Nissan, Ghosn to pay penalties to settle charges with U.S. SEC

September 24, 2019

New York--The U.S. Securities and Exchange Commission said Monday that Nissan Motor Co. <7201> has agreed to pay 15 million dollars in civil penalty to settle fraud charges related to the false disclosures of executive compensation of Carlos Ghosn, disgraced former chairman of the major Japanese automaker.

Ghosn agreed to pay one million dollars in penalty and former Nissan board director Greg Kelly 100,000 dollars.

Beginning in 2004, Nissan's board delegated to Ghosn the authority to set individual director and executive compensation levels, including his own, according to the SEC.

From 2009 until his first arrest in November 2018 by the Tokyo District Public Prosecutors Office for allegedly underreporting his pay in Nissan's financial statements, Ghosn, "with substantial assistance from Kelly and subordinates at Nissan, engaged in a scheme to conceal more than 90 million dollars of compensation from public disclosure, while also taking steps to increase Ghosn's retirement allowance by more than 50 million dollars," it said.

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," the commission said, adding that Ghosn and his subordinates, including Kelly, "crafted various ways to structure payment of the undisclosed compensation after Ghosn's retirement."

"Nissan's disclosures about Ghosn's compensation were false," Steven Peikin, co-director of the SEC's Division of Enforcement, said. "Through these disclosures, Nissan advanced Ghosn and Kelly's deceptions, and misled investors, including U.S. investors."

"Investors are entitled to know how, and how much, a company compensates its top executives," Stephanie Avakian, also co-director of the division, said. Ghosn and Kelly "went to great lengths" to conceal this information from investors and the market, Avakian said.

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

Ghosn and Kelly will be banned from serving as executives or board directors of U.S. companies for a certain period of time.

Nissan issued a statement saying that the company "is firmly committed to continuing to further cultivate robust corporate governance."

Ghosn's defense team said in a statement that Ghosn and the 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," the team also said in the statement released through Ghosn's public relations representative in the United States.

Yoichi Kitamura, chief attorney for Kelly, released a statement saying that the settlement with the SEC is something separate from the criminal case in Japan and will have no impact on it.

Ghosn and Kelly have been indicted by the Tokyo prosecutors office for the alleged executive pay concealment. Ghosn was removed from the post of Nissan chairman days after his first arrest on Nov. 19, 2018. Jiji Press