friday, 11 january of 2019

Carlos Ghosn

Nissan expands Ghosn probe to more countries, executive Munoz under scrutiny

Nissan Motor Co Ltd (7201.T) has broadened its investigation into ousted chairman Carlos Ghosn to include dealings that took place in the United States, India and Latin America, three people with knowledge of the inquiry said.

In one aspect of their internal probe, company investigators are looking into decisions made in the United States by Jose Munoz who led Nissan’s North American operations from 2014 to 2018, the people said. Munoz was recently placed on a leave of absence due to the probe, they added.

Nissan said this month that Munoz, its chief performance officer and widely seen within the industry as close to Ghosn, was on leave “to allow him to assist the company by concentrating on special tasks arising from recent events.”

Munoz is not cooperating with investigators, two of the people with knowledge of the probe said, both describing his actions as “stonewalling”.

One of the sources described Munoz, who currently heads Nissan’s China operations, as a “person of interest” in the probe, adding that it was not clear whether he would be accused of any wrongdoing.

Munoz, 53, did not reply to Reuters requests for comment. The people with knowledge of the probe spoke to Reuters on condition of anonymity due to the sensitivity of the matter. A lawyer for Ghosn, Motonari Otsuru, said in an emailed comment: “I am unaware of this.”

Some of the questions put to Munoz relate to dealer franchise rights, one of the sources said. Other questions relate to contracts with parts suppliers and service providers that Munoz approved when he was at the helm of Nissan’s U.S. operations, another source said.

The sources said the findings made as part of the probe into Ghosn’s affairs in the U.S. market are being shared with prosecutors. Tokyo prosecutors declined to comment.

Nissan has said its internal investigation had uncovered “substantial and convincing evidence of misconduct” by Ghosn and that its scope is expanding.

Ghosn, once the most celebrated executives in the auto industry and the anchor of Nissan’s alliance with France’s Renault SA (RENA.PA), has been charged with under-reporting his income. On Friday, he was also charged with aggravated breach of trust, accused of shifting personal investment losses worth 1.85 billion yen ($17 million) to Nissan.

In his first public appearance since his Nov. 19 arrest, Ghosn declared his innocence in court on Tuesday, saying he had never received compensation that was not disclosed and that Nissan had not suffered any losses due to a temporary transfer of a personal foreign exchange contract.

The transfer had been a temporary measure to prevent him from having to resign and use his retirement funds as collateral, Ghosn said.

Sources familiar with the matter have also said Nissan investigators are examining other dealer franchise decisions in several countries where Ghosn played a part in the decision-making to see if there had been any misconduct.

In particular, the automaker’s investigators are looking into Ghosn’s role in what Nissan insiders have described to Reuters as a surprise decision in 2008 to pick a company called Hover Automotive India Pvt Ltd (HAI) as Nissan’s partner for marketing, sales, after-sales service and dealer development in India.

A different firm, TVS, had been lined up for the role after much research by Nissan management in India when Ghosn personally intervened at the last minute to push for HAI, four Nissan insiders said. They add that in 2012, HAI became the Nissan’s exclusive national sales firm in India, despite being relatively inexperienced in distributing vehicles to dealers.

Reuters was unable to find a representative for HAI, which according to India’s Registrar of Companies was dissolved as of Sept. 11, 2018. TVS did not respond to a request for comment.

The probe is also looking at what appear to be outsized payments for Ghosn’s bodyguard services in Brazil, one of the sources said.

Ghosn’s lawyer Otsuru did not respond to requests for comment on the expansion of Nissan’s probe into dealings in India and Brazil. A U.S. representative for Ghosn declined to comment.

One source also said Nissan is conducting audits of some distribution partners in the Middle East, including Saudi Arabia’s Al-Dahana which owns half of a joint venture called Nissan Gulf with the other half held by a wholly owned unit of Nissan Motor.

Al-Dahana, a marketing and dealer development firm, is majority owned by Khaled Al-Juffali, vice chairman of one of Saudi Arabia’s largest conglomerates. Reuters has reported that Al-Juffali is the person prosecutors believe arranged a letter of credit for Ghosn over his foreign exchange contract after which a company that Al-Juffali owned received four payments totaling $14.7 million.

Both Ghosn and the Khaled Juffali Company have asserted that the payments were for legitimate business purposes. Asked about the audit, a representative for the Khaled Juffali Company said the firm stood by its previous statement.

Another Nissan executive, Arun Bajaj, senior vice president for human resources and who heads talent development for Nissan’s alliance with Renault and Mitsubishi Motors Corp (7211.T), has also been put on a leave of absence “to assist the company by concentrating on special tasks arising from recent events.”

Bajaj is being questioned and is cooperating with both Nissan’s internal investigators as well as prosecutors, the sources said, adding that they expect him to return to work soon. It was not immediately clear what the questions were about. Bajaj did not respond to a Reuters request for comment.

Ghosn is unlikely to be granted bail and is expected to remain in detention throughout his trial as is often the case under Japan’s criminal system, Otsuru told reporters this week. Ghosn’s trial may not begin for another six months, he added.

MORE ABOUT THE CASE

Nissan ex-Chairman Carlos Ghosn has requested his release on bail after being indicted in Tokyo on Friday on two new charges, his lawyers said, as the once-feted auto executive awaits a lengthy criminal trial that could be as long as six months away.

Ghosn was the overlord of an alliance that included Nissan Motor (7201.T), Mitsubishi Motors (7211.T) and France’s Renault (RENA.PA), until his surprise November arrest and removal as chairman of both Japanese automakers sent shockwaves through the industry.

The former executive, lauded for rescuing Nissan from the financial brink two decades ago, was charged with aggravated breach of trust for temporarily transferring personal investment losses to Nissan in 2008.

Ghosn, former Representative Director Greg Kelly and Nissan itself were also charged for understating Ghosn’s income for three years through March 2018. The three parties have already been indicted for the same charge covering the years 2010-2015.

Ghosn and Kelly have denied all charges. Nissan said it regretted any concern caused to its stakeholders.

It is rare in Japan for defendants who deny their charges to be granted bail ahead of trial. Kelly posted bail on Christmas Day and is unable to leave Japan without special permission. Ghosn’s lawyer, Motonari Otsuru, expects his client to be held until trial, which he said could begin in about six months.

If bail is granted, Ghosn - who is suffering from fever, according to his lawyer - would not likely be released until Tuesday given that Monday is public holiday.

Kelly, a Ghosn ally, was hospitalized for treatment of a pre-existing neck problem after his release and has since been discharged, said his lawyer Yoichi Kitamura.

This second indictment for Kelly comes as no surprise as it merely makes what was a five year period for the first into eight years,” Kitamura said.

Kitamura said he expects Ghosn and Kelly to be tried together on the two charges of understating income, and that he will work closely with Ghosn’s legal team.

NISSAN COMPLAINT
Also on Friday, Nissan said it had filed a criminal complaint against its former leader.

The automaker, in a statement, said it filed the complaint “on the basis of Ghosn’s misuse of a significant amount of the company’s funds. Nissan does not in any way tolerate such misconduct and calls for strict penalties.”

Ghosn, 64, appeared in court on Tuesday for the first time since his arrest, looking thinner and greyer. He denied the allegations, calling them “meritless” and “unsubstantiated”.

He said he had asked Nissan to temporarily take on his foreign exchange contracts after the 2008-2009 financial crisis prompted his bank to call for more collateral. He said he did so to avoid having to resign and use his retirement allowance for collateral.

Ghosn’s lawyer Otsuru on Tuesday said Nissan had agreed to the arrangement on condition that any losses or gains would be Ghosn’s. Ghosn said the contracts were transferred back to him and that Nissan did not incur a loss.

On Thursday, the boards of Nissan and controlling shareholder Renault - where Ghosn remains chairman - met for an update on the matter. Nissan later said it remained committed to the alliance.

(Published by Reuters, January 11, 2019)

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