Monday, January 17th, 2022

The story behind the Carlos Ghosn saga: the lawyers

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.

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