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Nissan's Ghosn crisis

Prosecutors probe source of Ghosn's extra $20m collateral

Investigation focuses on whether Mideast money trail leads to Nissan, sources say

Carlos Ghosn faces an extended detention without bail if prosecutors indict him on charges connected to suspected quid-pro-quo payments.   © Reuters

TOKYO -- Carlos Ghosn, the jailed former chairman of Nissan Motor, posted around $20 million in additional collateral in a currency-hedging deal central to Japanese prosecutors' case against him, sources familiar with the investigation told Nikkei on Thursday.

Tokyo prosecutors are investigating the source of this money as they prepare to indict Ghosn on Friday on aggravated breach of trust, a more serious charge than the allegations of understating pay that landed the auto executive in Japanese detention last November. 

Prosecutors are looking for evidence of whether Ghosn misused Nissan money to reward individuals who helped him. 

The additional collateral was posted around the same time a Saudi businessman provided a credit guarantee that allowed Ghosn to escape financial difficulties in 2008 and 2009. The money, held in a Ghosn relative's bank account, is suspected to have originated from a Middle Eastern auto dealer run by a friend of the former Nissan chief, sources said.

When the yen soared during the 2008 global financial crisis, Ghosn suffered about $17 million in paper losses on currency swap contracts supposed to shield his yen-denominated pay at Nissan. Faced with a daunting call for additional collateral from Tokyo-based Shinsei Bank, Ghosn transferred the loss-laden positions from his asset management company to Nissan in October 2008.

The contracts were returned to Ghosn's asset manager in February 2009. At the time, Saudi businessman Khaled al-Juffali helped arrange a credit guarantee of roughly 3 billion yen ($27.6 million at current rates) to satisfy Shinsei's collateral requirement.

Around this time, Ghosn also put up as collateral about 2 billion yen, or around $20 million, held in a time deposit under the name of a relative, according to sources. This money was apparently removed as collateral a few months later.

People connected with Nissan told investigators that this money is thought to have come from a Nissan dealer run by another Ghosn acquaintance in the Middle East. A large sum of money was paid from Ghosn's discretionary "CEO reserve" to this dealership, according to the sources.

Nikkei previously reported that the same discretionary fund was used to pay a total of $48 million to dealerships in Oman and Lebanon, as well as $14.7 million to a company run by al-Juffali in multiple installments between 2009 and 2012.

In a court appearance on Tuesday, Ghosn said the allegations against him were "meritless" and that payments made to al-Juffali's company were legitimate compensation for services rendered.

Ghosn's detention period ends on Friday, and barring his rearrest, his defense team has indicated it intends to request bail for the 64-year-old, whose lawyers said was suffering from a high fever.

Ghosn is also expected to be hit with further charges under securities law in connection with underreporting his compensation. Former Nissan Representative Director Greg Kelly, as well as Nissan itself, are also expected to be charged with breaking securities law following a complaint by Japan's Securities and Exchange Surveillance Commission.

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