In connection with his rearrest on suspicion of violating the Companies Law, former Nissan Motor Co. Chairman Carlos Ghosn has denied he misappropriated Nissan funds for personal use in two particular instances, saying neither instance constituted a special breach of trust under the law.
As in the case regarding false reporting of his annual executive remuneration in the automaker’s securities reports, for which Ghosn, 64, was indicted, the former chairman and the special investigation squad of the Tokyo District Public Prosecutors Office are in direct conflict over their assertions.
According to the defense counsel who met with him shortly after his third arrest, Ghosn seemed unconvinced with the latest charge, though he showed no sign of dissatisfaction or distress. With his term of detention set to end on Jan. 1, Ghosn faces the prospect of greeting the New Year in detention. There is even a possibility his term will be extended.
The latest arrest was on suspicion of two particular acts.
One is that Ghosn shifted private appraisal losses worth about ¥1.85 billion ($16.8 million) — incurred through a swap transaction contract with a bank — from his own asset management company to Nissan in October 2008, by naming Nissan as the party that had signed the contract.
The other is that, from June 2009 to March 2012, he had a total of $14.7 million transferred from funds managed by a Nissan subsidiary to an acquaintance in Saudi Arabia, who aided Ghosn in his bid to obtain a credit guarantee over the contract with the bank.
The special squad suspects that, in both cases, Ghosn inflicted property damage on Nissan by actions that ran counter to his duties as representative director and chief executive officer of the automaker.
According to informed sources, Ghosn signed a swap transaction contract with Tokyo-based Shinsei Bank in order to exchange executive remuneration paid in yen with U.S. dollars. Swap transactions enable deals involving large sums of money to be made with little capital, but are risky because huge losses can be incurred if market projections turn out to be wrong.
Ghosn did in fact suffer private appraisal losses due to the yen’s steep rise following the collapse of Lehman Brothers in autumn 2008. Ghosn, who was then asked by Shinsei Bank to provide additional collateral, allegedly transferred all of his rights, including the appraisal losses, from his own asset management company to creditworthy Nissan, thus avoiding the need for additional collateral.
The Securities and Exchange Surveillance Commission and others consider this move to be problematic. Ghosn allegedly returned these rights to his asset management company around February 2009. But a senior official at the public prosecutors office said, “even if it was temporary, as long as Ghosn forced the company to assume the appraisal losses from his private transactions, it would constitute a crime.”
While admitting to the transfer itself during his interrogation by the special squad, Ghosn told them he only temporarily used Nissan’s assets and creditworthiness. Although damages totaling several tens of millions of yen incurred in the several months following the transfer were paid under the name of Nissan, Ghosn asserted that he paid the same amount of money into Nissan, and that he had not caused damage to Nissan and had no intention of doing so.
The statute of limitations for aggravated breach of trust is seven years. Ghosn’s defense counsel, Motonari Otsuru, a lawyer and former head of the special investigation squad, said, “If it were not Ghosn, who has a presence overseas, the statute of limitations would have been up. Since Nissan has not actually suffered any losses, it’s not worth punishing him.”