Nissan Motor Co. and the U.S. SEC settle fraud charges

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Carlos Ghosn Former Nissan Renault CEO flickr / Adam Tinworth

Nissan Motor Co. and the United States Securities and Exchange Commision have settled fraud charges against the automaker, former Renault-Nissan Alliance CEO Carlos Ghosn, and former Nissan director Greg Kelly, related to filing false financial disclosures that hid more than $140 million allocated to Ghosn and his retirement package. Under the settlement, Nissan will be paying the SEC a $15 million fine. The settlement carries no admission or denial of the SEC’s findings by Nissan, Ghosn, or Kelly.

The SEC investigation was carried out with the cooperation of the Tokyo District Public Prosecutors Office. Ghosn was arrested in Tokyo last November, accused of financial shenanigans.

In a statement, Nissan said that it is “firmly committed” to further cultivating “robust corporate governance,” and that it has implemented remedial institutional changes to prevent a recurrence of the problem. The automaker will be restructuring to include three statutory supervisory committees overseeing audits, compensation, and “nomination,” presumably related to vetting personnel. With the SEC’s approval of the settlement, the case will now be closed.

“Investors are entitled to know how, and how much, a company compensates its top executives,” said Stephanie Avakian, co-director of the SEC’s Division of Enforcement. “Ghosn and Kelly went to great lengths to conceal this information from investors and the market.”

“Simply put, Nissan’s disclosures about Ghosn’s compensation were false,” added Steven Peikin, co-director of the SEC’s Division of Enforcement. “Through these disclosures, Nissan advanced Ghosn and Kelly’s deceptions and misled investors, including U.S. investors.”

According to the SEC, starting in 2004, the Nissan board gave Ghosn the authority to set compensation levels for directors and executives, including his own, which appears to be a clear conflict of interest. From 2009 until his arrest last November, the SEC says Ghosn, with material help from Kelly and other subordinates at Nissan, attempted to conceal more than $90 million in compensation from public disclosure, at the same time improperly increasing Ghosn’s retirement allocation by more than $50 million.

As part of the settlement, Ghosn is personally paying a $1 million civil penalty, and he’s barred from holding a corporate office or directorship for 10 years. Kelly was penalized $100,000 and given a five-year suspension.

This case is about fraudulent paperwork and reports, not actual theft. The SEC says that Ghosn never received a penny of the increased compensation or retirement benefits.

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