Disagreements, divorce and downfall.
Nissan did not like having so little control over its increasingly significant UK business and found Botnar’s forceful style of negotiation distasteful. In 1990 the Japanese company offered to buy Botnar out, or at least take a stake in Nissan UK, but Botnar demurred, determined to retain full control over the franchise. To this end, he refused to renew contracts with the independent dealers that had been key to the company’s early sales growth and began replacing them with his own dealerships.
These dealerships, owned by a Nissan UK subsidiary company, the Automotive Finance Group, were large and aggressively managed, with onerous sales targets. Botnar showed little patience with any dealership manager who failed to achieve these targets. They were radically different from the friendly local dealerships they had replaced.
Botnar’s disloyalty to the independent dealerships and his aggressive business practices were viewed with distaste by Nissan senior executives as it ran counter to the cultural norms of the company. Nissan also increasingly disliked Botnar’s pile ‘em high, sell ‘em cheap approach to marketing, believing that it was undermining buyers’ perception of what the company believed was an increasingly sophisticated and class-competitive range of cars.
The difference in approach came to a head when the Bluebird was replaced by the Primera in September 1990. The new car was a generational leap forward in terms of engineering, styling, quality and dynamics. The automotive press compared it favourably to the Peugeot 405, regarded as the best handling D-segment saloon at that time. Nissan was naturally delighted with the Primera’s reception and instructed Botnar that the car was to be marketed on quality and not discounted. A stand-off ensued, which made the UK launch of the Primera into, at best, a non-event and, at worst, a farce. Consequently, initial UK sales were derisory, fewer than 2,000 in the first three months, and Nissan was furious.
In December 1990, Botnar held a party at London’s Savoy Hotel to celebrate the 20th anniversary of Nissan UK Ltd. He also announced that the company would be donating £8 million to the Great Ormond Street Hospital for Children to mark the anniversary. The celebrations would be short-lived, however. Pushed to breaking point by Botnar’s behaviour, Nissan issued a formal termination of the Nissan UK franchise in the same month, giving the company one year’s notice. Botnar responded by suing for breach of contract, but an existential threat was about to intervene.
In the early morning of Wednesday, 26th June 1991, 135 police officers and investigators from the UK Inland Revenue raided thirteen locations related to Nissan UK, including the company’s headquarters in Worthing, East Sussex and the homes of Octav Botnar, Michael Hunt, the company’s Managing Director(1), and Frank Shannon, its former Finance Director and Company Secretary.
The investigators removed vanloads of documents from the premises. They suspected that Nissan UK had been using overseas intermediary companies to depress its reported UK profits over a number of years, hence evading corporation tax. Hunt and Shannon were later arrested and charged with tax fraud. Botnar would also have been arrested, but he had fled to Switzerland and refused to return to face charges.
Shannon admitted his part in the alleged fraud and Hunt, who pleaded not guilty, went on trial in June 1993 at Southwark Crown Court in London. He refused to take the stand to give evidence. At the trial, the mechanism for the fraud was explained to the Jury. In 1982, Nissan UK had appointed Scansiris, a Norwegian company run by Tore Thorsen, as its shipping agent for the imported cars. Scansiris contracted with Nissan Motor Car Carrier (NMCC) Nissan’s in-house transport division, for the delivery of the cars at NMCC’s normal commercial rates.
Scansiris then fraudulently invoiced Nissan UK for significantly inflated sums for the cars’ transport. The fraudulent invoices were for around 40% over what NMCC was charging Scansiris, roughly averaging around £115 per car. This was a relatively small amount and unlikely to attract attention, but was multiplied many thousands of times every year. Payment of these inflated invoices depressed Nissan UK’s taxable profits. The excess sums paid were laundered through a network of secret Swiss bank accounts before ultimately being paid out to those involved in the fraud. The total value of the fraud was estimated at around £200 million and the loss to the UK treasury was put at around £56 million initially, or £92 million including accrued interest to the date of the trial.
Hunt was found guilty by a majority 10:2 verdict of this charge. He was cleared of a second charge relating to a Dutch shipping agent that preceded Scansiris, which had allegedly operated in the same fraudulent manner from 1975 to 1982. Hunt was jailed for eight years, Shannon for three years, and both were disbarred from holding company directorships for ten years. In his evidence, Shannon claimed that he only went along with the fraud because of a “reign of terror” by the imperious and autocratic Botnar. Thorsen was also arrested and charged for his part in the fraud but fled to Norway and refused to participate, even as a witness in the trial.
Botnar never returned to face charges(2), citing his ill-health and continued to protest his innocence. He nevertheless paid the Inland Revenue £59 million in settlement, but then launched a lawsuit against the authority for malicious prosecution and damages. Botnar was suffering from stomach cancer and died at the age of 84 on 11thJuly 1998. His legal case was never heard.
Octav Botnar’s legacy is a decidedly uneven one. He built Nissan up to be the most successful importer of cars in the UK and owned a network of dealerships across the country that numbered over 200 at its peak. Botnar certainly played an important role in Nissan’s decision to locate its first European manufacturing base in the UK. After thirty-five years, the Washington plant remains a major employer and exporter, with around 7,000 employees and an annual production of around 400,000 vehicles. The plant celebrated the production of its 10 millionth vehicle in June 2019.
The success of the Nissan operation was undoubtedly a factor in encouraging other Japanese automakers to choose the UK as their European base; Toyota in Burnaston, Derbyshire and Honda in Swindon(3), Wiltshire, both opened in 1989.
Botnar is also reported to have donated over £100 million to charitable causes over his lifetime, but it can reasonably be argued that the money was not his to give, given that it was allegedly the gain from one of the largest ever corporate and tax frauds in UK history. What motivated Botnar allegedly to orchestrate such a fraud when he clearly had the talent and skills to run a successful company legitimately will forever remain a mystery.
(1) Hunt was, effectively, Botnar’s deputy and the company’s second-in-command. He held a 14% shareholding in Nissan UK Ltd.
(2) There was no extradition treaty between the UK and Switzerland covering cases of alleged financial fraud.
(3) Sadly, Honda’s Swindon plant was closed down in July 2021 with the loss of around 3,400 jobs because of the company’s declining European sales.