New allegations against Ghosn concern payments to Saudi businessman

Fresh misconduct allegations brought by Tokyo prosecutors against ousted Nissan Chairman Carlos Ghosn center on the use of company funds to pay a Saudi businessman who is believed to have helped him out of financial difficulties, two company sources with knowledge of the matter said.

Prosecutors arrested Ghosn for a third time on Friday, accusing him of aggravated breach of trust in transferring personal investment losses to the automaker. The prosecutors' statement said they believe that around October 2008, Ghosn was trying to deal with losses on paper of 1.85 billion yen ($16.6 million) incurred on a swap contract he had with a bank which it did not name.

A person helped arrange a letter of credit for Ghosn and a company run by the person later received $14.7 million in Nissan funds in four installments between 2009 and 2012, the statement said, adding that the payments were made in Ghosn's and the person's interests.

"By doing so, (Ghosn) behaved in a way that breached trust, and inflicted damage on the property of Nissan," the statement said. The statement also said Ghosn had earlier sought to have Nissan shoulder the appraisal losses directly.

According to the Nissan sources who have knowledge of the company's probe into its former chief, the person who helped Ghosn is Khaled Al-Juffali, vice chairman of one of Saudi Arabia's largest conglomerates, E. A. Juffali and Brothers, and a member of the board at the Saudi Arabian Monetary Authority.

He is also majority owner of a company called Al-Dahana which owns half of a regional joint venture called Nissan Gulf with the other half held by a wholly owned unit of Nissan Motor.

Sheikh Khaled Juffali has no comment on this subject, according to an emailed statement from E. A. Juffali and Brothers. Ghosn's Tokyo-based lawyer, Motonari Otsuru, was unavailable for comment on this article, according to a person who answered the phone at his law office. A representative for the Ghosn family declined to comment.

Other media have said Ghosn has through a lawyer denied that he shifted losses to Nissan and has told investigators that the four payments were for legitimate business purposes, including a reward for handling problems at Nissan dealers in Saudi Arabia.

Tokyo prosecutors declined to comment. Asked about Ghosn's reported comments, a Nissan spokesman said: "We cannot comment on matters related to Ghosn's arrest for breach of trust. Nissan's own investigation is ongoing, and its scope continues to broaden."

'PROSECUTORS KNOW MORE'

Ghosn's re-arrest – the latest twist in a saga that has jolted Nissan' alliance with France's Renault SA – came a day after a Tokyo court unexpectedly rejected a request from prosecutors to extend Ghosn's detention. Unlike his previous arrests on allegations of under-reporting his compensation which he faced together with former representative director Greg Kelly, prosecutors have leveled these latest accusations against Ghosn only.

The Nissan sources with knowledge of the matter said the automaker's investigators concluded that Ghosn was unsuccessful in his attempt to have Nissan shoulder the losses directly.

Japan's Securities and Exchange Surveillance Commission had at some stage flagged Ghosn's attempt to have Nissan directly shoulder the losses as illegal, one of the sources said. It was not immediately clear what the SESC deemed illegal. A SESC spokesman said he could not comment on specific cases.

The sources declined to be identified as the results of Nissan's internal investigation have not been made public yet.

Ghosn then gained help from Al-Juffali who used his personal assets to provide collateral for a bank to issue a letter of credit that Tokyo-based Shinsei Bank had required of Ghosn, the sources said. A spokesman for Shinsei said he could not comment on specific cases. Reuters was not able to determine the identity of the bank which issued the letter of credit.

The four payments arranged by Ghosn were made through a Nissan internal discretionary fund, known within the company as the 'CEO Reserve', to a Nissan unit which then paid a company owned by Al-Juffali, one of the sources said, without specifying the names of the companies.

The first payment of $3 million was made in fiscal 2009, followed by payments of $3.6 million, $3.9 million and $4.2 million in the three subsequent years, the sources added.

The sources said the Nissan investigators initially had not been looking at the transactions with the urgency prosecutors displayed last week.

"Prosecutors know more about this than we do," one of the sources said.

E. A. Juffali and Brothers was founded in 1946. The company set up electric power supply and telecommunications to some of Saudi Arabia's major cities and expanded into construction, insurance, vehicle manufacturing and distribution.

Established in October 2008, the Nissan Gulf joint venture was originally responsible for Nissan's marketing and sales strategy and dealer development in Saudi Arabia, Abu Dhabi, Kuwait, and Bahrain but the scope of the business has since been reduced to Kuwait and Bahrain for reasons that weren't immediately clear, one of the sources said.

Kelly was released on bail late on Christmas day but Ghosn remains in detention. After the latest allegations, prosecutors were granted permission to hold him for 10 days on Dec. 23 and will typically ask for another 10 days, which is usually approved.

Japanese prosecutors often arrest individuals repeatedly on different allegations linked to the same case. The practice allows them to hold suspects while they pursue their investigation and also means they can continue interrogations without the presence of a lawyer. (Reporting by Norihiko Shirouzu in Beijing; Additional reporting by Marwa Rashad in Riyadh, Saeed Azhar in Dubai, Tim Kelly, Kiyoshi Takenaka and Taiga Uranaka in Tokyo; Editing by Edwina Gibbs)