Business / Corporate

Carlos Ghosn may face Christmas in jail as he, Greg Kelly and Nissan are charged with underreporting chairman's pay

Kyodo, Bloomberg

Tokyo prosecutors on Monday indicted former Nissan Motor Co. Chairman Carlos Ghosn, close aide Greg Kelly and the automaker itself for allegedly breaching the Financial Instruments and Exchange Act by making misstatements in its securities reports.

The indictment comes three weeks after Ghosn, 64, was arrested on suspicion of underreporting about ¥5 billion of his remuneration in the company’s financial statements during the five years through March 2015.

Kelly, formerly representative director at Nissan, was arrested with Ghosn on Nov. 19 for allegedly conspiring to understate the former chairman’s remuneration by about half its full value for the five-year period from April 2010. Ghosn is accused of reporting only ¥5 billion of his ¥10 billion remuneration in the financial statements for the period.

Ghosn and Kelly were also served fresh arrest warrants the same day for allegedly continuing the misconduct through March 2018, a move that could lead to as much as 20 additional days of detention through Dec. 30 and spark further criticism from overseas.

Prosecutors said the amount of alleged underreporting in the period between April 2015 and March 2018 was about ¥4.27 billion. In total, Ghosn is suspected of having failed to report around ¥9 billion of his pay.

Ghosn is credited with rescuing Nissan from near-bankruptcy in the 1990s. According to Japanese law, a suspect served an arrest warrant by prosecutors can be detained for 22 consecutive days. The deadline for Ghosn’s initial detention period is Monday, but a fresh warrant means prosecutors can keep him in custody at the Tokyo Detention House even longer and conduct further interrogations.

Japan’s securities watchdog, meanwhile filed a criminal complaint earlier Monday against Ghosn, Kelly and Nissan over the ¥5 billion of underreporting.

The two executives’ detention and their prolonged interrogation without the presence of a lawyer have sparked criticism outside Japan. While visits are restricted, lawyers and embassy officials are allowed to meet them.

Ghosn and Kelly have admitted to prosecutors that the former chairman’s remuneration was not entirely stated in the reports but claimed it was not necessary to do so because the amount he was to receive after retirement had yet to be settled, according to sources with knowledge of the investigation.

The prosecutors, however, believe the payments were already fixed because they have obtained documents on Ghosn’s post-retirement compensation which he signed.

Nissan CEO Hiroto Saikawa was also found to have signed documents on post-retirement payments crafted by Kelly. The prosecutors have questioned Saikawa on a voluntary basis, believing he knows why and how they were drawn up.

Ghosn has told prosecutors he did not report the full amount because he did not want company workers to become unmotivated after learning about his high pay package, according to the sources.

Ghosn is likely to 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 site, where cases are argued in front of three judges.

Ghosn is likely to have two chances to appeal any verdict, first to the high court and then the supreme court.

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

Saikawa and other executives within Nissan have spoken strongly against a merger. Saikawa, a former protege of Ghosn’s, is now potentially succeeding him as chairman, after taking over as CEO last year.