Photo/IllutrationCarlos Ghosn, the former Nissan Motor Co. chairman, enters the Tokyo District Court on May 23 along with his lawyers for pretrial proceedings. (Yasuhiro Sugimoto)

Carlos Ghosn’s requests to two friends for 5 billion yen ($45.6 million) needed for collateral was the apparent trigger for funneling funds from Nissan Motor Co. to those same individuals, investigative sources said.

However, Ghosn, the former chairman of the automaker, has denied the payments were for personal reasons and is expected to argue in court that the expenditures were for a special business project in Saudi Arabia.

One of the charges against Ghosn, 65, is aggravated breach of trust concerning the flow of funds to Saudi Arabia.

Prosecutors have focused on a private contract between Ghosn and Shinsei Bank over a financial derivative known as a swap transaction.

After the 2008 collapse of U.S. investment bank Lehman Brothers, Ghosn suffered unrealized losses of about 1.85 billion yen on the derivative.

In late October 2008, he transferred the contract to Nissan, but an audit of Shinsei Bank by the Securities and Exchange Surveillance Commission raised questions about the contract transfer.

Ghosn asked Shinsei Bank to have the contract returned to his name.

However, a Shinsei Bank official e-mailed Ghosn in January 2009, saying he needed to put up 5 billion yen in collateral for the transfer to guard against any further increases in the value of the yen.

On Jan. 30, 2009, Ghosn signed a contract with one of the friends, Saudi entrepreneur Khaled Juffali, for a credit guarantee of up to 3 billion yen.

Moreover, between late January and early February that year, Ghosn also received loans totaling $25 million (about 2.25 billion yen at exchange rates of that time) from the other friend, Suhail Bahwan, the owner of a car dealership in Oman.

On Feb. 20, Ghosn used the loans from Bahwan for a fixed-term deposit with Shinsei worth $20 million (about 1.9 billion yen).

He also presented the 3-billion-yen credit guarantee signed by Juffali to the bank. With that as collateral, the bank transferred the contract back to Ghosn.

Ghosn apparently tried to have Nissan extend a loan of 3 billion yen to Juffali, but that plan was abandoned when Nissan’s chief financial officer at the time raised questions about the propriety of the move.

At a management meeting on March 26, 2009, Ghosn approved the establishment of a CEO reserve that he could freely use.

From fiscal 2009, 15 billion yen was budgeted into that reserve every year.

Prosecutors suspect the CEO reserve was used to illegally funnel a total of about 1.3 billion yen to Juffali between 2009 and 2012, and about 1.1 billion yen to the Oman car dealership between 2017 and 2018.

Half of the funds to the Oman dealership later found their way back to Ghosn, prosecutors contend.