By Dan Ferris
I don’t believe any business schools offer a ‘How to Escape From Japan 101’ course…
They might want to rethink that.
For example, let’s say you become the CEO of a big car company in Japan… get anointed as a hero for saving it… then get arrested on charges you deny have any substance… believe you’re the victim of a corrupt system… leaving you no choice but to sneak out of the country by hiding in a large audio-equipment case so you can be loaded onto a private jet and flown first to Turkey, then to Lebanon… all without being detected by the cops.
That business school course would come in handy then!
Don’t tell me it can’t happen… because Carlos Ghosn already lived it…
Ghosn, 65, is the former chief executive of the Nissan-Renault automotive alliance. The alliance is an informal relationship stretching back two decades, with the Japanese and French carmakers each owning a stake in the other.
Ghosn was arrested in Japan in November 2018, when prosecutors boarded his plane after it landed at Tokyo’s Haneda Airport. He was indicted on two charges of failing to disclose compensation and two charges of using corporate funds for personal gain.
Fearing the episode would drag on for years, meaning that he might never leave Japan alive or see his family again, Ghosn wasn’t going to just sit and wait for his punishment…
Instead, he cranked up the Mission: Impossible music, hired a team that included a Green Beret ex-convict with experience rescuing hostage victims, and executed an escape that was called “flawless and brilliant” by people he met with while under house arrest in Japan.
You see, after posting almost $14 million in bail to avoid jail last April, Ghosn lived in a video-monitored house in Tokyo. And almost instantly, he began planning his escape.
Finally, on December 29, it was “go” time…
Ghosn took Japan’s famous bullet train 300 miles from Tokyo to Osaka. Then, he folded himself into a large, black audio-equipment case with holes punched in the bottom so he could breathe.
Accomplices ferried the case through the security checkpoint at the private-jet terminal in Osaka. Security at that location had a reputation for not checking bags that couldn’t fit into the X-ray machine.
Next, somebody put the case on a private jet. After the plane took off, Ghosn got out and sat all the way in the back so he could avoid the flight crew. The jet flew overnight to Turkey, where Ghosn switched planes and traveled to Lebanon, where he grew up.
The great escape reportedly cost Ghosn $20 million, including forfeited bail money.
Finally, as Ghosn left Turkish air space, he ripped a rubber mask off his face, showing that it was really actor Tom Cruise the entire time in a publicity stunt for his latest action flick… Mission: Impossible – Escape from Japan premieres Tuesday in theaters everywhere.
OK, I made up that last paragraph just for fun… But the rest of this wild episode is all true, according to every major financial news service. As I write, Ghosn is living in Beirut.
And of course, Ghosn continues to deny any wrongdoing…
I have no idea if he’s guilty or not.
But spending $20 million to pull off a real-life Tom Cruise-like movie stunt is a good way to convince the world you truly believe you’re the victim of a grave injustice.
But spending $20 million to pull off a real-life Tom Cruise-like movie stunt is a good way to convince the world you truly believe you’re the victim of a grave injustice.
After such a daring escape, most real crooks wouldn’t want anyone to know where they are.
Not Ghosn…
He recently held a press conference in Beirut. During the event – which lasted more than two hours – he answered questions in English, French, Arabic, and Portuguese… describing his arrest as being “brutally taken from my world as I know it.”
Ghosn said Japanese officials interrogated him “for up to eight hours a day without any lawyers present, without an understanding of exactly what I was being accused of.”
He accused Japanese prosecutors of trying to force a confession by using threats, though he didn’t elaborate. (I’ve seen folks try that in the movies numerous times with Tom Cruise, too, so again… I figure Ghosn must be telling the truth.)
Ghosn criticized the Japanese justice system, which has been described as ‘Kafkaesque’…
The term refers to early 20th-century writer Franz Kafka’s portrayals of nightmarishly oppressive bureaucracies.
At his press conference, Ghosn said, “I didn’t escape because I was guilty. I escaped because I had zero chance of a fair trial.” He also said the odds were stacked against him from the beginning because 99% of indicted people are convicted in Japan…
The collusion between Nissan and the prosecutor is everywhere… The only people who don’t see it, maybe, are the people in Japan… and I’ve been told this is totally illegal.
Look, I understand if you find it hard to believe that Nissan executives and Japanese government prosecutors conspired to put a popular businessman in jail and leave him there.
But it’s hard for me to believe that the automotive alliance – a major corporation with an army of auditors – didn’t know how much it was paying its chairman. I also find it odd that Nissan doesn’t seem to take responsibility for paying Ghosn… as if Ghosn paid himself any time he wanted by making a random withdrawal from Nissan’s bank accounts.
So in the end, none of what Ghosn claims strikes me as totally absurd or untenable.
All governments lie, cheat, and prosecute people unjustly…
The prospect of losing a big public case would embarrass any well-ensconced satrapy holder, especially in a culture like Japan’s… where “losing face” can ruin your career, and ideas like truth and ethics are different than where most of us live in the West.
It’s easy to imagine Nissan executives ganging up on Ghosn, angry that he was getting paid a fortune compared with them, and that he had five homes, instead of the traditional single executive residence provided by most Japanese companies. And it’s easy to see Japanese prosecutors as characters straight out of one of Kafka’s novels, twisting the truth to influence the outcome. It’s in their job description, not to mention every bureaucrat’s DNA.
As I said earlier, Ghosn thought he would never leave Japan or see his family again. And as he told reporters during the press conference in Beirut…
It’s not very difficult to come to a conclusion – you’re going to die in Japan, or you’re going to have to get out. This was not about justice… I felt I was the hostage of a country that I have served for 17 years.
On the other hand, I’m not in love with Ghosn either…
He’s not my style.
For example, in October 2016, Ghosn held his wife’s birthday party at the lavish palace of Versailles… a €50,000 expense that mysteriously wound up on the company’s dime. Ghosn later tried to say, “Oh, I thought it was a gift” from France because Renault had sponsored the Versailles renovation.
He’s also known to be very combative and difficult to work with… Those traits make him seem petty to me. I also can’t help but view his tale as a cautionary one of “disconnection and entitled excess,” as Bloomberg Businessweek magazine put it a year ago.
There’s also the pesky allegation from the U.S. Securities and Exchange Commission (“SEC”) that he “fraudulently concealed $140 million in benefits and compensation from investors.” Ghosn quickly settled with the SEC for $1 million and a 10-year ban on serving as an officer or director of a public company in the U.S.
It sounds a lot like the Japanese charges, and also involved Greg Kelly, an attorney who was arrested in Japan at the same time as Ghosn.
Still, it’s widely acknowledged that Ghosn saved Nissan during his tenure, which began in 1999…
I bet many folks in Japan are happy about that.
He did it through some very un-Japanese techniques, like closing manufacturing plants and laying off workers. (There’s a whole book about it – Turnaround: How Carlos Ghosn Rescued Nissan by David Magee. You can find the book on Amazon right here.)
But that nontraditional strategy didn’t stop the Japanese people from liking Ghosn enough to stop him on the street to take photos. And investors are likely sad to see him go, too… Nissan and Renault’s share prices have fallen roughly by a third since Ghosn was arrested in November 2018 (and by roughly half since both companies’ stocks peaked in early 2018).
Mitsubishi, where Ghosn served as chairman, was also part of the automotive alliance. The three companies were collectively the world’s second-largest carmaker at one point. And as Ghosn pointed out in Beirut, they’re the only three large carmakers whose share prices fell last year.
Ghosn’s value to the automotive alliance is becoming more evident in his absence…
According to the Wall Street Journal, he spent the past 20 years brokering conflicts between the constantly bickering companies. Now that he’s gone, they’ve reverted to “a nasty and brutish state of nature.”
That’s a reference to 17th-century English philosopher Thomas Hobbes’ classic book, Leviathan. It’s devoted to the idea that, without powerful central governments, humans will live in a war-like state pitting “every one against every one,” leading to “solitary, poore, nasty, brutish and short” lives.
The irony, of course, is that powerful governments are often at war against their own populations… The “War on Drugs,” for example, is a war on (mostly uneducated, poor) people, not chemical substances. And as Ghosn tells it, Japan is certainly at war with him.
Maybe if Nissan and Renault’s share prices keep falling, they’ll break up the alliance and go about their businesses alone once again. Without Ghosn’s guidance, maybe they’ll wind up poorer (as shareholders already are today)… and maybe their corporate lives will be shorter without Ghosn as the peacemaker.
The drama in this action flick might not be over…
Ghosn is subject to a “red notice” from international police agency Interpol. As a result, Lebanese prosecutors issued a travel ban and asked him to hand in his French passport. There’s also a Japanese arrest warrant out for his wife on charges of false testimony regarding the transfer of money.
And as Sam Antar, an ex-convict and the former chief financial officer of the Crazy Eddie electronics chain, recently said on Twitter, “Governments have long memories.” Antar’s message implied that Ghosn’s lengthy press conference was a mistake. (However, I bet holding it during a thunderstorm, with lightning flashing nearby, will play well on screen once Netflix gets the rights.)
Ghosn better watch his back… Japan won’t remember this loss of face on the world stage.
Ghosn better watch his back… Japan won’t remember this loss of face on the world stage. And you better believe the Japanese government will be looking to escape the purgatory of humiliation.
I suppose we’ll find out what really went on with Ghosn at some point… even if we must wait to watch the movie that will surely be made about the whole saga. (Ghosn was talking with Hollywood executives before he escaped from Japan.)
Meanwhile, as a value investor, I have to wonder…
Has all this blood running in the streets after Ghosn’s departure made – or will it ever make – the stocks of Nissan or Renault cheap enough to be attractive as an investment?
These carmakers are in a god-awful, competitive, low-margin, capital-intensive business with a short product cycle. That isn’t a recipe for long-term investment success.
And making matters worse, the global car industry is in turmoil today… It’s shrinking faster than during the depths of the financial crisis, with 4 million fewer vehicles sold in 2019 than the previous year, according to a German auto-industry lobbying group.
Even though Nissan’s Leaf is the best-selling all-electric car in the world, I doubt either company will ever become a much better business than it is today. As a result, dropping to a bargain-basement valuation is the only way I expect either stock could become attractive.
And even if the stocks of Nissan and Renault did become cheap enough to own… again, we’re not talking about buying a great business and holding it for 20 years. In a terrible industry like this one, we’d only want to hold for several months to a year… at most.
These are trading sardines, not eating sardines.
Dan Ferris is the editor of Extreme Value, a monthly investment advisory that focuses on some of the safest and yet most profitable stocks in the market: great businesses trading at steep discounts. His work has been covered extensively in Barron’s and other respected news outlets.
