Ex-Nissan CEO Carlos Ghosn charged with fraud in US
Ghosn has already agreed to a settlement that includes a $1 million penalty.
The controversy over Carlos Ghosn, the embattled former CEO of Nissan and chairman of the Renault-Nissan-Mitsubishi Alliance, has reached the US.
The Securities and Exchange Commission announced on Monday that it has charged the ex-Nissan executive with fraud. At the same time, Ghosn has already settled the charges with a civil penalty of $1 million. Included in the announcement were charges against Greg Kelly, whom the SEC named as a co-conspirator. Kelly has also settled his fraud charges with a $100,000 civil penalty.
Prior to these US charges, Japanese authorities brought charges against both Ghosn and Kelly for similar alleged wrongdoings in December 2018. Ghosn's fall from grace saw him ousted as Nissan and Mitsubishi's chairman, he stepped down as CEO of Renault and he was swept from power at the Renault-Nissan-Mitsubishi Alliance. He's been charged with misreporting income to financial regulators in Japan and using company funds for personal expenses, among other wrongdoings.
In the US, the SEC's investigation went back as far as 2004. That year, Nissan's board gave Ghosn authority to set executive compensation, including his own. The investigation found that between 2009-2018, Ghosn worked with Kelly to hide $90 million of compensation from the public. The two also worked to add more than $50 million of retirement allowance for Ghosn.
Each year, Ghosn declared a certain amount paid, while another amount remained unpaid and undisclosed. The ex-Nissan head worked in various ways to shuffle the undisclosed money to Ghosn after his retirement. The SEC said this included "secret contracts" and backdating letters to approve Ghosn for Nissan's Long Term Incentive Plan. Additionally, they worked to change the former executive's pension plan.
In total, the extra compensation added up to $140 million, though the SEC said it was never paid out.
"Simply put, Nissan's disclosures about Ghosn's compensation were false," said 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 US investors."
"As noted in the order, Nissan provided significant cooperation to the SEC and has promptly implemented remedial acts to prevent recurrence, including transitioning to a new governance structure with three statutory committees (audit, compensation and nomination)," Nissan said in a statement. "Nissan has also amended its securities reports for all relevant fiscal years."
Nissan says it is firmly committed to continuing to cultivate robust corporate governance.
The SEC not only charged Ghosn and Kelly, but also Nissan. The automaker, charged with violating the antifraud provisions of the Securities Exchange Act of 1934, agreed to settle the case with a $15 million civil penalty. Ghosn and Kelly, as mentioned, settled with civil monetary penalties as well. Both former executives also agreed to bans on officer and director positions.
Nissan, Ghosn and Kelly all settled their own SEC cases without admitting or denying the SEC investigation's findings.
Originally published Sept. 23, 8:25 a.m. PT.
Update, 10:45 a.m.: Adds comment from Nissan.