 Okay, we're back for live and this time we're talking about Steve Zercher in Kansai-Gadai University in Kobe, Japan. There's lots of interesting things happening in Japan this week and we're going to talk to him about one thing that has international implications, that is Carlos Schoen. And well, welcome to the show, Steve. Nice to talk to you again. Yeah, thank you. It's been a month or so over the holidays. I haven't had a chance to chat, so it's wonderful that we were able to talk again. And as you mentioned, I want to highlight probably the biggest story in Japan, especially in the latter part of 2019 and going into 2020, and that's the story of Carlos Schoen, who is a well-known, well-respected, highly influential businessman in Europe and also in Japan. And that was a refugee, not a refugee, he's under interval arrest actually, so he's a criminal on the run in a sense. So I'd like to talk about his story and perhaps what this will lead to potentially. Yes, well, please let us know because frankly, you know, the way the press has covered it, it's confusing. Is he a good guy, is he a bad guy, is he running away, is he running away because of good reasons or bad reasons, and why did he go, where is he now, he went back to Lebanon, was it? Yeah, he's in Lebanon now, he's of Lebanon descent. Yes. So that's one of his home countries along with Brazil and France. So he decided when he escaped here at the end of last year to go to that country maybe for political cover, but also there's no extradition between Lebanon and Japan, so the Japanese government cannot ask the Lebanese government, at least legally, to bring him back to Japan to face justice here. But let me start at the beginning so the listeners have a context about this guy. Yes. He was arrested in late 2018 actually, so this has been an ongoing story for quite a while now over a year, and he was flying in on his private jet, you know, the Nissan jet, and he got off his tarmac and the Japanese prosecutors and Japanese police were waiting for him. This is under those to him, of course, and they immediately arrested him and put him into detention. The charges that were placed against him were under reporting income and also breach of trust in his role as CEO of Nissan Japan. His perspective on this is that this has all been trumped up charges, that he's completely innocent, and that the Japanese legal system basically amounts to what he calls hostage justice, hostage justice. That is, the presumption is that you're guilty rather than innocent when you're arrested. So just a little bit about him, he's 64 years old and he's a citizen of Brazil where he was born in Lebanon where his sentence from his parents were born in Lebanon and they immigrated to Brazil. He went to university in France and he worked for 18 years at Michelin, the famous French company, a tire manufacturer. From Michelin, he was hired by Renault in 1996 and Renault was nearing bankruptcy at that point, so the famous French manufacturer, French auto company. He came in there and he helped turn that company around into a profitable company and he's very famous within corporate circles as being an efficient cost cutter. So he restructured Renault and was able to turn that French company around. And then in 1999, and this is where the Japanese side of this starts, Renault made an investment in Nissan. At that point Nissan was two months away from bankruptcy. They were done. They couldn't get money from Japanese banks, which is unusual because usually banks bail out Japanese companies, but everyone within Japan had figured Nissan was done. So Renault came in as a white knight there at the very end, pumped them enough money to keep them going, and Goan was appointed as the COO of Nissan as a result of this investment and he laid off 20,000 people out of 150,000. He was highly criticized, it was brutal what he did from a Japanese perspective. He was highly criticized for doing this. This is, again, in 1999, 2000, traditionally, as you know, Japanese companies had not to want to lay people off in their lifetime employment, that's more of a myth than it is reality anymore. But anyway, back at that point, to have a major corporation when the same as Nissan to lay off 20,000 people was highly unusual. And as a foreigner, he could get away with it, but he was criticized. But in the end, he turned the company around as well. So over the preceding years, they opened up 15 new manufacturing sites worldwide. The employment went from 120,000 to 245,000, and Nissan moved from being the fourth largest car manufacturer in Japan to the second largest manufacturer in Japan. It was after Toyota, Toyota is number one, but that was quite amazing for a company that was two months away from going bankrupt. So he became the CEO of Nissan Japan in 2001, and he was in that role up until November 19, 2018, when he was arrested, as I mentioned before. So he was charged with underreporting his salary, about $9 million in future compensation. It wasn't salary that wasn't being paid weekly or monthly, it was future compensation that he had negotiated internally, and he had not reported that, which under Japanese law you're supposed to. Even money that you have not received, you need to report, you will receive in the future. So that's one of the reasons he was arrested. Immediately after that, he was kicked out of all, he's actually involved with three companies, Renault, where he was the CEO, and Nissan, where he was the CEO, and Mitsubishi, which is a car manufacturer here, a minor one. He was also involved there because Renault had made an investment there, and all three positions were taken away from him, and he immediately went into detention. So he was under house arrest, he wasn't in prison, but he was in a special room where the prosecutors could interview him for eight hours a day without any legal representation. That is the way the Japanese system works, and that's kind of the basis of why Renault has been making the case that he was being unfairly held, and that he really didn't have any chance whatsoever of having a fair trial. Well, that's really disturbing in the sense that it sounds like something you would find in Russia, or maybe the Middle East, or in some dictatorship country, not in a democracy. In a democracy, you have counsel, in a democracy, they don't, you know, I mean, I know this sort of thing happens, or it has happened with the CIA, but you know, I don't think we like it here, and I don't think the Western world likes it, and I would have assumed if you hadn't told me that, I would have assumed that he would not have been treated that way. So what is going on in Japan? Is Japan changing? Maybe going to the oppressive side? What happened? No, this is how things are typically done. When someone is arrested, no matter what level of crime it is, they can be held pretty much as long as the prosecutors want to hold them. They have to go through certain legal maneuvers, ask the judge, and they can make the case that the person who's been arrested is a flight risk, or some other extenuating circumstances. Listen to this, Jay. The conviction rate by prosecutors in Japan, not just Tokyo, but for the whole country, is 99.4 percent. Home. So basically what happens is once you're arrested, you're presumed to be guilty, and you're held until you confess. Well, you know, one thing it strikes me about, this is worth dwelling on for a moment, is that, you know, given this opportunity to interview for days and a time, it's not so much that the prosecutors make their case. It's that they do investigation, and they decide whether to prosecute the case. And so being fully informed, they don't, they don't, I'm making this up. I mean, I'm just imagining, that means that they would not prosecute a case that should not be prosecuted. Therefore, the only cases they prosecute are the ones they feel certain about, that they have the evidence that there is guilt there. But, you know, so that's the question I want to put to you. Is it this 99 percent thing, which is a little chilling? Is it because 99 percent of these defendants are really guilty? Or is it because, you know, the prosecutors have a system where they can convict everyone, including people who are not guilty? What's the bottom line? Is this... Yeah, this is the transparency here just doesn't exist. So my own reaction would be probably out of that 99 percent. There's some people who are innocent, but they just say, you know, I'm not going to get justice. They are already presuming that I'm guilty, even though I'm not. So therefore, you know, I go along. I just plead guilty, and I'll get out in five years if I protest my innocence, and I'm held under house arrest, or I'm prosecuted, and I'll end up staying in jail even longer. So Golan, you know, it's been over a year. He was under house arrest. He was charged. But there was no trial date set. It kept on slipping into the future. So part of the rationale, I'm kind of jumping ahead a little bit for why he decided to become a criminal, basically by escaping Japan, was that he felt that he would never get a fair trial, and he would be under house arrest indefinitely. Well, it sounds to me, you know, this revelation about the, you know, long interview by the prosecutors, it sounds to me that that might have been, you know, a valid decision on his part. How do you feel about it? It's, you know, it's really hard to say. I've been in Japan long enough that I know what he's saying is absolutely correct. That once you're arrested, you're presumably guilty, and you end up, you end up basically confessing. That's generally how things go through. So that's what they were trying to pressure him to do. He claims to be innocent in the press conference that you talked about before we started the official discussion here. He claims that innocent is the innocent. I kind of doubt it. I think what's turning out to be the case is that within the Nissan company itself, as with so many Japanese companies over the last few years, the corporate governance is non-existent and they're basically corrupt at the top. And he probably was either participating in that process or helping to create that process. So my own perspective, I think he probably has violated Japanese laws, but the way they've arrested him, the way they've managed him, the way they've actually gone after his wife as well. He wasn't able to see a lawyer. He wasn't able to visit with his family while he was under house arrest. It's pretty rough from the Western perspective, but again, from the Japanese perspective, it's business as usual. Oh, that's really tough. So let me say it sounds like something might happen in China. But, but query though, you know, he's, let me go back and ask you one question that dwells on this. Here's, here's a guy who is not Japanese who manages to do very well in the corporate world in Japan. And he's selected for this very high level position. And I guess, you know, what that means that we have a global corporation and Nissan is certainly a global corporation. The Japanese like to hire people who are not necessarily Japanese people, they feel who are global executives. But with that, and this is my question with that, it seems also that they give a lot of power. And with a lot of power comes a lot of responsibility. And what do you want to call it risk risk of the regulators dealing harshly with you and the criminal criminal organizations criminal prosecution organizations dealing harshly with you. And you mentioned one thing a minute ago, you said that at the top, these big companies are corrupt. What do you mean by corrupt? Do you mean that there's nobody, there's no regulation that they buy off officials? Do you mean that there's nobody telling them no, you can't do that at the board of directors is ineffectual? What does corrupt mean? Yeah, it's basically the latter chain. So in the last few years, some of the best known companies in Japan have been discovered to have basically lied about their sales reports, lied about the quality of their products, funnel money into undisclosed locations. This is Olympus, Toshiba, in my neighborhood here, Kobe Steel. Many of them were overreporting sales and there was no corporate overview. The board of directors, if they knew about it, didn't do anything about it or maybe was not reported by management. So Japan Inc over the last few years has really taken many, many hits because blue shift companies, companies that you thought were professionally managed have turned out to be not so. In the case of Olympus, this was about five or six years ago. It was a whistleblower who was a foreign CEO. So again, we have a foreigner who went to the press and said that it was half a billion dollars was being funneled into these companies where the money just disappeared days after. There were rumors that the Yakuza was involved in helping Olympus to maintain their high sales numbers by loading the money and then extorting them. So it was a terrible, terrible episode of complete corporate failure, corporate governance failure in Japan. And Nissan also is now in the limelight because of what's happened with Goan and kind of exposed how poorly Nissan had been managing themselves. The chief guy who actually helped to set up the prosecution, he was a Nissan leader, he also had to resign a few weeks later after this whole thing started with Goan because he also was accepting money and not reporting it in the proper way. Same thing with Goan, he had future compensation that he was not reporting. So it wasn't just Goan, apparently, who was participating in this under-reporting of salary that he was arrested for. Well, that leads to the question of what the Japanese government is doing. So there you have Goan and he's in Lebanon and he's telling his side of the story and criticizing the Japanese government and system of laws for that matter. What is the Japanese government doing? Are they responding? Are they arguing with him? Are they taking action to prosecute others in Nissan who might have been in league with him? And are they changing the system because it sounds like he is inviting criticism of the Japanese government and prosecutorial system and maybe the Japanese government should take note of that and try to improve it? What's happening? Okay, so your question about if other Nissan officials have been arrested and treated in the same way, the answer is no. So that stands out as something that doesn't make sense if you look at it from a fairness perspective. Other officials in Nissan have done the same thing and they've been removed from their position but they have not been arrested. So they're focusing on Goan and that's because they set him up, basically. He was asked to come to a board of directors meeting. He flew on his jet and everything was set up already to arrest him as soon as he stopped off the plane and was on the tarmac is what they've done. Now part of what Goan is claiming is that this is all has to do with internal politics. He had been attempting to move Nissan and were no closer so that the management would be more leaning towards the French side. This is what the Japanese press is reporting. This is what Nissan officials were saying that Goan was trying to do in the background. So Goan responded and said, look, this is all trumped up. I wasn't doing anything that was illegal. This is something that Nissan agreed to do with me in terms of my salary and other things. What that really got me for was the fact that they thought that I was going to take away independence from Nissan and make it more subservient to her own, which he in his press interview has claimed many times he was not trying to do. So from his perspective, this is more political than it is legal. And to your second question about what the Japanese government is going to do, clearly this is shining a light on the Japanese justice system, which is uniform. It's not just NGOs, the high level famous people get treated this way. It's everybody. Will Japan change because of this outside, this light shining on from the outside on this and the pressure perhaps that Goan is going to create to try and change the system? I don't know. So far, they have not responded in that way. They have issued an arrest warrant for him through Interpol and his wife. And they're claiming that if he really is innocent, he needed to prove that he was innocent here in Japan, even though they held him for so long and didn't even give him a date when he would potentially be able to have a trial and prove to hopefully prove that he would be innocent. But in the end, Goan decided that he wouldn't be able to do that, even if he is innocent and it's true that he is innocent, that he would not be able to prove that in the Japanese court because the court is so stacked against him that he's basically presumed to be guilty, which the Ministry of Justice actually said. It was kind of a slip of the tongue that she said, Goan needs to prove that innocent. That was a direct quote from her when she was commenting about him being in Lebanon. Yeah, this is very disappointing. It's very disappointing. I mean, maybe I have to read further on it, but my reaction to the way you framed it is that he may very well be right. This is a fairly peculiar thing to regulators would come to him and say, you know, you should report that and we're going to audit you and we're going to require you to pay it back. And I'm sure he's a wealthy man. He could do that. Likewise, breach of trust. They could straighten him out. They could straighten the board out. You don't have to put him in jail over those things. They're corporate transgressions, but they're not necessary. And if they're if they're criminal, they're white collar criminals and not the kind of they're not murder and rape and what have you. And so my reaction is they went over the top. Not only did they go over the top, but they brought him down. They ruined him. He's globally ruined. He's radioactive. He's not going to be able to get a job anywhere now as a corporate executive. What else? My other reaction to this is that is that this had to be an inside job. Somebody had to finger him. And it really does sound like a political maneuver because of what you said, because of his effort to change the relationship you know between Nissan and who was it? The other the other car company. We're no investor. We're no, I think they don't 40% of Nissan as a result of bailing them out back when they were nearly putting bankrupt. So they are the majority owner of Nissan, but they don't. Nissan has been independent in terms of how it's been managed. Although Golan was CEO or no, and he's also CEO of Nissan. By the way, he is the only person ever to be CEO of two Fortune 500 companies at the same time. Remarkable. Well, it sounds like he was pretty good actually. You know, Steve, it sounds like he was a really good executive and he could he could do what he could do amazing things with two companies at the same time. And you know when you get to the top, maybe those people would like to bring you down simply because you're so good. Yeah, there could be some resentment, but he did what he did, you know, that he did turn Nissan around clearly. But also I think this issue of the politics between the French, you know, we're not owned by the French government. So there's also there's national politics involved on this. And there's a Japanese sense that Nissan is one of our blue chip companies and we don't want to know him by the French government. So there's a lot of ramifications or undercurrents on this. But I think, Jay, your instinct on this is right, that a lot of this has to do with politics. So just very briefly, let me talk about the escape, which is this is going to be a Netflix video or maybe a movie. And there's already discussion who's going to play Carlos, Carlos Ghosn, you know, maybe Tom Hanks. The guy who looks the most like him is Mr. Bean. I don't know if you know him, Ron Atkinson, but they look very similar. But Ghosn has already said, I don't want him to play me. He wants some kind of handsome person. This is going to be huge. Our favorite president, Trump is involved too. The wife of Ghosn has reached out to Trump to help with this injustice that they see that's being carried out by the Japanese government. But what happened is he's under house arrest and there are security guards that are in front of his place and there's cameras and so forth. So he doesn't have a windowless arm band. Jay, if you or I were arrested in America and we were under bail, we would probably be wearing one of those things. In Japan, that's not legal. They don't actually have that. But he's under supposedly 24 by 7 surveillance. But on the evening of 12.29, the end of last year, he walks out of his home. He has a hat on and a face mask. So he's kind of trying to disguise himself. But he walks out and nobody notices. And you know, the end of the year in Japan is a holiday season. So apparently the security guards weren't working. No one was paying attention. And maybe they figured this out. So he goes, this is incredible. So he meets Tokyo and then he figured this all out. The easiest airport to get out of without being reviewed or being searched is the Kansai Airport. They've done their homework on this. So he gets on the bullet train. He goes down to Osaka and then he has a private jet set up. And apparently he climbs into a musical instrument box. There were some Gregorian musicians that were leaving Japan. So he went inside one of those big boxes for their musical instruments. And the box is so big that he couldn't go through the X-ray machine. So it was just waved through. So he gets on the plane. This is why Hollywood is going to be doing this day. It's an incredible story. He gets on the plane. He flies to Istanbul and then he transfers over to Lebanon. So he arrives on the 29th of the 30th. In Japan, no one notices. So he's gone. The day goes by, two days go by. And then finally on the 31st in Lebanon, he sends out a notice and says, hello, guess what? I've been Lebanon. I just came to Japan. And then Japan goes, holy crap, just what happened? They got caught. What a great story. You're right. It's a great movie. And my last question, we only have a minute left. But my last question is, how do people in Japan feel about this? Are they ticked off that he escaped the system? Are they ticked off with him for the apparent violations that claim the alleged violations of the criminal law? Or has he become a kind of hero, a kind of bad guy hero? How do people feel about that? Well, I'd say the reaction's been interesting. They think that what he's done is wrong, that basically he's escaping and that he has turned himself into an international criminal. But there's also anger directed at the justice system and the prosecutors for how they handled him and also for the fact that they let him escape so easily. How could they do that? How could they let him go like that when they were supposedly under surveillance 24 by 7? So it's hard to say how this has all been evolved. He wants to clear his name and he said he's willing to go through a court system or court case in some place where he feels he can get a fair trial. I don't know if that probably is not Lebanon. It had to be maybe some other place. But he wants to prove his innocence because Jay, you're right. He's from an international perspective. He's completely gone. He has no future whatsoever in a corporate role because of escaping from Japan. Even if he's innocent, the fact that he did that, I think he's done. Well, I imagine he was as a corporate executive of a multinational that way. He had a few bucks stashed away. Is there any discussion about his assets elsewhere? Yeah. The bail that he put up, he actually got out on bail in Japan. He put up $10 million and he just left that. When he escaped Japan, that money goes into the Japanese government coffers. I don't know what his net worth is, but I'm sure it's probably into the hundreds of millions. I don't think we need to worry about him having to eat cup noodle every day or not being able to hire the best lawyer that he available to try and clear his name. But he seems very animated along those regards along that way. He's going to attempt to clear his name. We'll see. It's a great story, Steve. Thank you for sharing it with us. What a great discussion. Now we'll all be watching for it. Thank you so much, Steve Zercher. Really appreciate it. Talk to you again in a couple of weeks. Look forward to your trip to Hawaii. Take care. Looking forward to it as well. Bye-bye. Thank you.