Ghosn slapped with two more indictments in Japan

TOKYO -- Tokyo prosecutors have indicted ousted Nissan Chairman Carlos Ghosn on two additional charges, further complicating the legal battle facing the jailed auto executive.

The first of the two new indictments alleges that Ghosn temporarily shifted personal securities losses to Nissan, in a special breach of trust case. As part of the charge, prosecutors also claim Ghosn then arranged for Nissan to pay an associate who helped him with the red ink.

The second of the new indictments is related to an earlier indictment handed down Dec. 10.

It accuses Ghosn, fellow director Greg Kelly and Nissan as a company of falsifying securities filings by under-reported Ghosn’s compensation in the fiscal years 2015-2017.

Prosecutors earlier said they suspect his remuneration was under-reported by some by some 4 billion (37 million) during that period. On Dec. 10, prosecutors indicted all three for allegedly not reporting 4.9 billion yen ($45.3 million) in deferred compensation in the 2010-2014 fiscal years.

Kelly is embroiled in those indictments as an alleged accomplice who set up the scheme. Kelly’s lawyers have denied American executive did anything wrong.

Ghosn also denied all the charges against him at a Jan. 8 court hearing, his first public appearance since being detained Nov. 19 with Kelly in a stunning arrest.

“I have been wrongly accused and unfairly detained based on meritless and unsubstantiated accusations,” Ghosn told the court in a calm controlled voice. “I have always acted with integrity and have never been accused of any wrongdoing in my several-decade professional career.”

The breach-of-trust indictment had been widely expected.

In that matter, Ghosn is charged with temporarily shifting 1.85 billion yen ($17.1 million) in personal swap contract losses to Nissan when he was having trouble gathering collateral to cover mounting paper losses. Prosecutors allege Ghosn later arranged to have Nissan pay a company owned by a business associate $14.7 million from 2009 to 2012 to help manage the losses.

Under Japanese law, breach of trust occurs when executives abuse their position for personal gain. A central question will whether Nissan incurred any damage from the arrangement.

Ghosn’s defense team admits he had Nissan take over the swap contract.

But they said Ghosn entered an agreement with the automaker and his bank that safeguarded Nissan from losses. The so-called novation agreement said Nissan would incur no monetary loss and required any loss settlement to be paid through Ghosn’s asset management company.

Ghosn entered foreign exchange contracts to protect his salary from dramatic shifts in value of the yen versus the dollar. Ghosn was being paid by Nissan in Japanese yen, but he need to convert a significant amount into U.S. dollars, the base currency of much of his expenses.

In a brief court hearing on Jan. 8, Ghosn noted that his children lived in the U.S. and that he has strong ties to Lebanon, which has a currency pegged the dollar.

But things fell apart when the global financial crisis hit in 2008. The yen unexpectedly appreciated, leaving him with massive paper losses on his swap contract.

His bank said he needed more collateral or it would have to close his position.

Ghosn said he considered using his Nissan shareholdings as collateral. But their value plunged during the financial crisis. He also considered cashing in his Nissan retirement allowance.

But he nixed that on the grounds it would require him to step down when Nissan needed experience leader to it navigate the worsening economic storm. Thus, he turned to Nissan.

Eventually, Ghosn associate Khaled Al Juffali – a Saudi business man with ties to Nissan’s operations in the Middle East – stepped with 3 billion yen ($27.7 million) in extra collateral for Ghosn in 2009. That allowed Ghosn to take the contract back from Nissan onto his own books.

But later, Ghosn arranged for Nissan to pay a company operated by Juffali the $14.7 million in four installments. Prosecutors suspect this was some kind of kickback for Juffali’s collateral.

Both Ghosn and Juffali deny that saying the payments were actually disbursements for legitimate business expenses. Among the services he performed for Nissan, Juffali said he helped resolve a dealer dispute in Saudi Arabia and helped Nissan negotiate with the Saudi Arabian government about its plans to build a new plant in the country.

Regarding the other two indictments about under-reported compensation, Ghosn has said the amount of deferred remuneration had not been fixed and that not of it had been disbursed.

Thus, he said, there was nothing to disclose and there was no intent to violate the law.

“Contrary to the accusations made by the prosecutors, I never received any compensation from Nissan that was not disclosed, nor did I ever enter into any binding contract with Nissan to be paid a fixed amount that was not disclosed,” he said in his prepared court statement.

“The test is the ‘death test’: If I died today, could my heirs require Nissan to pay anything other than my retirement allowance?  The answer is an unequivocal ‘No.’”

Ghosn’s lead attorney, Motonari Otsuru, said after the hearing that it could take another six months before Ghosn’s case goes to trial in Japan. That is partly because of the time in organizing and translating so many business documents that are in English and Japanese, he said.