An Apology and a New Suspect in the Renault Spying Debacle

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Yuriko Nakao / Reuters

Carlos Ghosn, Chairman and CEO of Renault-Nissan Alliance, speaks during an interview inside the Nissan headquarters building in Yokohama, south of Tokyo February 25, 2011.

Accusations of industrial espionage at French carmaker Renault may have fallen to bits, but that doesn't mean the drama and controversy that has roiled the company for two months is over. Though Renault CEO Carlos Ghosn confirmed on Monday that three senior executives he claimed in January had been caught spying for unknown interests are in fact innocent, French investigators continue to look into what they believe was an inside scam to swindle the company out of what could be a surprisingly modest amount of money. The main target of those suspicions: the head of Renault's own security division, who lead the internal inquiry against his three colleagues.

On Monday night, Ghosn appeared on France's evening news to apologize to and fully clear the three senior executives in the Company's electric car development program of any wrong-doing. It was the same news show on which Ghosn had declared on Jan. 23 that Renault had abundant "proof" and total "certainty" that the trio had been passing company secrets to outside sources. During the intervening two months — and even before the allegations against them began to wilt — all three executives maintained their innocence, protested that there was no evidence against them, and vowed that once they were cleared, the company would suffer payback for firing them. It was doubtless with that in mind that on Monday Ghosn not only apologized on his behalf and that of Renault's entire management, but also promised "compensation will be made, taking into account the grave human prejudice that [the executives] and their families suffered."

Given the enormous media attention Renault's charges of industrial espionage generated, it's likely the payments for damage done to the three men's reputations will mount well into the millions. In order to address that financial hit — and accept moral responsibility for having aired the company's mistaken accusations — Ghosn said he and any other managers "who from near or afar were involved in this affair" would renounce the bonuses they were granted for 2010 (Ghosn's bonus alone was $2.2 million) as well as 2011 stock options earned. And while Ghosn expressed his willingness to have the wrongly dismissed men returned to their jobs — two of the three say they might consider the offer once damages are paid — he rebuffed calls that he and his chief operating officer, Patrick Pélata, resign over the matter.

Despite thundering controversy about how the matter was handled, there are certain factors that mean Ghosn and Renault aren't taking as much heat for the now infamous Case Of the Inexistent Spies as they could be. First among those are indications that Renault was also a victim in the affair. Earlier Monday, as Paris prosecutor Jean-Claude Marin officially dropped the case against the accused trio of managers for lack of evidence against them, he noted that investigators were now "orienting [themselves] towards possible intelligence fraud." Their suspicions currently center on former French military spy Dominique Gevrey, who as director of Renault's security oversaw an internal inquiry after he received an anonymous letter in August accusing the trio of industrial espionage.

Though Marin said police didn't find any foreign accounts into which the three executives were said to have paid their spying proceeds, their search did turn up accounts in Spain and Dubai holding some of the $433,000 that Renault had given Gevrey to obtain further information from the anonymous whistle-blower. Gevrey — who was arrested on March 12 as he prepared to board a flight from Paris to Guinea — has steadfastly refused to tell his bosses or police who his informant was. He also flatly denies allegations he was seeking to defraud Renault. On Monday, Gevrey was officially placed under investigation — a judicial step that effectively designates a suspect in a criminal inquiry — and held for a third straight day of questioning.

French media accounts quoting officials involved in the case are more pointed about the "intelligence fraud" Marin mentioned. The operating theory, those authorities say, is that Gevrey allegedly organized the accusation of the three Renault executives, and ran the internal investigation against them in order to bank the money the company gave him to finance it. If so, Renault got off relatively lightly: in addition to the $433,000 it already paid Gevrey, it was also set to provide him with an additional $545,000 to get more information from his whistleblower — and was considering making $1.3 million available to him for related operations. But even that is relatively small potatoes for a company that posted $54.5 billion in sales last year, and whose CEO makes an annual, pre-bonus salary of around $12.8 million.

Though Ghosn is at times denounced by detractors as an overly authoritarian, control-happy boss, his success in keeping Renault profitable and innovative is muting calls for his resignation. French cabinet members have aired criticism of his management of the spying affair — and remain infuriated that it took so long for Renault to inform police and intelligence services about its suspicions — but it seems unlikely they'd be any more inclined to force a resignation that even the notoriously unforgiving union leaders aren't demanding. Renault's apparent spy-scam caper may have created an embarrassing scandal for the company and France, but no one seems keen to make things stickier still by replacing a manager who's considered critical to the firm's future.