Ghosn, Kelly, Nissan all indicted for under-reporting compensation

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UPDATE: 12/10/18 03:29 am ET – adds Nissan confirmation

TOKYO prosecutors from Tokyo have sued the suspect Nissan boss Carlos Ghosn, alongside Greg Kelly and Nissan Motor Co., for allegedly misrepresenting Ghosn's compensation for tens of millions of dollars in the company's financial records for five years, the Japanese media reported.

Both men were also arrested again in a move that prolongs their lengthy imprisonment in Japan.

Nissan was also charged as a legal entity for its alleged role in filing securities reports that undervalued Ghosn's remuneration.

Nissan confirmed his own charges against those against Ghosn and Kelly in a statement, apologized for the situation and promised to improve compliance with the company.

"By making incorrect statements in annual impact reports, the integrity of Nissan's public disclosures on the securities markets is severely damaged and the company expresses its deepest regret," said Nissan. "Nissan will continue its efforts to strengthen its governance and compliance, including providing accurate disclosure of corporate information."

The movements came three weeks after the prosecutors arrested Ghosn and Kelly in a surprise flight that cast a shadow over the future of the alliance between Renault and Nissan-Mitsubishi, which Ghosn has merged into the world's largest car group in two decades.

Prosecutors accuse the company and two executives of violating the Japanese financial instruments and bill of exchange by allegedly claiming damages from Ghosn of approximately 5 billion yen ($ 44.4 million) in fiscal years 2010-2014, reported the Nikkei- newspaper, broadcaster NKH and Kyodo News.

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Ghosn has been detained at a detention center in Tokyo since 19 November arresting accusations of financial misconduct at Nissan, the company he nearly saved bankrupt almost 20 years ago and headed as chairman until he was fired at the end of last month.

Kelly, an American director on the Nissan board, was picked up the same day and accused by the company of the "mastermind" behind the scheme.

The law firm of Go Kondo, one of Ghosn's lawyers in Japan, declined to comment after the complaint filed by Ghosn. A spokesman for the family said they had no public comment planned.

Ghosn has denied any mistake, according to the spokesman and Japanese media reports.

Kelly's lawyer in Japan, Yoichi Kitamura, confirmed the charge and the re-identification of his client. "We believe he is innocent, so we will fight in court," Kitamura said.

If they are found guilty, Ghosn and Kelly can each get 10 years in prison, a fine of up to 10 million yen ($ 88,750) or both, according to the Nikkei. Companies can get a fine of up to 700 million yen ($ 6.21 million).

Renewed arrest

Both men were held without formal charges until their indictment on Monday. Ghosn and Kelly were arrested again on Monday on grounds that prolonged their detention without bail, the Japanese media reported.

The two were again arrested for new accusations that they had also endorsed compensation in the 2015-2017 financial years. They are accused of hiding about 4 billion (35.5 million) of income in that period, Japanese media say.

The system of Japan also allows reopening. The maneuver allows prosecutors to re-arrest suspects on various grounds and to restart the detention clock altogether.

The relocation could extend their detention for another 20 days until 30 December, according to Kyodo. After that, prosecutors must sue or release them. Or prosecutors could find new grounds for a new recapture and start the cycle again. Japanese prosecutors use the re-arrest system to conduct long-term investigations and gather more evidence, partly in the hope of producing a confession.

The cycle of detention can take a long time. Muneo Suzuki, former legislator in the lower house of Japan, was arrested in 2002 on charges of bribery. He detained 437 days in detention before he was finally found guilty and sent to prison.

Nissan's internal analysis of the case accuses Ghosn of hiding about 9 billion yen ($ 79.9 million) in deferred compensation over the combined eight fiscal years in an arrangement to have him pay later.

Nissan has worked with researchers, the company has said.

A person familiar with the case said that Nissan had prepared for the possibility of filing charges against the case since the accusations against Ghosn and Kelly first appeared last month.

Prosecutors say that deferred compensation must be fully reported by Nissan in depositing securities even though the amount has not yet been paid out because it was a future liability against the company, said a person who was familiar with the issue.

Saikawa responsibility

CEO Hiroto Saikawa apparently signed documents regarding plans to pay Ghosn's deferred compensation after he retired in the form of a consultant's fee, said the Nikkei. But Saikawa apparently did not understand that the document was intended to set up deferred payments, and prosecutors believed that he was not involved in misleading registration files, he said.

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Prosecutors are faced with obstacles in sentencing Ghosn, said Masaru Wakasa, a former deputy in the special investigation of the prosecutor in Tokyo.

They have to prove that the amount and timing of future payments are definitive, Wakasa said. They must also demonstrate that there was an obligation to report the payments in the annual accounts. That gives Ghosn's defense team some leeway to ward off attacks, Wakasa said.

Wakasa added that Japanese prosecutors have probably already received a statement from the Financial Services Agency of the country that requires such financial reporting; otherwise they would not be as confident as they apparently are in prosecuting the case.

"Financial statements are an important tool to report to stakeholders, so making an erroneous report in a financial statement comes down to misleading stakeholders, so this can be a real crime," Wakasa said. "The research now leans in the direction that prosecutors pursue."

Ghosn and Kelly reportedly admitted that Ghosn's remuneration was not fully reported in reports, but they said that this was not necessary because the amount had not yet been determined, Kyodo said, citing unnamed sources who were familiar with it. research.

Prosecutors will probably re-arrest Ghosn even after the current period expires later this month, Wakasa predicted. "It is likely that he will remain in detention until at least the end of this year," he said.

Naoto Okamura contributed to this report