January 28, 2019 11:15 AM, EST

Nissan Under Investigation by SEC Over Executive Pay

NissanPaul Sancya/Associated Press

The Securities and Exchange Commission is investigating whether Nissan Motor Co. accurately disclosed its executive pay in the United States, according to several people familiar with the matter, compounding the carmaker’s woes as it grapples with the aftermath of former Chairman Carlos Ghosn’s arrest.

The U.S. financial regulator is examining whether Nissan’s executive-pay disclosures were accurate and whether the carmaker had adequate controls to prevent improper payments, the people said, asking not to be identified because the probe hasn’t been disclosed publicly.

Nissan, in response to questions, confirmed it has received an inquiry and said it is cooperating. The company could not provide further details, spokeswoman Kristina Adamski said. Nissan shares fell 0.8% in Tokyo trading, their biggest decline in three weeks.

The SEC investigation adds to scrutiny surrounding Japan’s second-largest automaker and its executives after Japanese authorities arrested Ghosn and another company director, Greg Kelly, in November. Both men were indicted there over allegations Ghosn underreported his income at Nissan by tens of millions of dollars. The carmaker — whose largest shareholder is French alliance partner Renault SA — also has been indicted, a step that allows prosecutors in Japan to lay formal charges.


Christophe Ena/Associated Press

Ghosn and Kelly were arrested after a monthslong internal investigation at Nissan uncovered what the company said were financial misdeeds by Ghosn. Both men deny wrongdoing.

The SEC inquiry, launched out of its Washington headquarters, is focused on whether lapses by Nissan in reporting on its executives’ pay violated U.S. securities law, one of the people said. The regulator’s work was slowed by more than a month of partial U.S. government shutdown, another said.

While the SEC’s civil inquiry is in its early stages and may not point to wrongdoing, it adds a layer of complexity for Nissan and the two former executives. SEC, which often works closely with law enforcement, could seek financial penalties and injunctions to prevent violations of laws or SEC rules.

Aubrey Harwell Jr., an attorney for Kelly, said his client hasn’t received an SEC subpoena and declined further comment. U.S.- and Japan-based representatives for Ghosn declined to comment.

In a memo to staff last month, Nissan CEO Hiroto Saikawa, who succeeded Ghosn as CEO, said oversights in the company’s corporate governance “permitted the situation to continue, which clearly calls for grave reflection.”


Nissan CEO Hiroto Saikawa (Akio Kon/Bloomberg News)

Nissan shares trade in the United States via American Depositary Receipts, which generally gives SEC enforcement authority. U.S. courts have disagreed about whether the regulator has jurisdiction in certain cases in which wrongdoing occurred abroad. The activities under scrutiny at Nissan to date took place mostly in Japan and Europe. But SEC believes it has authority in this instance, according to one of the people familiar with the matter.

Japanese authorities have accused Ghosn and Kelly of colluding over several years to underreport Ghosn’s deferred retirement pay. Ghosn, who gained near-mythic status in the auto business for rescuing Nissan and forging a global alliance between it and Renault, also was indicted in relation to a decision to temporarily transfer personal trading losses to Nissan. He remains in custody.

Renault also was headed by Ghosn until his resignation last week. The French carmaker last week appointed Michelin CEO Jean-Dominique Senard chairman.

Kelly, the only American on Nissan’s board, was known inside the company as the “CEO whisperer” for his close ties to Ghosn during his leadership tenure. A Tennessee resident, Kelly was released on bail last month but must remain in Japan pending trial as a condition of his release.