranging undisclosed payments to the then-chairman.

One memo from the firm to Nada laid out in detail how Japanese authorities might interpret any failure by Nissan to fully account for Ghosn’s compensation in securities filings, saying there could be fines, other penalties and even imprisonment for those responsible.

Essentially, Latham & Watkins was offering guidance to Nada, who was working with a small group within Nissan, on compensation measures that could run afoul of securities law, the memo showed. Some of that communication was sent to Nada’s personal email address instead of his company account, documents show.

Then, after the arrests and despite being a key adviser on Ghosn’s compensation, the law firm accepted a formal mandate from then-Nissan CEO Hiroto Saikawa to investigate the matter. Saikawa enlisted Latham & Watkins on Nada’s advice, people with knowledge of the matter said. Saikawa, who left Nissan in late 2019, declined to comment.

The report that resulted from the probe — code-named Kali 10 by Nada, for the Hindu goddess and destroyer of evil — ran to more than 170 pages and was kept to a close group within Nissan. An army of Latham & Watkins lawyers and paralegals in Tokyo and Los Angeles spent hours sifting through emails to construct a timeline of how Ghosn’s pay was crafted, and who decided what and when.

The report ultimately became the official account of Ghosn and Kelly’s alleged misdeeds that Kobayashi presented to Nissan’s board as a PowerPoint presentation in September 2019, almost a year after the duo’s arrest.

“Nissan’s internal investigation, conducted along with Latham & Watkins, was tainted by conflict of interest issues and was not independent,” said Leslie Jung-Isenwater, a spokeswoman for Ghosn. “As Nissan’s long-time outside counsel, the firm was indeed not an independent fact finder, as they had given legal advice concerning precisely the very issues that were the subject of the investigation.”

James Wareham, Kelly’s U.S. attorney, called Latham & Watkins the “most conflicted law firm on earth” for leading the investigation into its own advice, and that it should never have agreed to take on the probe. Nissan’s board “must engage truly independent counsel to revisit the entire affair — Nada’s role, as well as the role of other conspirators; the role of the Ministry of Economy, Trade and Industry; and the role of the Japanese prosecutors,” he said.

Other warnings

No fewer than six other law firms, one hired by Renault and others by Nissan, warned the automaker’s legal department, then led by former chief counsel Passi, of the potential legal risks and conflicts of interest of keeping Nada and Latham & Watkins involved in the probe.

“L&W are not independent as they were involved in the facts under investigation and acknowledge they could be called as a witness,” Allen & Overy, a law firm brought in to advise Nissan’s legal department, wrote in a January 2019 letter.

Quinn Emanuel Urquhart & Sullivan, a law firm retained by Renault to look into the circumstances surrounding the arrests, wrote: “Latham has been deeply involved, for a very long time, in various aspects of Nissan’s executive compensation, the propriety of which is the very basis of the charges against Mr Ghosn.”

“If concerns are ultimately raised regarding Latham’s work,” it continued, “a claim for malpractice may be contemplated, which will make Latham a party to the lawsuit and require that some of its current or past members be interviewed.”

Cleary Gottlieb Steen & Hamilton and Mori Hamada & Matsumoto, two firms hired by Passi to review the investigation, also warned that Latham & Watkins should be kept at a distance from the criminal proceedings and internal investigation.

A representative from Cleary Gottlieb declined to comment for this story. Representatives from Allen & Overy, Quinn Emanuel and Mori Hamada didn’t respond to requests for comment.

The warnings didn’t just come from other law firms. Megumi Yamamuro, a former judge hired by Nissan’s legal department in 2019 to advise on criminal proceedings, told the carmaker’s lawyers that he was shocked by Latham & Watkins’s involvement in the probe into Ghosn and Kelly given the firm’s conflicts of interest, according to a summary of a July 2019 meeting between Yamamuro, Passi and Nissan’s lawyers.

Yamamuro also zeroed in on other conflicts. He pointed out serious issues with Nissan’s interactions with Japanese prosecutors over the handling and review of exculpatory evidence related to the allegations against Ghosn and Kelly. Yamamuro didn’t respond to a request for comment.

By the end of 2019, two lawyers from Latham & Watkins’s Tokyo office involved in the Ghosn probe had left the firm, fearing that their careers would be tarnished by its conflicted role as enabler and investigator, according to multiple people familiar with their thinking at the time.

No links

When companies find themselves under pressure to conduct an internal investigation, standard practice calls for the board of directors to hire an outside law firm with no links to the company to conduct the probe. That was the case earlier this year with Toshiba, which was accused by activist shareholders of colluding with the Japanese government to thwart their efforts to place directors on the board and have a say in the electronics maker’s strategy.

The investors successfully introduced a shareholder motion to commission an independent report that came to a starkly different conclusion from the company’s own internal investigation: Toshiba had rigged the vote on board appointments at its own shareholders meeting.

“A probe is supposed to be about getting an accurate reflection of the facts,” said Passi, who said his questioning of the investigation as well as Nada and Latham & Watkins’s role in it ultimately cost him his job. He was demoted from global general counsel to a special projects role, reassigned to the UK and later dismissed.

In his wrongful termination suit lodged in a British employment tribunal, Passi said that Nissan, led by Nada, directed a campaign of surveillance and harassment to drive him out. Nissan declined to comment on Passi’s assertions.

Passi — along with the other law firms — had warned that keeping Nada and Latham & Watkins involved with the probe would eventually lead to “exposure and risk” for Nissan. The automaker’s ability to defend itself at trial would be compromised, they said, according to documents seen by Bloomberg.

Signs of that may already be emerging. Nissan recently agreed to settle a class action brought in Tennessee by investors after facing demands to produce documents about Ghosn’s compensation arrangements and the internal probe. The automaker has also been sued in various jurisdictions for wrongful termination by former employees, some of them linked to Ghosn.

Hundreds of millions of dollars have been spent by Nissan on investigations and lawyers to deal with the fallout from the former chairman’s ouster, well above the $80 million in income he allegedly hid.

“The potential consequences of whether you know the truth are huge for a listed company when you’re investigating alleged crimes by executives,” Passi said. “Because of the inherent conflict that should have been accounted for and dealt with immediately, one has to ask whether Nissan will always be on the back foot.”