Business & Tech

Prosecutors in Japan indict Carlos Ghosn and Nissan

Former Nissan Motor Co. Chairman Carlos Ghosn in a news program on Monday in Tokyo.
Tomohiro Ohsumi/Getty Images
Former Nissan Motor Co. Chairman Carlos Ghosn in a news program on Monday in Tokyo.

TOKYO — Tokyo prosecutors have charged Nissan’s former chairman Carlos Ghosn, another executive and the automaker itself for allegedly underreporting income.

The charges imposed Monday involve allegations Ghosn’s pay was underreported by about $44 million in 2011-2015. The prosecutors said earlier that the allegations were the reason for Ghosn’s arrest on Nov. 19.

The prosecutors issued statements also outlining new allegations Monday against Ghosn and Greg Kelly, the other executive. The fresh allegations are of underreporting another $36 million in 2016-2018. Nissan as a company was not mentioned in the latest allegations.

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In Japan, a company can be charged with wrongdoing.

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Some kind of action by the prosecutors had been expected because the detention period allowed for the allegations disclosed earlier was to end on Monday.

Nissan Motor Co. confirmed the charges against it in a statement and vowed to strengthen its governance and compliance.

‘‘Nissan takes this situation extremely seriously,’’ it said.

‘‘Making false disclosures in annual securities reports greatly harms the integrity of Nissan’s public disclosures in the securities markets, and the company expresses its deepest regret.’’

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Kelly, 62, is suspected of having collaborated with Ghosn. Kelly’s attorney in the U.S. says he is asserting his innocence, noting that insiders at Nissan said the procedure was legal.

Ghosn has not commented.

Ghosn was ousted as Nissan chairman and Kelly lost his representative director title following their arrests, but they both remain on Nissan’s board pending a shareholder’s meeting.

Ghosn, 64, was sent to Nissan by its partner Renault SA of France in 1999. He led a dramatic turnaround of the near-bankrupt Japanese automaker. But Ghosn’s star-level pay drew attention since executives in Japan tend to be paid far less than their international counterparts.

Only Ghosn’s attorneys and embassy officials from Lebanon, France and Brazil, where he has citizenship, have been allowed to visit him.

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It is typical in the Japanese legal system for there to be little access to comment by suspects. Prosecutors have also said little.

Shin Kukimoto, deputy chief prosecutor at the Tokyo District Prosecutor’s Office, declined to say if the suspects were rejecting the allegations. He said Ghosn and Kelly were being detained because they are considered flight risks.

He also denied that the two would be forced to make confessions.

‘‘We do not have such a scenario. There is no such thing and we do not force suspects to make confessions to fit the story,’’ Kukimoto said.

Meanwhile, the Securities and Exchange Commission said it had filed criminal complaints against Ghosn, Nissan and Kelly. A commission official said Monday that Nissan, Ghosn and Kelly were suspected of falsifying reports on millions of dollars’ worth of Ghosn’s income.

In the first sign of blowback from the scandal for Nissan, the carmaker is set to be indicted for breaching Japan’s financial instruments and exchange law by under-reporting Ghosn’s compensation by about $44.5 million, Kyodo reported. A Nissan spokesman declined to comment and prosecutor representatives said an announcement on indictment hasn’t been made. Lawyers for Ghosn couldn’t immediately be reached for comment.

The indictment of Nissan shows that the scandal that has sent shockwaves through the car industry is spreading beyond Ghosn and his aide. The charges also represent a victory of sorts for Nissan Chief Executive Officer Hiroto Saikawa, who has emerged as a driving force into the investigation into Ghosn’s alleged wrongdoing. Ghosn is in custody in Japan after his Nov. 19 arrest on allegations of under-reporting of his income at Nissan, which has since ousted him as chairman.

While he remains at the helm of Renault SA, Nissan’s partner in the world’s biggest auto alliance, he has been replaced on an interim basis. Tension within the Franco-Japanese partnership that has been held together by Ghosn for two decades has all but exploded into the open since his shock incarceration.

Former representative director Greg Kelly, who is accused of aiding Ghosn in understating his income and misusing Nissan assets, was also indicted, Kyodo said.

Shares of Nissan declined 2.3 percent at 2:10 p.m. local time in Tokyo. They have lost about 5 percent since Ghosn’s arrest.

Here’s how Ghosn’s legal process could play out:

Japan has one of the highest criminal conviction rates in the world, and prosecutors typically try to use interrogations to extract signed confessions from defendants. Fewer than 1 percent of cases in Japan’s district and county courts resulted in a not-guilty verdict or the defendant being released in 2017, according to prosecution data.

Nissan, which Ghosn helped resurrect by uniting it with Renault in an alliance almost two decades ago, conducted a months-long probe into Ghosn’s financial reporting and alleged misuse of company assets. The timing prompted some analysts to say the scandal may have been manufactured in order to block a merger that Ghosn was advocating between Nissan and Renault.

Saikawa and other Japanese executives within Nissan have spoken strongly against a merger. Saikawa, a former protege of Ghosn’s, is now potentially succeeding him as Nissan’s chairman after already taking over as CEO last year. Ghosn remains the chairman of the Amsterdam-based Renault-Nissan-Mitsubishi Motors Corp. alliance.

Renault appeared to have been blindsided by Ghosn’s arrest and the allegations that have drifted out.

Executives are suspicious of Nissan’s motives, demanding to see proof from the Japanese carmaker of the accusations against Ghosn, people familiar with the matter have said. Nissan offered up a presentation summarizing his alleged transgressions, but Renault declined, requesting the presence of lawyers and the full report on the allegations, the people said.

A spokesman for Renault said Nissan still hasn’t provided the evidence Renault’s board has asked for. He declined further comment. Renault is aiming to reach in about a week the first conclusions of its internal probe into whether the pay packages of Ghosn, along with the French carmaker’s other top managers, were properly disclosed to shareholders, the people said.

Renault and Nissan have complicated cross-shareholdings, and poor relations would make operations difficult. The French carmaker is the largest shareholder in Nissan and has voting rights, while the Japanese company is the second-largest shareholder in Renault, with no votes. Nissan is keen to achieve a more equal power balance but its demands have been stonewalled by Renault and the French state.