Nissan and ex-CEO pay $16m to settle SEC fraud charges

Nissan has paid $15m (£12m), and its former CEO Carlos Ghosn has paid $1m and been given a 10-year company officer ban, to settle fraud charges brought by the Securities and Exchange Commission (SEC) relating to failure to disclose over $140m of pay and benefits

The US regulator said that from 2004, Nissan's board delegated to Ghosn the authority to set individual director and executive compensation levels, including his own. From 2009 until his arrest in Tokyo in November 2018, Ghosn, with substantial assistance from another former Nissan director, Greg Kelly, and subordinates at Nissan, engaged in a scheme to conceal more than $90m of compensation from public disclosure, while also taking steps to increase Ghosn's retirement allowance by more than $50m.

Each year, 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, created various ways to structure payment of the undisclosed compensation after Ghosn's retirement, such as entering into secret contracts, backdating letters to grant him interests in Nissan's long term incentive plan, and changing the calculation of his pension allowance to provide more than $50m in additional benefits. 

The SEC said Kelly and Ghosn's Nissan subordinates misled Nissan's CFO and Nissan issued a misleading disclosure in connection with the increased pension allowance. The $140m in undisclosed compensation and retirement benefits was never paid out to Ghosn.

Steven Peikin, co-director of the SEC's division of enforcement, said: ‘Simply put, Nissan's disclosures about Ghosn's compensation were false.

‘Through these disclosures, Nissan advanced Ghosn and Kelly's deceptions and misled investors, including US investors.’

Nissan, Ghosn and Kelly settled without admitting or denying the SEC's allegations and findings.

Nissan agreed to pay a $15m civil penalty and to cease and desist from committing or causing violations of the anti-fraud provisions.  Ghosn and Kelly agreed to be permanently enjoined from violating or aiding and abetting violations of the anti-fraud provisions. Ghosn also agreed to a $1m civil penalty and a 10-year officer and director bar. Kelly agreed to a $100,000 penalty, a five-year officer and director bar and a five-year suspension from practicing or appearing before the Commission as an attorney. 

The SEC’s legal challenge was a civil matter, but Ghosn has been under arrest in Japan on criminal charges relating to the fake compensation claims since late 2018.  He was originally held in jail but has since been confined to his home under strictly controlled conditions pending his trial.

A spokesman for Ghosn’s legal team said in a statement: ‘’We are pleased to have resolved this matter in the US with no findings or admission of wrongdoing.

‘The SEC settlement expressly permits Mr. Ghosn to continue to contest and deny the factual and legal allegations against him in the criminal proceedings in Japan, and Mr. Ghosn fully intends to do so.

‘Mr. Ghosn and his defense team are now able to focus their efforts on continuing to vigorously fight the criminal case in Japan and pursue his claims against Nissan around the world. They remain confident that, if given a fair trial, he will be acquitted of all charges and fully vindicated.’

SEC order relating to Nissan is here

SEC complaint relating to Ghosn and Kelly is here

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