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Nissan's Ghosn crisis

Ghosn suspected of transferring private losses to Nissan, say sources

Nissan allegedly documented future payments that should have been reported

If the amounts of deferred payments to ousted Chairman Carlos Ghosn were set, Nissan would have been required to declare them in annual securities reports.

TOKYO -- Ousted Nissan Chairman Carlos Ghosn is suspected of having transferred over a billion yen of losses in private financial transactions to the company in 2008, sources have told Nikkei.

Japan's Securities and Exchange Surveillance Commission was aware of the incident and raised the issue at the time.

According to people familiar with the matter, Ghosn managed part of his private funds in currency derivative transactions. During the 2008 financial crisis, the yen appreciated sharply, causing more than a billion yen in losses for the holdings.

When Ghosn's bank raised the issue of his lack of collateral, the executive suggested handing all rights over the derivatives including the losses incurred to the automaker.

At first, the bank demanded that the decision go to the company board, but then likely agreed to the transfer without the board's consent on Ghosn's insistence.

The SESC discovered the incident during routine inspections and indicated that such actions could entail compliance issues.

Also on Tuesday, sources said that Nissan Motor had annually prepared documents pledging deferred compensation to Ghosn.

If prosecutors conclude that the amounts of future payments were decided when the documents were compiled, Nissan would have been required to include them in annual financial statements.

Ghosn, 64, who was recently arrested on suspicion of underreporting pay, had allegedly set his annual compensation at around 2 billion yen ($17 million), with roughly half of the amount to be received in the future.

Deferred payments for the eight years through March 31, 2018, are estimated to total 8 billion yen.

According to the sources, Ghosn and former representative director Greg Kelly, 62, who was also arrested, had compiled documents setting the amounts to be deferred, while Nissan pledged to make the payments after Ghosn retired.

In addition to Ghosn and Kelly, only a small number of close aides were aware of the mechanism of deferred payments and the existence of the documents, the sources said.

The documents did not include details regarding payment dates or the reasons for future compensation, but it may have been planned for Ghosn to receive the money under categories such as advisory fees after retirement, the sources added.

Japanese law requires companies to name directors who are paid at least 100 million yen a year and the amount of compensation in securities reports. Businesses must also declare payments that are set during the fiscal year, even if they are to be paid at a later date.

Prosecutors may be treating the documents as evidence that Ghosn's remuneration had been fixed, and thus Nissan was required to cite the complete amount in its reports.

Both Ghosn and Kelly have reportedly denied the allegations, claiming that the payment amounts had not been set and that they had been reported adequately.

Nissan has been conducting an internal investigation since June, after a whistleblower and auditors raised the issue of the handling of Ghosn's compensation and alleged misuse of investment funds. Nissan found documents Ghosn had compiled himself in the process.

Nissan executives from both Japan and overseas have reportedly agreed to a plea bargain. Nissan has also cooperated with the investigation by submitting documents on Ghosn's deferred payments to prosecutors.

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