Amid a prospect of being released on bail, Carlos Ghosn received an unexpected blow from prosecutors who are wary of him leaving Japan and disrupting subsequent investigations.
The former chairman of Nissan Motor Co. was rearrested Friday on suspicion of aggravated breach of trust under the Companies Law, because the special investigation squad of the Tokyo District Public Prosecutors Office apparently became wary of his possible release on bail.
He has already been indicted for understating his remuneration in securities reports.
Using Nissan as a wallet
"For Ghosn, Nissan is just like his own wallet," a senior prosecutor said.
"It's meaningless if we don't investigate a case that symbolizes how he appropriated the company," the prosecutor added. The prosecutor has been insisting since immediately after Ghosn's first arrest on Nov. 19 the need to establish a case that can prove such an act.
According to sources, the squad started a secret investigation in connection with allegations against Ghosn around May. Upon receiving relevant information from the Nissan side, the investigators obtained a large amount of documents based on the Japanese version of the plea-bargaining system. The documents included information that suggested a suspicious purchase of a house via a Dutch subsidiary of Nissan among other acts of suspected misconduct which took place abroad, according to the sources.
However, it was difficult to probe Ghosn's "overseas routes" in the stage of the undercover investigation. Serving as chairman of France's Renault SA as well, Ghosn was based overseas. Therefore, once he became aware of the ongoing investigation, he could have possibly taken action to destroy evidence, perhaps fouling up the lead to an arrest.
Taking this into consideration, the prosecutors decided to investigate and proceed with the overseas routes immediately after Ghosn's arrest, according to the sources close to the squad.
Under such a policy, the prosecutors gave top priority to investigate the alleged case of falsely understating his executive remuneration in Nissan's securities reports.
A total of more than 9 billion yen was believed to have been understated in the reports over a total of eight years.
The squad then drew up a blueprint to first arrest him on suspicion of violating the Financial Instruments and Exchange Law by understating his remuneration over five years until March 2015. Then after indicting him for the charge, they planned to rearrest him on suspicion of violating the law, but this time for the three years until March 2018.
This would detain him for about 40 days in total, and during that period, the prosecutors had planned to proceed with the probe into the overseas channels so they could launch a third arrest around the beginning of the year on an allegation that indicates he appropriated and used Nissan with the aim of benefiting himself.
Arrest warrant in early hours
The special investigation squad considered Nissan's confidential reserves to be the core of Ghosn's alleged misconduct. The fund was managed by Nissan Middle East F. Z. E., a Nissan subsidiary based in the United Arab Emirates, and Ghosn was in charge of how to use the reserves, the sources said.
The investigation into the flow of money in the reserves found that Ghosn allegedly provided a total of 14.7 million dollars (about 1.6 billion yen) to an acquaintance in Saudi Arabia in connection Ghosn's private investment loss.
The prosecutors' blueprint, however, did not unfold as initially planned as the situation suddenly changed following the Tokyo District Court's decision not to extend his detention period.
On Thursday, the court rejected a request by the special investigation squad to extend the period of Ghosn's detention. Regarding his two arrests on suspicion of understating his remuneration, the court concluded that there was no reason to extend the detention period on a series of charges of false statements which had taken place in the continuing business years. The court's decision made it highly likely that Ghosn would be released soon.
Shock and frustration spread among prosecutors following the court's move.
"If Ghosn leaves Japan, we won't be able to investigate the core allegation," a source close to the squad recalled on the day.
The squad then decided to advance their timeline and obtained a fresh arrest warrant early on Friday. Several hours later, the prosecutors rearrested Ghosn, a move that sent another shock wave around the world.
Year-end and new year probe
When corporate board members and those in similar positions act in order to benefit themselves or third parties and cause financial losses to their companies as a result, their deeds are regarded as aggravated breach of trust, a criminal charge specified under the Companies Law.
Ghosn allegedly transferred his personal investments loss to Nissan, which brought about Friday's arrest.
Then, the loss was returned to Ghosn. As a result, it is believed that Nissan did not suffer any actual damage. However, the prosecutors concluded that a crime had been already established when the loss was transferred to Nissan, the sources said.
On the other hand, it is difficult to prove that someone caused damage to a company in a case of aggravated breach of trust, and therefore in many cases in the past, defendants have been acquitted.
Now that the prosecutors had to bring forward the initial schedule on their blueprint, the subsequent investigation is expected to be carried out around the year-end and over the New Year's holidays, possibly making it difficult to question people involved in the case.
Yasuyuki Takai, a lawyer and former prosecutor of the special investigation squad, said, "The latest arrest may come under criticism of some other countries as a means of thwarting Ghosn's release on bail.
"But the court, which received a request to detain Ghosn, determines whether an arrest is justifiable. So, it's unreasonable to criticize prosecutors for detaining him for a long time," he added.
"However, if the prosecutors knew they could rearrest him on Friday, they could have concluded charges of underreporting his pay in a single arrest, and then rearrested him on suspicion of aggravated breach of trust," Takai pointed out.
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