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Nissan's Ghosn crisis

$15m payment to Ghosn associate was logged as 'promotional costs'

Nissan ex-chairman says the money was legitimate reward for lobbying activity

Carlos Ghosn at a 2009 event in Riyadh. The arrested Nissan ex-chairman allegedly used company funds to reward a Saudi associate for help with a personal investment.
Carlos Ghosn at a 2009 event in Riyadh. The arrested Nissan ex-chairman allegedly used company funds to reward a Saudi associate for help with a personal investment.   ¬© Reuters

TOKYO -- Then-Nissan Motor Chairman Carlos Ghosn treated as "sales promotional costs" roughly $14.7 million paid to a Saudi associate as part of an alleged scheme to shift private investment losses to the automaker, sources told Nikkei on Sunday.

Ghosn is suspected to have transferred the $14.7 million from Dubai-based Nissan Middle East, which oversees the automaker's operations in that region, to a bank account of a company operated by the acquaintance in four installments from June 2009 to March 2012. As then-CEO of Nissan, Ghosn apparently used the automaker's discretionary "CEO reserve."

Ghosn reportedly insists that the payments were proper compensation for lobbying and other services provided by the acquaintance, but the Tokyo District Public Prosecutors Office believes that the associate carried out no promotional activities.

Ghosn was rearrested Friday on suspicion of breach of trust. He was first arrested in Japan a month earlier for allegedly underreporting his compensation and was believed on the verge of being released on bail.

According to a lawyer, Ghosn says the acquaintance, an important figure in Saudi business circles, lobbied in support of the Japanese automaker to the Saudi government and royal family and was entrusted to resolve any issues between Nissan and local dealerships.

But prosecutors appear to doubt that the associate's company did any of the work Ghosn claims. Instead, they believe that the payment was intended as a reward to the acquaintance, who in early 2009 offered a credit guarantee to help Ghosn avoid putting up massive collateral on a personal investment.

According to prosecutors, a personal asset management firm of Ghosn's was asked by a bank to provide more collateral after it suffered heavy paper losses on a derivatives contract amid the 2008 financial crisis. Ghosn, unable to come up with the collateral, transferred the contract to Nissan in October 2008. But he returned it back to his asset manager in February 2009 after Japan's Securities and Exchange Surveillance Commission took issue with the transfer. After this, the Saudi acquaintance supplied the credit guarantee to help Ghosn.

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