TOKYO — A clique of Nissan colleagues worked secretly to investigate their chairman at the time, Carlos Ghosn, before taking their findings directly to prosecutors, a witness testified this month in the Tokyo trial of former Nissan director Greg Kelly.

Hidetoshi Imazu, Nissan Motor Co.’s statutory auditor at the time and the man who initiated the probe into potential misconduct, said he began looking into matters concerning Ghosn’s travel expenses in July 2017, more than a year before the chairman’s arrest in Japan.

Imazu, now retired, also said he went to authorities with little forethought about possible fallout for the company or its shareholders. The ensuing scandal triggered a massive slide in Nissan’s market capitalization and rattled relations with French partner Renault.

Testifying last week in Tokyo District Court, Imazu said his probe picked up speed in March 2018 and eventually expanded to look into corporate outlays for Ghosn’s housing and other expenses.

Imazu said he took his findings to the Tokyo Public Prosecutors Office on June 16, 2018, to get its read on whether anything illegal had occurred. According to Imazu, prosecutors told him that those financial matters probably didn’t rise to the level of criminality, but the auditor should keep on digging.

Imazu said prosecutors also urged him to keep the probe under the radar from the rest of the company for fear that leaks would spur guilty parties to dispose of evidence.

The testimony sheds new light on a key question in the Ghosn takedown: How could such a small group of executives go rogue, apparently delivering their boss to authorities all by themselves?

Supporting Imazu in the effort was executive Hitoshi Kawaguchi, then senior vice president in charge of government relations and Hari Nada, then head of Nissan’s CEO office.

Private lunch sessions

According to Imazu’s narrative, the three did not inform CEO Hiroto Saikawa, its audit board, nor the automaker’s board of directors as they worked with prosecutors and outside lawyers. The executives discussed the matter during private lunch sessions, Imazu added.

Ghosn and Kelly, Nissan’s only American director at the time, were both arrested Nov. 19, 2018, and charged with scheming to hide more than $80 million in deferred compensation supposedly owed Ghosn. Both Ghosn and Kelly deny any wrongdoing, but Kelly was left to stand trial alone in Tokyo after

Ghosn jumped bail and fled to Lebanon at the end of 2019.

Ghosn contends that a small group of Nissan insiders targeted him with concocted allegations to block his plans to integrate Nissan and Renault under a holding company.

Outside advice

Before going to prosecutors, Imazu said, he approached an outside criminal lawyer for advice on what to do about suspicions of wrongdoing. That attorney, after listening to Imazu, asked whether some faction inside Nissan was whipping up allegations as a “plot” to achieve some objective.

“I answered there was never such a thing,” Imazu recounted saying.

As Nissan’s lead corporate auditor, Imazu had the authority to initiate internal probes. And in addition to the outside criminal lawyer, he enlisted Nissan’s external counsel to help.

Imazu told the court that the standard course of action during such reviews would be to report wrongdoing to the auditing board or to the board of directors. Imazu did neither because he said he was following the prosecutors’ directive to keep things confidential, he told the court.

Imazu told Saikawa of the investigation on Oct. 11, 2018, barely a month before Ghosn’s arrest. Saikawa then said the probe would be handled in-house and Imazu was relieved from leading it.

Travel, housing probed first

Imazu’s probe began by looking into travel and housing expenditures the company paid on Ghosn’s behalf. Those details raised eyebrows when they went public following Ghosn’s arrest, but they never ended up being part of the criminal indictments.

In the end, Ghosn and Kelly were charged with improperly reporting compensation. Ghosn faces additional breach-of-trust charges, but those indictments are unrelated to the case against Kelly.

In the wake of Ghosn’s arrest and the crisis it unleashed at Nissan and Alliance partner Renault, Nissan’s share price plunged by more than half from early 2019 through March 2020.

In the trial, Kelly’s defense lawyer asked Imazu if he should have exercised more caution in bringing his suspicions to prosecutors, in light of the possible impact on shareholders.

Said Imazu: “I did not think that way.”