The rise and fall of Carlos Ghosn

Carlos Ghosn was tired. At 64 years old, the chairman of an auto empire that spanned several continents and included Nissan, Renault and Mitsubishi wasn't bouncing back from jet lag the way he used to. Melatonin wasn't working anymore, and he had bouts of insomnia, phoning his children in the middle of the night or going on long walks around his Tokyo or Paris neighbourhood. He planned to retire soon, stepping back from spending his life on an airplane, albeit a luxurious one paid for by Nissan.

Last month, just before Thanksgiving weekend, Ghosn headed to Tokyo to meet his youngest daughter and her boyfriend and attend a board meeting. He was scheduled to land at Haneda Airport at 4pm.

The daughter, Maya Ghosn, 26, had spent most of her childhood in Japan and wanted to introduce her boyfriend, Patrick, to her favorite places. Bringing a boyfriend home is a common rite of passage, but a particularly intimidating prospect when growing up Ghosn - a child of one of the most romanticised and ruthless chief executives the global business community has ever seen.

Maya Ghosn had made a 7.30 dinner reservation at Jiro, the Michelin-starred sushi counter hidden in a basement in the city's Ginza district.

On the tarmac in Beirut, Carlos Ghosn opened WhatsApp and texted his four children on a group chain labeled "Game of Ghosns," for his favorite TV show, ‘Game of Thrones’, the bloody HBO drama about dynasties under siege. "On my way to Tokyo! Love you guys!" Ghosn texted as his jet lifted off.

He never made it to dinner.

On November 19, Japanese prosecutors surrounded Ghosn's Gulfstream after its arrival and arrested him on allegations that for years he had withheld millions of dollars in income from Nissan's financial filings.

Maya Ghosn was staying at her father's corporate apartment, and when he didn't show up she checked with his longtime driver at Nissan, who assured her his flight had probably been delayed. She texted: "Hey, just heard your flight got delayed. Please let me know when you land, worried about you."

Exhausted from jet lag, she took a nap. Patrick woke her when he saw a tweet about Carlos Ghosn's arrest. "I was in shock," she said in an interview.

Minutes later, the doorbell rang. Two Japanese men in black suits slipped off their shoes to enter the two-bedroom apartment and showed Maya Ghosn a brief note in English.

"There is a case against your father," it read, according to Maya Ghosn's account. "The Tokyo judge has warranted us access to search the house. We need a witness. Thank you for cooperating."

Fifteen men, also in suits, followed. They locked the front door, told Maya Ghosn that they were prosecutors, warned the couple not to use their phones and suggested that they might tap the apartment. They rummaged through Carlos Ghosn's drawers, studying family photos, Maya's 10th-grade report card, personal letters, her parents' divorce papers.

"I wanted my dad to know that in this situation I was polite and handled it maturely, and I didn't want to give them any reason to feel satisfied by an ounce of despair in my eyes," Maya Ghosn said. "But inside, I was shaking. I couldn't stand up. I had to hold the wall."

Six 1/2 hours later, at 11.30pm, the men left.

Worried that anything they said was being recorded, Ghosn and her boyfriend went into the bathroom, climbed into the shower fully clothed, turned on the water and whispered about what to do next. She called her siblings to figure out how to tackle Japan's labyrinthine legal system.

Told by authorities that she was forbidden to contact her father, Ghosn waited at the apartment for nearly two days until an American lawyer working for her family called.

"We got very clear instructions to leave as soon as possible for fear of being detained or interrogated to extort my dad," she said. "So we got on the first flight out."

Carlos Ghosn wasn't supposed to succeed in Japan, but he wasn't supposed to fail like this. He first made headlines in 1999 when, in a nation known for its distrust of outsiders, Ghosn, a brash Brazilian-born and Lebanese- and French-educated engineer, showed up in sunglasses and a pinstripe suit with plans to carry out an American-style restructuring of a failing Nissan. The Japanese carmaker had $35 billion (Dh128 billion) in debt, provided lifetime employment to a bloated workforce and produced a fleet of the kind of cars you'd dread getting at the rental counter.

Ghosn, then 45 and a vice president at Renault, had helped oversee a turnaround at the middling French automaker, which had agreed to spend $5.4 billion to buy a 36.8 per cent stake in Nissan Motors.

John Casesa, then a top auto analyst at Merrill Lynch, advised Ghosn to rent a house in Tokyo rather than buy one.

"The widely held consensus was that he would fail, that Nissan wasn't worth saving and it couldn't be done," Casesa said.

At the time, Bob Lutz, the loquacious vice chairman of General Motors, assessed the deal this way: Renault would be better off "taking $5 billion, putting it on a barge and sinking it in the middle of the ocean."

But Ghosn, with his severe black eyebrows and puffed chest, was undeterred. He closed factories, slashed suppliers, laid off 14 percent of the workforce and invested in design. Six years later, Nissan had surpassed Honda to become Japan's No. 2 automaker, its market capitalisation had quintupled and its operating margin had risen tenfold. Altima sedans, Titan pickup trucks and Murano SUVs made Nissan a major player in the US market - an achievement that Wall Street once deemed impossible.

By the early 2000s, Ghosn was head of the Renault-Nissan alliance and the first person to simultaneously serve as chief executive of two Fortune Global 500 companies, the type of chief executive who even if you didn't know how to pronounce his name (rhymes with phone), you'd know his products.

The enigmatic "gaijin" (as foreigners are called in Japan) had achieved a status bestowed on only a handful of chief executives, akin, at least in Japan, to Steve Jobs, Warren Buffett or Elon Musk. Paparazzi swarmed. Fans asked for autographs. Japanese businessmen, eager to emulate the Nissan chief, inquired where Ghosn had bought his rectangular sunglasses and custom suits.

In 2004, Emperor Akihito awarded Ghosn a Blue Ribbon Medal for his extraordinary contributions, making him the first foreign business leader to receive the honor. A manga comic book, "The True Story of Carlos Ghosn," heralded a shadowy hero from a faraway land. Lebanon put Ghosn's face on a postage stamp.

But even as many in Nissan celebrated the comeback, others scoffed at Ghosn's celebrity.

From the start, he faced distrust from the Japanese policymaking and business establishment. The very idea of an outsider's bringing free-market capitalism to Japan's quasi-socialist corporate culture jabbed at historical wounds.

"When MacArthur came after World War II, the Japanese just surrendered to his leadership," a retired Nissan executive told Newsweek.

Ghosn pulled on a white jumpsuit to tour factory floors, but beyond the photo ops, there were signs that his splashy - some would say autocratic - presence was out of sync with modest Japanese culture. In 2004, Ghosn grazed a motorbike while driving a Porsche in the Roppongi area of Tokyo, a haven for moneyed foreigners. (The couple on the bike had minor injuries.) The Japanese media groused that Ghosn wasn't driving a Nissan.

“Cost killer”

Then the man whose militant approach to cutting jobs (21,000, if you're counting) earned him the nickname "Le Cost Killer" spent more than $200 million for Nissan to be a sponsor of the Rio Olympics in 2016, casting himself in the Olympic torch relay. He hopped between homes paid for by Nissan. In 2017, he paid a Lebanese artist and friend $888,000 to create a statue, "Wheels of Innovation," for the entrance of Nissan's Yokohama headquarters. (Having a lavish second wedding reception in Versailles the same year, with Marie Antoinette-themed costumes and, yes, lots of cake, did not help.)

"He was a person who was above the clouds," said Yuichi Ishino, who worked in Nissan's finance department from 2002 to 2005. "No one dared to say anything that would confront his opinions."

The stickiest issue was always Ghosn's pay.

Cash concerns

In Japan, salarymen slave away at the kaisha (or company) with a sense of communal pride almost as important as the salary. Last year, Ghosn made $16.9 million ($8.4 million from Renault, $6.5 million from Nissan and $2 million from Mitsubishi). That's nearly 11 times what the chairman of Toyota, the world's largest carmaker, earns but well below the $21.96 million paid to Mary Barra, chief executive of General Motors.

In 2008, the same year that Japanese law began requiring companies to disclose directors' pay in their annual reports, Nissan's shareholders voted to set an annual cap of about $27 million on compensation for all board directors combined.

After that, Ghosn made the case to the public that he was underpaid - instructing Nissan to hand out background materials reminding investors and the news media that he made significantly less than his counterparts at other global automakers.

At the company's most recent annual meeting, in June, Ghosn stressed to shareholders that the company's compensation policy was "designed to reward performance and to attract, promote and retain the best management talent in the auto industry." He added that while Nissan tried to reward senior management "competitively," the company remained "financially very disciplined".

Asked by the Financial Times that same month if he was overpaid, Ghosn laughed. "You won't have any CEO say, 'I'm overly compensated,'" he said.

Such brazenness rankled employees and the public in Japan.

"Even when a company is a global multinational company, it's still stamped by its country of origin and the place where it has its headquarters," said Sanford M. Jacoby, a professor of management at the University of California, Los Angeles, who has studied Japanese corporate culture. The Japanese, he said, put more weight "on egalitarian policies of government and pay and other things."

In France, where the government owns a 15 per cent stake in Renault, shareholders have also taken issue with Ghosn's pay. "We believe that anyone making 240 times more than the minimum pay of his employees is out of control," said Pierre-Henri Leroy, head of Proxinvest, a French shareholder advisory group.

In October, a whistleblower inside Nissan said he had evidence that Ghosn had been instructing Greg Kelly, a top aide and a board member, and a small group of confidants at Nissan to effectively create two salary pots for Ghosn's compensation.

One pot would be paid in the current year and reported in the company's annual report and securities filings. Another amount would be designated to be paid out after Ghosn left Nissan, according to a person familiar with Nissan's internal investigation. The whistleblower's findings were sent to Hiroto Saikawa, the company's chief executive, and an internal auditor.

Nissan went to prosecutors with allegations that Ghosn, working directly with Kelly, who was once the head of human resources at Nissan, had underreported his income from 2009 to 2017, according to a person with knowledge of the internal investigation. Nissan's investigation found that the underreporting had occurred when some of the compensation, though committed, was deferred and not reported in securities filings.

Nissan also told prosecutors that it had evidence Ghosn and Kelly developed plans to pay Ghosn a further $124 million in cash and other financial instruments, some as compensation for a future advisory position for Ghosn.

Hari Nada, a Nissan executive and confidant of Kelly's, sent a private jet to fly him from Nashville, Tennessee, to Tokyo for the same board meeting that Ghosn planned to attend. The two men were arrested hours apart. Kelly's family said Nada had assured him that he would be back in Nashville by Thanksgiving, in time for scheduled neck surgery.

Nissan would not comment about the Kelly family's statements about Nada. Nada did not answer phone calls seeking comment.

Kelly was released on Christmas after his family cited his ill health and posted bail of 70 million yen (about $640,000). His lawyer in Nashville, Aubrey Harwell Jr., said his client denied wrongdoing. Kelly and Ghosn "had conversations regarding legal ways they could defer compensation," Harwell said.

Ghosn, Kelly and Nissan itself all face charges they violated financial reporting laws. The company's board removed Ghosn and Kelly as representative directors, positions with power to sign company documents.

Thirty-two days after Ghosn's initial arrest, when his release on bail appeared likely, Japanese authorities rearrested him on new charges that he shifted personal losses during the 2008 financial crisis temporarily onto Nissan's books. On Monday a court extended his detention until Jan. 11.

That Ghosn may have deceived regulators while enriching himself runs afoul of cultural norms in Japan, where the public is more likely to forgive corporate cover-ups when executives appear to be protecting the company.

"Although you don't see it written down, there is almost a social consensus that 'OK, you did your crime, but you did it for the company,'" said Seijiro Takeshita, dean and professor at the School of Management and Information at the University of Shizuoka.

Or as Jesper Koll, who has worked in Japan for decades as an economist and is head of Japan for WisdomTree investments in Tokyo, said: "The one thing that Japan does not want and would never tolerate is personal greed."

Ghosn's longtime driver has been out of touch since shortly after the arrest. The driver told the Ghosn children the day after their father was detained that Japanese authorities had found his car in Tokyo. They tore up the leather seats and found only cat food.

Ghosn's chief of staff, FrEdErique Le Greves, who arrived in Tokyo the same day as Ghosn, has not made any statement and returned to France after she learned of the arrest, a person close to the Ghosn family said.

Their silence is one of many plot twists in the corporate saga. A person close to the family has started to call it "As the World Ghosns."

Under Japanese law, only Ghosn's Japanese lawyer and representatives from the French, Brazilian and Lebanese embassies have been allowed to visit or talk to him.

Ghosn's allies view his incarceration, with no foreseeable chance for bail, as revenge by Nissan (and, by extension, Japan) on a foreign adversary. He lives in a 16-by-10-foot cell with a tatami mat, a toilet in a corner and the lights always on, in the same facility that once housed the death-row inmates who committed a deadly sarin attack on the Tokyo subway in 1995.

The frustration has led a few of Ghosn's longtime friends in France to some extreme and possibly culturally insensitive metaphors. Two of them compared the meticulously planned surprise arrest to the 1941 attack on Pearl Harbor, which killed 2,400 Americans.

Ghosn's children have learned from his visitors that he has lost weight, at least 20 pounds (9kg). Prosecutors question him daily. Several requests to jail authorities for a mattress were denied, but a Lebanese diplomat succeeded in getting him a thin cot and vitamin C pills.

The books that Ghosn is reading in jail - including "When Things Fall Apart," by Pema Chodron; "Teachings of the Buddha," by Jack Kornfield; and "A Little Life," a dark novel by Hanya Yanagihara - speak to his state of mind. He has been denied other items, including family photos, a pen and paper, dental floss ("He is a big flosser," his daughter Maya said) and an iPod Nano loaded with music by his favorite, Phil Collins.

Ghosn's defenders, largely in the business community, contend that he is being treated harshly because he is a foreigner. They claim that the latest charge, rooted in dealings from 2008, was beyond the statute of limitations for Japanese citizens. According to Japanese law, the statute is tied not to citizenship but to how much time the accused has spent outside Japan.

His defenders also said Japanese executives at Takata and Toshiba, who were embroiled in serious accounting scandals in 2014 and 2015, didn't receive the same harsh treatment or any jail time. (Three executives from Olympus were detained for nearly six weeks in 2012 and convicted of accounting fraud but served no prison time.)

"It seems really strategic. It's a political fight," said Ralph Jazzar, a banker in Paris and Ghosn's first cousin. He recited an expression in French and then translated it: "He who wants to get rid of a great dog pretends the dog has the plague."

Early days

Jazzar and Ghosn grew up together in a middle-class neighborhood in Beirut. Ghosn, who was born in Rio de Janeiro, was 6 when his Lebanese father moved the family to Beirut.

His sister, Claudine Bichara de Oliveira, said he was fascinated by cars at an early age. She remembers him lying in the back seat of the family car, "closing his eyes and guessing the kind of car just by hearing its horn."

From Lebanon, Ghosn went to Paris to attend France's most prestigious schools, Lycee Saint-Louis and the Ecole Polytechnique. And then he worked his way up Michelin.

Whether in Lebanon or France, Ghosn always assumed the role of the ambitious outsider. In 1989, he perfected his English and added America to his resume, soon becoming the chief executive of Michelin's North American operations. Ghosn moved his young family to Greenville, South Carolina. He took a road trip to see the Grand Canyon, Las Vegas and Los Angeles, studying the world's largest tire market along the way.

If there was any community in which Ghosn seemed to finally fit, it was the global elite, a coterie of chief executives and billionaire philanthropists who have yachts in the south of France and standing invitations to the World Economic Forum in Davos, Switzerland. ("If Davos Were a Person, It Would Be Carlos Ghosn" was the headline of a Bloomberg profile last year.) Ghosn's new wife, Carole Nahas, persuaded him to take ski lessons at age 60.

Ghosn's unabashed globalism clashed with the current era of inequality and off-with-their-heads isolationism. In 2015, Emmanuel Macron, then the French finance minister, criticised Ghosn, calling his $8 million salary at Renault "excessive." Early this year, an auditor at Nissan began investigating the homes that a company subsidiary had bought for Ghosn's personal use, according to a person with knowledge of the investigation.

In an internal investigation, Nissan learned that a subsidiary set up in the Netherlands ostensibly to fund venture capital investments had been used to buy or rent corporate properties that Ghosn lived in when he traveled, according to a person familiar with the investigation. Nissan had invested 73 million euros (currently equivalent to about $83 million) in the venture, known as Zi-A, and Kelly was put in charge of it.

In addition to a 5,400-square-foot flat in Paris' elegant 16th arrondissement, Zi-A bought an apartment in Rio in 2011 for $6 million. (The Ghosn family planned to spend Christmas there this year with his ailing mother.) In Beirut, there is a salmon-hued mansion on a tree-lined street that Zi-A paid $8.75 million for in 2012, followed by $6 million in renovations and furnishings, according to a person briefed on Nissan's investigation.

Ghosn's family said Nissan had known about the homes. "Over 19 years, the company put these things in place to maximize his productivity," his eldest child, Caroline Ghosn, 31, said in an interview.

Ghosn hasn't been charged with any illegal activity related to his corporate residences. Caroline Ghosn said media accounts about the homes were part of Nissan's and Japanese prosecutors' efforts to "muddy the waters" in a public-relations campaign against her father.

Nissan declined to comment, but a person familiar with its investigation said the fact that the Dutch subsidiary was buying homes rather than paying for car-related startups was among the red flags for internal auditors. The person also pointed out that Nissan did not have substantial operations in Beirut, the location of one of the disputed homes.

"Do not take this as a coup d'Etat," Saikawa, the current chief executive of Nissan, whom Ghosn had mentored, told reporters hours after the arrest.

Saikawa said he felt "strong anger and despair" over Nissan's findings, but analysts and investors closely watching the company believed that complicated interpersonal dynamics were at play.

Critics inside and outside Nissan had started to question whether Ghosn's star had faded. In recent years, sales had slowed. The miraculous turnaround he orchestrated started to stall. One former executive, who spoke on the condition of anonymity, summed up the new sentiment spreading inside the company as "What have you done for us lately?"

Midway through a plan known as Power 88, which Ghosn unveiled to much fanfare in 2011, it became clear that Nissan would fall short of the ambitious targets he had set. He wanted Nissan to reach 8 per cent profit margins and 8 per cent market share in the countries where it operated. Dealers complained that they were losing money and that Ghosn's big incentives to buyers to meet his targets were eating into their margins. They also grumbled that Nissan was selling too many vehicles to rental companies that then would flood the secondary buyers' market.

"They would sell cars in any manner and in any way without any regard for what the long-term implications were," said Steve Kalafer, chief executive of a chain of auto dealerships in New Jersey. After 36 years of owning a Nissan dealership, Kalafer said, he sold it two years ago because he objected to Ghosn's policies.

Ghosn's daughters said that in the past few years he had started on a succession plan to help cement his legacy and plan for his retirement. Ghosn explored what he called a "re-imagining of the alliance" that would permanently bind Nissan and Renault. And he picked Saikawa, his close confidant, to succeed him as chief executive.

"He is like Carlos Ghosn in many ways," Patrick le QuEment, a former head of design at Renault, said of Saikawa. "Not much feeling."

But as Ghosn sought to integrate Nissan's operations more closely with Renault, maybe connecting them permanently, the relationship was getting shaky. Some Nissan executives, engineers and marketing staff began to resent what they saw as Renault's unfairly piggybacking on Nissan's technology, research and brand strength, according to three former managerial employees.

The French saw things another way, accusing Ghosn of favoring the Japanese and Nissan and blocking Renault's expansion into China, the world's largest car market, to clear the field for Nissan.

"We felt he was escaping us," le QuEment said. "A lot of decisions were being taken that were to the detriment of Renault."

Asked about merger discussions, a Nissan spokesman, Nicholas Maxfield, said, "It is true that the 'Alliance 2022' six-year plan announced last year calls for additional synergies and further convergence among member companies in specific operational areas."

As tensions grew, Ghosn mused about getting out. On his long walks around Tokyo when he couldn't sleep, he would pass an old man playing the shakuhachi, an end-blown bamboo flute that dates to seventh-century Japan. Ghosn told his children that in retirement he hoped to learn how to play it. A Byzantine Empire buff, he said he also might write history books or lecture MBA students.

Then late in 2017, speculation spread that Ghosn and Saikawa's relationship had become strained after Nissan faced accusations that it had been using uncertified technicians for vehicle inspections, leading to a recall and halts in production. Ghosn left Saikawa to take the blame. As the new chief executive offered a deeply apologetic bow, as is customary in Japan, and told a voracious news media that the carmaker had "done something inexcusable," Ghosn was nowhere to be seen.

Caroline and Maya Ghosn used to joke that Nissan was the "very demanding fifth child" in their family. To them, Saikawa's statements (without an apologetic bow) the night of their father's arrest were proof that his fall was akin to a palace coup.

What doesn't make sense to Ghosn's friends and family is how the man with a preternatural talent for seeing around every corner - whether maneuvering through Japanese bureaucracy, managing French ministers or designing a midsize SUV - didn't see this coming.

Maybe, they theorised, it was the jet lag and the 100 days a year he spent on an airplane, and that old man with the flute whom he saw himself becoming.

Jazzar, his cousin, said Ghosn had failed, in the end, at the "PYA" approach to management: Protect Your Ass.

"God only knows what is going on inside his head," Jazzar said.