Ghosn indicted as pay scandal escalates

Former Nissan chief was re-arrested for understating his income for another time period

TOKYO • Carlos Ghosn was indicted in Tokyo three weeks after his arrest for understating his pay at Nissan Motor Co Ltd, which will also face charges as Japanese prosecutors step up the investigation that has shaken the global car industry.

The former Nissan chairman was also re-arrested on allegations of understating his income for another time period, prosecutors said yesterday. That means he will be denied a chance to be released on bail for now.

In the first sign of blowback from the scandal for Nissan, the carmaker was indicted for breaching Japan’s financial instruments and exchange law by under-reporting Ghosn’s compensation.

The charges represent a victory of sorts for Nissan CEO 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.

A Nissan spokesman and lawyers for Ghosn declined to comment.

The charges are related to a relatively arcane point of accounting — whether retirement payments were properly booked. Ghosn has denied any rules were broken around deferred compensation, people with direct knowledge of the case have said. His defence is that the amount of such pay wasn’t certain, and therefore it was appropriate to omit it from securities filings, they said.

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.

More on Ghosn

Ghosn was indicted for understating his salary by ¥4.8 billion (RM179.31 million) during the five years until March 2015, and the re-arrest is for suspected income understatements of ¥4.2 billion for the three years until March 2018, prosecutors said.

Former representative director Greg Kelly was also indicted for aiding Ghosn in understating his income. Nissan faces a fine of no more than ¥700 million.

Shares of Nissan declined 2.9% in Tokyo. They have lost 6% since Ghosn’s arrest.

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

Ghosn will remain in custody as prosecutors continue to investigate additional suspected crimes. A trial typically takes place about 40 to 50 days after indictment. Ghosn’s trial is likely to take place at the Tokyo District Court or a similar tribunal, where cases are argued in front of three judges. Should he want to, Ghosn is likely to be able to appeal the verdict twice, first to High Court and then Supreme Court. If convicted, Ghosn could face up to 10 years in prison, prosecutors have said.

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% 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.

Growing Distrust

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 summarising 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. 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. — Bloomberg