Former Nissan chief faces 10 years in prison if convicted

Tokyo prosecutors indicted ousted Nissan Motor chairman Carlos Ghosn for under-reporting his income and also officially charged the automaker, making the firm culpable for the financial misconduct scandal that has shocked the industry.

Ghosn was arrested on November 19 on suspicion of conspiring to understate his compensation by about half of the actual ¥10 billion ($88 million) over five years from 2010. He has been held in a Tokyo jail since then for questioning, but had not been officially charged until now.

Prosecutors re-arrested him on Monday on fresh allegations of understating his income for three more years through March 2018. Nissan, which fired Ghosn as chairman days after his arrest, said that the misconduct was masterminded by the once-celebrated executive with the help of former representative director Greg Kelly, who was also indicted for the first time on Monday.

Ghosn and Kelly have not made any statement through their lawyers, but Japanese media reported that they had denied the allegations. Calls to Ghosn's lawyer, Motonari Otsuru, at his office went unanswered. Nissan, indicted for filing false financial statements, said it takes the charge seriously.

“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,” it said, adding it will correct past financial reports to include appropriate compensation figures.

Japan’s securities watchdog, the Securities and Exchange Surveillance Commission (SESC), said the crime carried a fine of up to ¥700 million ($6.2 million).

Analysts and legal experts say it will be difficult for Nissan and its Chief Executive Hiroto Saikawa to avoid blame, regardless of whether other executives knew about Ghosn's misconduct or that the company lacked internal controls. “It becomes difficult to overlook Saikawa's role in all of this. That becomes the main focus now,” prominent lawyer and former prosecutor Nobuo Gohara said.

Ghosn, if convicted, faces up to 10 years in prison and/or ¥10 million in fines under the Financial Instruments and Exchange Act. Ghosn's arrest marks a dramatic fall for a leader once hailed for rescuing Nissan from the brink of bankruptcy. The once-feted executive has been treated like others in detention, held in a small chilly room. Authorities have limited his opportunities to shower and shave, according to a person familiar with the matter.

Asked about criticism that Japanese prosecutors often try to force confessions from suspects, deputy prosecutor at the Tokyo District Public Prosecutors Office, Shin Kukimoto, said no such method was being used with Ghosn and Kelly. “Questioning is by no means being conducted in a way that forces confession,” he told a news conference. “It's my understanding that both of them are being treated appropriately at the Tokyo Detention Center.”

The arrest of Ghosn and Kelly has shaken up the foundations of the Renault-Nissan alliance. While the Japanese automaker has stepped up its offensive against Ghosn, seeking to block access by his representatives to an apartment in Rio de Janeiro citing a risk that the executive may remove or destroy evidence, the European partner has kept him on as its chairman and CEO.

The key question is whether and how the ownership structure of the alliance might change. Ghosn, under pressure from the French government, had pushed for a deeper tie-up including a possible full merger between Renault and Nissan, despite strong reservations at Nissan. Some Nissan executives have long been unhappy with what they see as Renault's outsized influence over the Japanese automaker, which dwarfs Renault in vehicle sales.

Renault holds around 43% of Nissan, while Nissan has a non-voting 15% stake in the French partner.