United States fines Nissan, Ghosn, Kelly over fraud

THE United States Securities and Exchange Commission (SEC) has fined Nissan, its former CEO Carlos Ghosn and former director Greg Kelly a combined $US16.1 million ($A23.8m) for attempting to hide more than $US140 million of Mr Ghosn’s retirement pay and benefits.

 

Due to his arrest in Tokyo last November and subsequent international investigation, none of this undisclosed compensation was ever paid to Mr Ghosn.

 

With assistance from the Tokyo Public Prosecutors Office, the SEC investigation culminated in Nissan and Mr Ghosn being charged for violating anti-fraud provisions of the Securities Exchange Act, while Mr Kelly was charged with aiding and abetting these violations.

 

All the accused settled without admitting or denying the SEC’s allegations, with Nissan, Mr Ghosn and Mr Kelly respectively agreeing to pay civil penalties of $US15m, $US1m and $US100,000.

 

Nissan also agreed to cease and desist from committing or causing violations of the anti-fraud provision while Mr Ghosn and Mr Kelly agreed to stop violating or aiding and abetting violations of anti-fraud provisions.

 

In addition, Mr Ghosn and Mr Kelly respectively agreed to 10-year and five-year bans on holding officer or directorship positions. Mr Kelly was also suspended for five years from practicing or appearing before the SEC as an attorney.

 

The SEC complaint alleged that the foundations of the fraud dated back to 2004, when the Nissan board gave Mr Ghosn responsibility for setting his own remuneration package, as well as those of individual directors and executives.

 

It goes on to allege that between 2009 and Mr Ghosn’s arrest, the former Nissan CEO along with Mr Kelly and unnamed subordinates “engaged in a scheme to conceal more than $US90 million of compensation from public disclosure, while also taking steps to increase Ghosn’s retirement allowance by more than $US50 million”.

 

The SEC alleges that Mr Ghosn “fixed a total amount of compensation for himself, with a certain amount paid and disclosed and an additional amount that was unpaid and undisclosed”.

 

“Ghosn and his subordinates, including Kelly, crafted various ways to structure payment of the undisclosed compensation after Ghosn’s retirement, such as entering into secret contracts, backdating letters to grant Ghosn interests in Nissan’s Long Term Incentive Plan, and changing the calculation of Ghosn’s pension allowance to provide more than $50 million in additional benefits,” the SEC alleged in a statement.

 

“Kelly and Ghosn’s Nissan subordinates misled Nissan’s CFO and Nissan issued a misleading disclosure in connection with the increased pension allowance.”

 

In March, Mr Ghosn posted ¥1 billion ($A13m) bail to be released from Tokyo Detention House after 108 days behind bars. He is still awaiting trial for charges of financial misconduct that could result in him spending 10 years in prison.

 

After two unsuccessful attempts, Mr Ghosn’s third bail application was granted on strict conditions including a ban on international travel, the use of only court-approved accommodation, continuous video surveillance and restricted access to the internet.

 

Mr Kelly was granted bail on December 25, with similar conditions to Mr Ghosn. His bail was set at ¥70m.

 

Following his arrest, Mr Ghosn was removed from leadership positions within the Renault-Nissan-Mitsubishi Alliance and Mitsubishi Motors Corporation. In January he also agreed to step down as CEO and chairman of Groupe Renault.

 

In Japan, Mr Ghosn, Mr Kelly and Nissan Motor Company stand accused of violating the financial instruments and exchange act by falsifying documents in order to under-report Mr Ghosn’s salary by ¥5 billion between 2011 and 2015.

 

The scandal has been linked to a collapse in merger talks between Fiat Chrysler Automobiles and Renault.