Universal City Nissan Sues Saudi Billionaire, Khaled al-Juffali and Nissan Motor, Among Others, over Payoff by Carlos Ghosn

AutoInformed.com on Ghosn Matter

Ex-Nissan president last June before he was forced to resign. This is starting to sound like Judy Garland singing The Company that Got Away. “The road gets tougher…

In a lawsuit filed in Superior Court of California in Los Angeles just before Christmas, a Nissan Dealership Group sued Nissan North America, Nissan Motor Acceptance Corporation, and Nissan Motor Company alleging that Nissan through Carlos Ghosn forced the bankruptcy of the dealerships as a payoff for a Saudi Investor that financed Ghosn’s losses during the Great Recession. (AutoInformed footnote 1 below)

The charges – among others – are:

  • Concealment
  • Breach of Contract
  • Breach of the Implied Covenant of Good Faith and Fair Dealing
  • Tortious Interference with Contract

Simply put: the plaintiffs’ – a 50-year-old family business operating Nissan and other dealerships – were the victims of Nissan’s unethical culture and dishonest business practices.

Nissan North America said, “We don’t comment on pending litigation,” to an AutoInformed request for comment on what looks to be a long, potentially damaging and costly multi-jurisdictional dispute that further extends the ongoing complications of the Ghosn matter.

Filing and Demand for a Jury Trial

The Plaintiffs are established by their  holdings or previous holdings in several Nissan dealerships. whether they have standing will be up to the court.

Their legal filing alleges: “Unbeknownst to Plaintiffs, the collision course between Nissan’s corruption and Plaintiffs’ car dealerships began in 2008. When the financial crisis hit, Ghosn suffered personal financial strain when his currency-trading options contracts went bad. He turned to Saudi billionaire, Khaled al-Juffali, for help. Al-Juffali provided Ghosn millions in financial assistance to cover his personal losses. In return, Ghosn arranged payment of $14.7 million from a Nissan subsidiary to a company owned by al-Juffali, and he arranged for Nissan to enter into a joint venture with a company jointly owned by al-Juffali and Defendant Nasser Water.”

Some of the dealerships dealerships in dispute were part of a larger group of automobile dealerships founded by Morris Sage 50 years ago. In 1969, Morris Sage opened “one of the first Nissan dealerships in the United States. “The parties enjoyed a long-term successful relationship,” according to the filing.

Nissan admitted in an internal investigation –  AutoInformed.com covered footnote 1 –  that “Ghosn had concealed millions of his own compensation from investors; used $27 million from a Nissan subsidiary to purchase private residences for himself; awarded his sister a lucrative no-show, no-work job; and donated millions of company funds to his pet charities.”

Plaintiffs allege that all of this occurred because of a total and complete lack of corporate governance— and the endorsement of an unethical corporate culture—at Nissan. Nissan’s fraud and corruption harmed  the Plaintiffs, the Nissan brand and all other Nissan dealers in the United States and around the world they say.

As always when there is a lot of money involved and multiple corporate entities, as well as US an international regulatory bodies, sorting the facts will be no simple matter in any legal system.

The plaintiff’s apparently have their own legal problems. In their filing they said, “in 2017, the Sage Group was struggling. In the years after Morris’ passing, his sons found it difficult to share control over the company. In time, however, the Sage Group could have recovered its former strength. But in the new Nissan created by Carlos Ghosn, Nissan turned its back on a business partner of almost a half-century and carried out a scheme to ensure the Sage Group’s demise.

“Nissan, headed by Ghosn, saw the Sage Group as another bounty and pay-back for Ghosn’s benefactor, al-Juffali. water and al-Juffali were actively looking to acquire dealerships in the United States. Watar repeatedly boasted about, and touted, his wealthy Middle East partner, al-Juffali, when seeking out new dealerships to acquire. Watar claimed that, despite his lack of experience managing automobile dealerships, he was well-financed because of his partnership with al-Juffali. Nissan, through its top executive Carlos Ghosn, intended to do everything in its power to help them acquire Nissan dealerships.

“The Sage Group had its inventory financing with Nissan’s financing arm, Defendant Nissan Motor Acceptance Corporation (“NMAC”), and Plaintiff dealerships had franchise agreements with Defendant Nissan North America, Inc. (“NNA”). <Defendant Nissan Motor Co., Ltd. (“Nissan Japan”) is the parent company of both NNA and NMAC>.

“Beginning in January 2017, the Nissan Defendants acted in concert to prevent the Sage Group from recovering its former financial strength, thereby forcing a fire-sale to al-Juffali and Watar’s U.S. company, Defendant Trophy Automotive Dealer Group LLC.

“Unbeknownst to Plaintiffs, al-Juffali and Watar had bailed out Ghosn from his personal financial troubles, and Nissan gave them an exclusive Middle East distributorship as a gift for their “loyalty” to Ghosn. Nissan and Trophy concealed their improper financial relationship from the Sage Group.

“NMAC stopped the Sage Group from financing the purchase of new vehicles for the dealerships even though the Sage Group was in compliance with all of NMAC’s covenants at two of its stores. Nissan used the excuse that the Sage Group was “out of trust” – i.e., taking longer than NMAC’s policies to repay vehicles sold – when that was a common practice for many dealerships. <plaintiff’s allegation – KZ> As a result, Nissan stopped shipping new vehicles to the dealerships.

“Without new vehicles to sell, the Sage Group’s finances declined further. Nissan was digging a grave for the Sage Group and simultaneously burying them in it. Nissan then introduced the Sage Group to Trophy as a potential buyer. Trophy and Plaintiffs executed a letter of intent to purchase the dealerships. <plaintiff’s allegation – KZ>

“Nissan and Trophy (and Trophy’s lead negotiator, Watar) concealed that they had a substantial relationship, involving improper financial entanglement, dating back to 2008. They also concealed that Nissan would be doing everything it could to give Trophy additional leverage and drive down the sale price.

“These efforts succeeded. The deal that eventually closed between Trophy and the Sage Group in September 2017 was a fraction of Plaintiffs’ worth. Trophy profited immensely – and Plaintiffs were damaged – from Nissan’s fraud and duplicity” according to the filing.

This is just the opening volley in what will likely be a long fight.

Footnotes 1

About Kenneth Zino

Ken Zino is an auto industry veteran with global experience in print, broadcast and electronic media. He has auto testing, marketing, public relations and communications expertise garnered while working in Asia, Europe and the U.S.
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