In the three years since
A small clutch of attorneys from
“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.”
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 —
A powerful force at Nissan since engineering its rescue with a bailout from
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
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,
‘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 —
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
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
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
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, 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.”
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,”
Quinn Emanuel Urquhart & Sullivan LLP, 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 LLP 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
“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 U.K. 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
“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.”
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Katrina Nicholas
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