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Legal Developments in The UK Legal 500 2019

DISMISSAL AT NISSAN AND WORKPLACE CRIME PREVENTION

January 2019 - Crime. Legal Developments by Rahman Ravelli Solicitors.

More articles by this firm.

The sacking of Nissan’s high-profile chairman may have beenproof that nobody is infallible. But Nicola Sharp argues that it should also beseen as an indicator that no company can be considered safe from wrongdoing.

Nissan Chairman Carlos Ghosn, recognised worldwide as one of the car industry's leading figures, was sacked following his arrest in Japan.His arrest and subsequent dismissal came after an internal investigation discovered what the car manufacturer has called "significant acts of misconduct" over many years by him and another top executive.

Nissan said in a statement that it had been investigating Ghosn, aged 64, and another board member for a number of months. The company has said the accusations include him using company assets for his personal use.

Japanese prosecutors confirmed that Ghosn and the other board member were arrested on suspicion of violating financial laws by filing false statements. According to the prosecutors, the two men are alleged to have collaborated to under-report Ghosn's income by about $44 million over a five-year period ending in March 2015. The filing of a false financial statement in Japan can carry a sentence of up to ten years in prison.

While Ghosn considered his possible fate, his former employers had to manage a fall in share value prompted by the announcement of their former chairman’s arrest. Nissan also had to hold what may well have been difficult discussions with Renault, which is recognised as the dominant partner in the alliance between the two car companies. It has also apologised to shareholders for causing them “great concern’’ and has insisted it will “continue our work to identify our governance and compliance issues, and to take appropriate measures."

Questions

Nissan’s statement at least indicates that it has realised that it has failed massively when it comes to ensuring it had preventative measures in place that were fit for purpose and properly enforced. While the car giant has been reasonably open in acknowledging its problem, we still have far more questions than answers regarding the fall from grace of its top man.

Some of those questions will demand answers in the near future: What is the true extent of the wrongdoing? Who was complicit in either the wrongdoing or any attempts to cover it up? And why did it take a whistle blower - rather than someone whose job it was to scrutinise the finances – to identify the wrongdoing and raise the alarm?

The answers, if and when they come, may well help us deduce whether this was a one-off case that was allowed to happen through negligence on the part of the company or part of systematic wrongdoing involving more thanone or two individuals.

The crux of this may well turn out to be who knew what was going on. It almost goes without saying but we will say it anyway: every company has to have in place crime prevention procedures that cover each and every person working for or on behalf of it. Even the boss has to be subject to appropriate controls and proper scrutiny. Presumably there are now a number of people at board level in Nissan who want to know precisely how this has been allowed to happen. In truth, they are playing catch-up when it is way too late.The effort now being expended on trying to find out what has happened and putting it right should have been put in long ago to ensure this never becamethe embarrassing problem it now is.

Prosecution

We are in an era where business crime has worked its way higher and higher up the agenda of law enforcement agencies both in the UK and in many other countries. Recent high-profile investigations into some of the best-known companies and financial institutions in the world have seen heavy penalties imposed. In some cases, the companies have avoided criminal prosecution while individual employees have been charged.

If the Carlos Ghosn investigation was happening in the UK, it is unlikely Nissan would be facing prosecution as we do not have the offence of failing to prevent economic crime. Our failure to prevent offences are limited to the 2010 Bribery Act’s Section 7 failure to prevent bribery and failure to prevent the facilitation of tax evasion, under the Criminal Finances Act 2017. It is just possible that the under-reporting could be considered failure to prevent tax evasion. In both UK failure to prevent offences, a company has a defence if it can show it had prevention procedures in place that could be considered adequate.

But, as we have mentioned, the Ghosn situation and what appears to be accompanying compliance issues have created plenty of problems – that could have been avoided – for Nissan. Simply avoiding criminal prosecution can be a far from perfect outcome for a company in such a situation.

From what we know of the Carlos Ghosn situation so far, it appears that Nissan as a company is not set to face investigation. But the company has already suffered in terms of negative publicity, disruption and difficulties in its relationships with major trading partners; even if such factors cannot be clearly identified on a balance sheet. Which is why companies must be aware of the need to tackle all possible workplace wrongdoing – at all levels of the company.

Proof

There can be very few people who would have predicted with any confidence that a company as large and respected as Nissan would have found itself in this situation. But the Nissan case can be seen as proof that no company can automatically assume it will be somehow immune to wrongdoing. This wrongdoing can be committed from within it by employees or from outside by third parties.

No company would ever come out and state that it believed it had such immunity. But there is certainly the belief in some corporates that they are not as risk of business crime. Some may believe that they will not be targets while others think that those in the company are bright enough to spot any possible problems at any levels within the organisation.

Until any wrongdoing comes to light it is understandable that such beliefs are held. But two points need to be made here. The first is that waiting until wrongdoing has been committed until taking action can be costly.And the second is that crime could be being committed in a company - but it is simply not being detected because no measures are in place to identify it or reduce the possibility of it being committed.

Prevention

The amount of wrongdoing in a company is due to prevention.And prevention means taking all available steps to identify the potential for crime being committed by staff, trading partners, suppliers, intermediaries,customers and anyone else who has knowledge of the way a company functions.

Senior staff have to take responsibility for recognising the potential for problems and then devising, introducing and maintaining procedures to identify and / or prevent wrongdoing. A company will always be vulnerable to business crime without adequate prevention measures that cover every aspect of its activities.

For those who feel unwilling or under-qualified to take on this role, there are business crime lawyers with the relevant expertise who canassess a company’s working practices, identify areas of vulnerability and then develop and introduce measures that remove those vulnerabilities. Such measures can include changes to any aspect of the company’s functions that are recognised as carrying a risk. But they should also include an appropriate whistle blowing procedure.

Investigation

A carefully-devised whistle blowing procedures allows staff- and anyone else with a connection to the company - to report their suspicions of wrongdoing as early as possible, knowing that their concerns will be treated seriously. Apart from helping recognise individual examples of workplace wrongdoing, this also creates a culture of crime prevention; which itself makes it more likely that crime will be detected and serves as a deterrent to those who may be thinking of committing it.

Reports from a whistle blower can be investigated discreetly so a company can find out if wrongdoing has been committed and, if so, what response is necessary. Having carried out many internal investigations for companies, we can say that investigating whistle blower’s reports can be of huge value in establishing whether wrongdoing has been committed.

The value of bringing in third parties from outside to conduct such an investigation cannot be overestimated.This is because the scale of the problems uncovered by a properly-conducted internal investigation may require informed decisions to be made regarding how and to whom these findings should be reported. And if this then results in regulatory and / or criminal investigations in a number of countries, a company will require expert legal representation from the earliest possible stage.

It is also worth pointing out that if an internal investigation is carried out by company staff who are then subsequently implicated in the wrongdoing or the failure to identify it, such an exercise can produce more problems than it could ever have hoped to resolve.

But, ideally, matters should not have to reach the investigation stage. An intelligent and robust approach to prevention by a company, whether it be Nissan or any other corporate, can reduce the potential for any wrongdoing ever being attempted.

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