Nissan lawyers report potential conflicts of interest in Ghosn Probe

Advocate General Ravinder Passi informed Nissan's directors of the conflict of interest issue by handing them a letter when they met on 9 September to review the results of the investigation, according to those attending the meeting. meeting. The objections of Passi and others in Nissan uncovered the automaker's corporate governance turmoil about a year after Ghosn's arrest and the resignation of its CEO, Hiroto Saikawa.

"I think these issues raise fundamental concerns and that these issues will quickly resolve and create exposure and risk for society," Passi wrote in the letter, which was read for The Wall Street Journal.

On Monday, Nissan agreed to pay $ 15 million to settle a dispute with the Securities and Exchange Commission for failing to declare a compensation of more than $ 140 million to be paid to Mr. Ghosn after his retirement. Mr. Ghosn agreed to pay $ 1 million to settle the dispute.

The concerns raised by Mr. Passi and other Nissan employees focus on:

Hari Nada,

a senior vice president of Nissan who oversees his legal department, and Latham & Watkins, the law firm that conducted Nissan's internal investigation into alleged alleged wrongdoings by Mr. Ghosn and others.

Nada is part of a group of Nissan leaders who filed allegations against Ghosn last year that led to the arrest and impeachment of former president Nissan, for financial malpractices, according to people familiar with the investigation. Mr Ghosn says that he is innocent.

Nada assisted Ghosn in some of the investigators' actions and signed an agreement with prosecutors that Nada was not indicted in exchange for his cooperation, according to people close to the investigation. Nissan and prosecutors. As a result, some Nissan members thought that Mr. Nada should have been excluded from any role in Nissan's legal affairs after agreeing to cooperate with prosecutors, said people familiar with domestic concerns.

"Nissan executives and employees, including Mr. Passi, were aware of the potential for potential conflicts of interest throughout the investigation process," Nissan said in a statement. "We believe that the investigation was conducted in a rigorous and appropriate manner."

Latham has a long-standing relationship with Nissan, which has advised the company on some of the issues currently being investigated by Nissan investigators and Japanese prosecutors, particularly with respect to disclosure of executive pay, said people familiar with internal concerns. Nissan should have turned to a law firm that had no previous relationship with the company to conduct the investigation to protect itself even from the appearance of a conflict of interest, said these people.

"From the beginning and throughout the mission, Mr. Latham regularly discussed the company's involvement in the internal investigation with several Nissan executives, including Mr. Passi, and the company has chosen to continue this mission." said a spokesman for Latham.

The letter from the Advocate General recalls the question of responsibility for what Nissan has described as bad governance and undue compensation under Mr Ghosn. Nissan claims that Mr. Ghosn was to blame and forced his subordinates to comply, while Mr. Passi's letter suggests that the problems went beyond one person. Mr Ghosn said that other people in the company had approved his actions.

In early July, Mr Passi asked two other outside law firms, one based in the United States and one in Japan, to consider the potential for conflict. interests related to Mr. Nada and Latham. In his letter of September 9, Mr. Passi wrote that his concerns grew after a memorandum from these two companies was not given to the members of the board of directors.

The memorandum was sent to

Motoo Nagai,

On July 25, the director of the audit board and Mr. Passi requested that it be shared with the other board members, he said in his letter. "I have tried several times to check if the memorandum had been shared, although I have not received any positive confirmation about it," wrote Mr. Passi. The memorandum was attached to his letter to the council.

The four-page memorandum concluded that Nissan should take additional steps to ensure that persons knowledgeable of potential wrongdoing being investigated, as well as any outside advisor previously informed of problems, are required to away from discussions and decision-making regarding relevant events. legal affairs. The memorandum indicated that this was the best way to ensure "the highest degree of credibility, objectivity, impartiality and independence in the decision-making process of society".

One of the people who saw Mr. Passi's letter described the conclusions of the memorandum as overly simplistic. "It's just that it indicates that we need to be attentive to conflicts of interest, but we have already done so," said this person. Nada was removed from the investigation in April and has not been involved since then, said the person. Latham does not review any of the advice he gave Nissan, and the majority of Latham's lawyers who conducted the investigation had no connection with Nissan, said this person.

Others said that Mr. Nada had continued to influence legal issues after his challenge. This included the possibility that Nissan had hired labor lawyers to consider the possible sanctions imposed on Nissan employees who had witnessed the alleged acts of Mr Ghosn, said one of the people.

Nissan managers have received anonymous letters from Nissan employees that echo many of the concerns expressed by Mr. Passi, according to people who have seen these letters. Many of these letters are against maintaining the role of Mr. Nada in the company, said these people.

In a letter dated 19 September, a Nissan employee wrote that Nada's role in the investigation had been reduced in April, but that his influence within the company had not been reduced. "He was directly involved in the processes and activities of the board (although he acts through subordinates)," wrote this person.

Some Nissan employees are worried about what they perceive as a redesign of failed governance, according to the newspaper's complaint letters. Nissan employees have been encouraged to talk about internal issues after Ghosn's arrest, but fear that internal complaints will reach the board through the company's whistleblowing system, according to people aware of complaints.

In his letter to the Board of Directors, Mr. Passi stated that copies of a complaint filed with directors through Nissan's internal whistleblowing system had been collected by the Human Resources department from the secretaries prior to filing. to be read by the administrators. When Mr. Passi asked why the letters of complaint had not been sent to the directors, he was told that it was to allow a human resources officer to prepare a response to the complaint before transmitting it, according to his letter.

"At August 30, almost two months after sending the first letters to the directors, I understood that this correspondence had still not been passed on to the directors concerned," said Mr. Passi. . A person familiar with the complaint said that it concerned a Nissan executive, whose legal problems had already been solved by the company.

The last question raised by Mr Passi in his letter to the jury concerned the sudden departure, at the end of August, of

Christina Murray,

responsible for Nissan's audit and compliance. Ms. Murray was one of Nissan's lawyers who had expressed concerns about potential conflicts involving Nada, people close to her opinion said.

Ms. Murray was promoted to vice-president in May and was expected to present the findings of the investigation to the company's management and board of directors in early September. "In my opinion, the timing is very unusual," Passi wrote.

At a press conference following Nissan's board of directors in September, Nagai, director of the board responsible for auditing, said Murray told her in July that she wanted to resign. .

Write to Sean McLain at [email protected] and Nick Kostov at [email protected]