A Japanese automaker and its former CEO (along with one of its former insider directors who reported to the CEO) settled SEC charges for making false financial disclosures. The financial disclosures omitted reference to $140 million of compensation and retirement benefits to be paid to the former CEO.

According to the SEC, the CEO, with the assistance of the director, caused Nissan to fail to disclose $90 million in compensation and $50 million in pension benefits for the former officers.

To settle the SEC charges, Nissan agreed to cease and desist from further violating certain sections of the Securities Exchange Act and pay a civil monetary penalty of $15 million. According to the SEC's press release, the former CEO agreed to be permanently enjoined from violating anti-fraud provisions of securities statutes, to pay a $1 million civil monetary penalty, and to a ten-year officer and director bar. Separately, the former director agreed to be permanently enjoined from violating anti-fraud provisions of securities statutes, a $100,000 civil monetary penalty and a five-year officer and director bar, as well as a five-year suspension from practicing or appearing before the SEC as an attorney. Nissan, the former CEO, and the former director settled without admitting or denying the SEC's allegations.

Commentary

Kyle DeYoung

This is one of those cases where the corporate employer (and, indirectly, its shareholders) is the victim of the fraud and penalized for it. It certainly can be argued that the company's governance practices were the primary cause of the problems, and, thus, sanctions were in order.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.