Ghosn slapped with two more indictments in Japan

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The breach-of-trust indictment had been widely expected.

In that matter, Ghosn is charged with temporarily shifting 1.85 billion yen ($17.1 million) in personal swap contract losses to Nissan when he was having trouble gathering collateral to cover mounting paper losses. Prosecutors allege Ghosn later arranged to have Nissan pay a company owned by a business associate $14.7 million from 2009 to 2012 to help manage the losses.

Under Japanese law, breach of trust occurs when executives abuse their position for personal gain. A central question will whether Nissan incurred any damage from the arrangement.

Ghosn’s defense team admits he had Nissan take over the swap contract.

But they said Ghosn entered an agreement with the automaker and his bank that safeguarded Nissan from losses. The so-called novation agreement said Nissan would incur no monetary loss and required any loss settlement to be paid through Ghosn’s asset management company.

Ghosn entered foreign exchange contracts to protect his salary from dramatic shifts in value of the yen versus the dollar. Ghosn was being paid by Nissan in Japanese yen, but he need to convert a significant amount into U.S. dollars, the base currency of much of his expenses.

In a brief court hearing on Jan. 8, Ghosn noted that his children lived in the U.S. and that he has strong ties to Lebanon, which has a currency pegged the dollar.

But things fell apart when the global financial crisis hit in 2008. The yen unexpectedly appreciated, leaving him with massive paper losses on his swap contract.

His bank said he needed more collateral or it would have to close his position.

Ghosn said he considered using his Nissan shareholdings as collateral. But their value plunged during the financial crisis. He also considered cashing in his Nissan retirement allowance.

But he nixed that on the grounds it would require him to step down when Nissan needed experience leader to it navigate the worsening economic storm. Thus, he turned to Nissan.

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