From Carlos-san to Ghosn 'yougisha' (suspect)
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From Carlos-san to Ghosn 'yougisha' (suspect)

Carlos Ghosn in court, in a sketch made on Jan 8. (AP)
Carlos Ghosn in court, in a sketch made on Jan 8. (AP)

In the autumn of 2015, Carlos Ghosn more than likely overlooked Japan's National Tax Agency obtaining information on roughly 550,000 overseas accounts as part of increasing scrutiny of wealthy residents. It is quite possible his accounts were amongst this dataset. His lawyers may have realised this, albeit far too late, when Mr Ghosn was arrested on Nov 19 accused of falsifying financial reports in underreporting his income.

While these charges are serious, Al Capone aside, it is exceptionally unusual that tax-evasion charges are used as a pretext for repeated detention pending the judicial process. Yet here we are. While Carlos Ghosn and his lawyers strenuously deny any wrongdoing, Mr Ghosn has had his detention extended until now.

If tax evasion is indeed a pretext for Mr Ghosn's detention, let's examine some potential geopolitical reasons for the Japanese authorities to take such a course of action. Could it be that Mr Ghosn's status as a foreigner is at issue, or is it more the foreign entities he represents in addition to Nissan, including the French government's 15% stake in the Renault-Nissan-Mistubishi Alliance.

Making acquisitions abroad has rarely, if ever, posed a problem for Japanese companies. Sony was one of the initiators of this in their acquisition of CBS and Columbia Pictures in the eighties. More recently in 2018, Takeda acquired Shire, a UK pharmaceutical firm, for US$62 billion to take the title of the largest-ever foreign acquisition by a Japanese firm.

However, when it comes to foreign acquisitions of Japanese entities, things are somewhat different. Japan is still very much a cloistered business culture that does not deal well with foreign influence on traditional hierarchies. The largest inbound deals in 2018 were driven by private equity firms, such as Bain Capital for Toshiba Memory Corporation and KKK for Calsonic Kansei, Hitachi Kochi and Hitachi Kokusai Electric. These investments are more easy to accept as they are financial in nature and don't significantly disrupt the prevailing corporate culture.

When it comes to industrial acquisitions, they have traditionally occurred when a Japanese company files for bankruptcy, as was the case with Takata Corp in 2017, subsequently acquired by Key Safety Systems. The same was true of Nissan's rescue by Renault in 1999.

However, perhaps the prevailing view that Carlos Ghosn wanted to transform the Renault-Nissan Alliance, latterly the Renault-Nissan-Mitsubishi Alliance, into a takeover controlled by France was a bridge to far, and perhaps even a humiliation for Japanese business people and politicians. When the rational and economic principles collide with national identity politics, the latter invariably prevails.

Another contingent point is that of nationality. Greg Kelly, Mr Ghosn's close associate and ostensible right-hand man, was detained with Mr Ghosn. Of course, it is Mr Ghosn who is accused of underreporting his income, but the Tokyo Prosecutor's Office accuses Mr Kelly of aiding and abetting Mr Ghosn. The Prosecutor's Office had requested the same extended detention for Mr Ghosn and Mr Kelly, indicating it viewed them as two sides of the same coin. Yet Mr Kelly has been released on bail, while Mr Ghosn languishes in the Tokyo Detention House before having the opportunity to defend himself in court.

It has not been revealed why Mr Kelly was released on bail and not Mr Ghosn. Surely it would have been possible to release Mr Ghosn with the same conditions as Mr Kelly, not giving him a possibility to leave the country but permitting him to build his defence from outside jail. Since there is no explanation forthcoming as to why Mr Ghosn and Mr Kelly are being treated so differently, speculation and conspiracy theories are rife.

One of them is particularly interesting. The media present Mr Kelly as an American with an American lawyer, while Mr Ghosn is presented as a Brazilian-born French man of Lebanese descent, holding three citizenships and with a defence team comprised of several nationalities. One view is that no one country has stepped up to defend Mr Ghosn because he holds several nationalities, contrary to Mr Kelly who solely holds American citizenship.

The United States wields more power in defending its citizens abroad than any other country. Running a close second, China exercises considerable influence in ensuring the welfare of its citizens, as we have seen recently in the case of Meng Wenzhou, the CFO of Huawei. When she was arrested in Canada at the request of US authorities, China protested vehemently. Perhaps coincidentally, or not, two Canadian citizens resident in China were arrested shortly afterwards. Since then, Ms Wenzhou has been released on bail but faces extradition to the US.

No such robust intervention has been mounted by any country for Carlos Ghosn. While French President Emmanuel Macron has pressed Japanese Prime Minister Shinzo Abe and the Japanese government for the evidence against Mr Ghosn, it appears their primary concern is more the continuation of their business interest and less the welfare of Mr Ghosn.

The Ghosn saga has lessons for people working as CEOs in foreign countries. Since the early nineties, companies and businesspeople have believed under the canopy of globalisation companies can be multinational and virtual, having no nationality, moving people and goods from one part of the world to the other seamlessly, and benefit from legal loopholes in minimising revenues and tax payments. This was before Donald Trump's election and the wave of populism emerging not only in Europe, but also in Latin America and Asia.

Nationality is back on the agenda for companies and businesspeople. This means that companies cannot escape their nationality and fly a flag of convenience. Nationality can work in a company's favour at times but at other times it comes with a cost.

There are two questions for foreign CEOs. Can this happen to me? Meaning, can I be a victim of a geopolitical battle and lose everything by being arrested and jailed? And, will my company country defend my interests? These are crucial questions for all foreign CEOs. Carlos Ghosn was once venerated in Japan as the saviour of Nissan, a god in its corporate culture. If this could happen to him, it can happen to anyone.

Cedomir Nestorovic is a Professor of International Marketing and Geopolitics at ESSEC Business School based in Singapore.

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