Former Nissan Motor Co. Chairman Carlos Ghosn allegedly ordered the creation of a confidential fund around December 2008 and part of the money was transferred to an acquaintance in Saudi Arabia, according to sources close to the case.
Ghosn, 64, has been rearrested on suspicion of aggravated breach of trust under the Companies Law, involving the misappropriation of Nissan funds for personal use.
The sources said that part of the confidential fund had also been transferred to other countries in the Middle East.
The special investigation squad of the Tokyo District Public Prosecutors Office believes that Ghosn, who incurred huge financial losses from a private investment, made the company prepare funds that could be used at his discretion for purposes such as making up for the losses.
According to the sources, Ghosn had been conducting swap transactions with Tokyo-based Shinsei Bank since around 2006. However, Ghosn suffered losses of about 1.85 billion yen due to an appreciation in the value of the yen following the so-called Lehman shock in autumn 2008.
It is believed that when Ghosn was asked by the bank to provide additional security, he transferred all of the investment rights, including the losses from his own asset management company, to Nissan in October 2008, apparently in an effort to avoid the need for extra collateral.
In December 2008, Ghosn, then representative director and chief executive officer of the automaker, instructed subordinates to create a confidential fund that could be used at his discretion. The fund was named "CEO reserves" and was managed by Nissan Middle East FZE, a Nissan subsidiary based in the United Arab Emirates.
About one month before Ghosn's instruction to create the fund, around November 2008, the Securities and Exchange Surveillance Commission began a periodical inspection of Shinsei Bank, from which it discovered the transfer of the loss. Later, the commission informed the bank that there was a problem concerning the bank's legal compliance.
Around February 2009, Ghosn returned the investment rights to his own asset management company and at the same time requested the acquaintance in Saudi Arabia to provide a credit guarantee. The acquaintance paid about 3 billion yen for such funds as "guarantee fees."
Over a period from June 2009 to March 2012, Nissan Middle East sent remittances of 14.7 million dollars (about 1.6 billion yen at the current exchange rate) from the confidential fund to the acquaintance's firm at Ghosn's request. The special squad suspects that Ghosn provided the money to the acquaintance mainly for making up the investment loss and for rewarding the acquaintance.
The confidential fund was understood internally at Nissan as money for sudden and unexpected matters that had not been identified in the process of compiling its budget. The purpose of the fund had not been specified.
According to the sources, a large amount of money was also provided from the confidential fund to auto-related companies managed by several of Ghosn's acquaintances in Middle Eastern countries. In an interview with The Yomiuri Shimbun, a senior Nissan official said, "It was an opaque fund used at Ghosn's request."
The special squad believes that the acts of transferring the private loss to Nissan and sending remittances to his acquaintance could represent an aggravated breach of trust because they inflicted damage on Nissan in the interests of Ghosn and his acquaintance.
The sources said that Ghosn has denied the allegation, insisting that he has not inflicted and had no intention of inflicting any damage on Nissan.
Regarding the remittances from the fund to his acquaintance, Ghosn has said the fund was provided in exchange for the acquaintance's efforts in resolving a problem between Nissan and a car dealership and for lobbying activities in Saudi Arabia.
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