WASHINGTON -- Nissan Motor Co. and former CEO Carlos Ghosn have agreed to settle claims from the U.S. Securities and Exchange Commission over false financial disclosures related to Ghosn's compensation, an SEC statement said on Monday.
Nissan will pay $15 million, while Ghosn agreed to a $1 million civil penalty and a 10-year ban from serving as an officer or director of a publicly traded U.S. company, the SEC statement said.
Ghosn was arrested in Japan and fired by Nissan last year. He is awaiting trial in Tokyo on financial misconduct charges that he denies.
Ghosn's legal team said in a statement they were "pleased to have resolved this matter in the U.S. with no findings or admission of wrongdoing ... The SEC settlement expressly permits Mr. Ghosn to continue to contest and deny the factual and legal allegations against him in the criminal proceedings in Japan, and Mr. Ghosn fully intends to do so."
The team added "that, if given a fair trial, he will be acquitted of all charges and fully vindicated."
Former Nissan human resources official Gregory Kelly agreed to a $100,000 penalty and a five-year officer and director ban. Nissan, Ghosn and Kelly settled without admitting or denying the SEC's allegations and findings.
The SEC said in total Nissan in its financial disclosures omitted more than $140 million to be paid to Ghosn in retirement -- a sum that ultimately was not paid. The SEC also accused Ghosn in a suit filed in New York that he engaged in a scheme to conceal more than $90 million of compensation. That suit is being settled as part of the agreement announced Monday.
Corporate governance issues
Nissan confirmed it had settled the allegations and said it "is firmly committed to continuing to further cultivate robust corporate governance."
Nissan provided significant cooperation to the SEC, the agency said. The company now has a new governance structure with three statutory committees -- audit, compensation and nomination -- and has amended its securities reports for all relevant years.
The SEC said beginning in 2004 Nissan's board delegated to Ghosn the authority to set individual director and executive compensation levels, including his own.
The SEC said "Ghosn and his subordinates, including Kelly, crafted various ways to structure payment of the undisclosed compensation after Ghosn's retirement, such as entering into secret contracts, backdating letters to grant Ghosn interests in Nissan's Long Term Incentive Plan, and changing the calculation of Ghosn's pension allowance to provide more than $50 million in additional benefits."
"Investors are entitled to know how, and how much, a company compensates its top executives. Ghosn and Kelly went to great lengths to conceal this information from investors and the market," said Stephanie Avakian, co-director of the SEC's Division of Enforcement.
More fallout
Nissan said earlier this month CEO Hiroto Saikawa was stepping down after he admitted to being overpaid in breach of company rules.
Renault has unsuccessfully sought a full-blown merger with its larger partner Nissan. Japan’s second-largest automaker is currently planning to cut around one-tenth of its global workforce -- its deepest job cuts since 2009 -- and to slash production capacity while shuttering underutilized plants.
French prosecutors have opened their own investigation into Ghosn, who previously served as Renault SA’s chairman. The probe was initiated after Renault disclosed that Ghosn may have improperly used a company sponsorship deal to host his 2016 wedding party at the Palace of Versailles. The French automaker also has alerted French prosecutors to millions of euros paid by Ghosn to a distributor in Oman.
A spokesperson for the French prosecutor declined to comment on the investigation Monday.
Inside Nissan, the allegations involving Ghosn continue to reverberate. The Wall Street Journal reported Monday that some Nissan lawyers have raised concerns that the company’s internal investigation into the matter wasn’t appropriately independent because the law firm that conducted it has had a long relationship with the automaker.
The SEC fines are unlikely to have a major impact on the finances of Nissan or its former executives. Nissan expects to earn an operating profit this year of 230 billion yen ($1.2 billion) and Ghosn had an estimated net worth of about $120 million earlier this year, according to an analysis by the Bloomberg Billionaires Index. Kelly’s net worth is unknown, but he owns two properties in the U.S. -- his primary residence in Tennessee and a vacation home in Florida.
Bloomberg contributed to this report.
