NEWS: Carlos Ghosn arrested, to be fired from Nissan for alleged financial crimes [UPDATED]

Former Nissan CEO and current chairman of Mitsubishi Motors and Nissan Carlos Ghosn is facing arrest charges in Japan, according to the Asahi Shimbun newspaper. Details are sparse at the moment, but it is being reported that his is suspected of under-reporting his salary.

Ghosn was famously appointed head of Nissan in 2001, after Renault purchased a 34 percent stake of the ailing company. Ghosn was responsible for a controversial turnaround of Nissan, and then oversaw Nissan’s takeover of Mitsubishi Motors, forming the Renault-Nissan-Mitsubishi Alliance.

Last February, Ghosn stepped down as Nissan CEO, opting instead to focus on the RNM Alliance and reviving Mitsubishi. He stated in February 2018 that he wants to make the alliance irreversible. However, Nissan said they would oppose this as long as the French government, who owns 15 percent of Renault, keeps their stake.

In France, Ghosn is largely seen as someone “who makes too much money,” according to Ronan Glon, an automotive journalist based in France and contributor to JNC. Renault stock has dropped 6 percent in morning trading on news of Ghosn’s arrest. Nissan’s has dropped 11 percent on the German stock exchange.

UPDATE: According to those familiar with Japanese financial laws, the charge of under-reporting salary is typically associated with tax evasion. The issuance of an arrest warrant means prosecutors believe Ghosn submitted under-calculated paperwork, or “fake paperwork,” as it is more commonly called.

If arrested, Ghosn will be held by authorities but can may be released on bail. Typically in such cases, bail is set tremendously high. Ghosn will then face trial in court. If found guilty, he could face jail time.

In Japan, large companies will not tolerate individuals with criminal records. If guilty, Ghosn will almost certainly be fired from his post as chairman of Mitsubishi Motors and Nissan.

UPDATE 7:15 am: Nissan will fire Ghosn from his position as chairman. The company issued the following statement:

Based on a whistleblower report, Nissan Motor Co., Ltd. (Nissan) has been conducting an internal investigation over the past several months regarding misconduct involving the company’s Representative Director and Chairman Carlos Ghosn and Representative Director Greg Kelly.

The investigation showed that over many years both Ghosn and Kelly have been reporting compensation amounts in the Tokyo Stock Exchange securities report that were less than the actual amount, in order to reduce the disclosed amount of Carlos Ghosn’s compensation.

Also, in regards to Ghosn, numerous other significant acts of misconduct have been uncovered, such as personal use of company assets, and Kelly’s deep involvement has also been confirmed.

Nissan has been providing information to the Japanese Public Prosecutors Office and has been fully cooperating with their investigation. We will continue to do so.

As the misconduct uncovered through our internal investigation constitutes clear violations of the duty of care as directors, Nissan’s Chief Executive Officer Hiroto Saikawa will propose to the Nissan Board of Directors to promptly remove Ghosn from his positions as Chairman and Representative Director. Saikawa will also propose the removal of Greg Kelly from his position as Representative Director.

Nissan deeply apologizes for causing great concern to our shareholders and stakeholders. We will continue our work to identify our governance and compliance issues, and to take appropriate measures.

Ghosn allegedly reported personal earnings of ¥5 billion ($44,440,000 USD) to the Japanese government but was paid ¥10 billion ($88,900,000 USD). In addition he misappropriated company funds for his personal use.

Ironically, Ghosn was known as Le Cost Killer within the industry, for his brutal slashing of expenditures, supplier profits, and headcount. Nissan’s official statement came this evening (it is just past midnight in Japan). According to Japanese sources, Ghosn is spending the night in jail.

UPDATE 7:30 am: President Emmanuel Macron has said his government, which owns a 15 percent stake in Renault and is the company’s top shareholder, “will be extremely vigilant about the stability of the alliance.” However, the French government’s ownership was one of the main sticking points for Nissan against a permanent merge with Renault, as they did not want a foreign government having such a large voice in its business matters. Ghosn had been trying to facilitate a deal in which the French government took less of a role.

Current Nissan CEO Hiroto Saikawa said in a press conference that “The partnership of the three entities [Nissan, Renault, Mitsubishi] will not be affected by this event.” Renault currently owns 43.4 percent of Nissan, while Nissan owns 15 percent of Renault, with no voting rights. Nissan holds a 34 percent controlling stake in Mitsubishi Motors.

UPDATE 7:50 am:  Japanese media is quoting relevant passages from the Financial Instruments and Exchange Act to shed light on Ghosn’s possible fate. The act obliges listed companies and others to submit securities reports that describe important matters concerning the company activities, such as the accounting for each fiscal year.

Penalties for individuals who commit fraud in the contents of a report include up to 10 years in prison or a fine of ¥10 million ($88,870 USD) or less; corporations are fined up to ¥700 million yen ($6,220,900 USD). In order to protect investors’ judgment based on correct information, if the stock exchanges judge that the influence is large, it may be delisted in some cases.

Renault stock has now fallen around 12 percent, and Nissan’s 10 percent (on the German stock exchange).

UPDATE 8:24 am: Japanese sources say Ghosn arrived in Tokyo on Monday and was intercepted by authorities at the airport. Investigators also searched Nissan’s headquarters building in Yokohama.

“I feel strong anger and disappointment,” Saikawa told reporters at Nissan headquarters in Japan. “I am very sorry.”

This is a developing story, and we will have more as information becomes available.

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24 Responses to NEWS: Carlos Ghosn arrested, to be fired from Nissan for alleged financial crimes [UPDATED]

  1. Nigel said:

    No comment…

  2. XRaider said:

    Shocked……But I don’t wanna say something at this time….

  3. Mind Synthetic said:

    there is a god, get that twaaattttaaa out of there.

  4. James said:

    Charges for Nissan’s poor CVT design should be added as well…Just saying.

  5. Negishi no Keibajo said:

    I’m not an industry insider, but I have never been a fan of him. Yes, he brought (or bought) an ailing Nissan back on it’s feet again, but in a decidedly un-japanese fashion. I feel for the employees of Nissan and believe the anger expressed. I hope that in the end, a better company comes out the other side of this dark tunnel.

  6. Tofu Delivery said:

    come on! we’re all here begging for a new z and this joker is scamming billions from the company??

  7. Negishi no Keibajo said:

    Who is Gregg Kelly?

  8. FastwayRP said:

    I smell a job opening! If Nissan is looking for a CEO later, I’ll take the position! It’s time for change Nissan. I know it, you know it, the world knows it. Give me a chance and you won’t regret it!

  9. Negishi no Keibajol said:

    I smell a F1 team for sale… C’mon Toyota, have the last laugh ( at Renault).

  10. Tom Westmacott said:

    I think we can assume that the allegations are well-founded; Nissan would hardly humiliate themselves on global news if they weren’t 100% certain. Possibly something about having Nissan buy houses for him in Lebanon, Brazil etc but putting them in his own name rather than the company’s ? Along with the salary under-reporting.

    To me this is a reminder that power corrupts, and absolute power corrupts absolutely; it is very hard for most people to remain level-headed when they are given total control and are praised at every turn. Conversely, Nissan perhaps put a bit too much blind faith in their ‘miracle worker’ CEO, and could have strived harder to keep hold of their critical faculties.

    In terms of his legacy, I think it is mixed. On the one hand, he turned around Nissan and steered it away from bankruptcy. On the other hand, he turned them away from selling exceptionally well-engineered cars for unexceptional prices, and towards Renault platform-sharing and cost-cutting. The nineties Nissans – think K11 Micra, Primera, or 200SX – had no real mechanical flaws, apart from eventually rusting away. Their successors were not always so dependable. He launched the 350Z and the R35 GT-R, but he killed the smaller, lighter, more affordable 200SX line, and declined to resurrect it with the exciting ID-X concept.

    It’s a bit early to say, but there is speculation that Nissan will use this moment to pull away from the Renault alliance somewhat, and re-assert their independence, being much stronger now than when they were rescued by the French in ’99.

    • Last Iconoclast said:

      It is reported that under his direction in 2010, Nissan established a venture capital subsidiary in the Netherlands for the purpose of investing in startups, but that he diverted those funds to buy homes in Rio de Janeiro (he was born there), Beirut (he was raised there), and possibly Paris and Amsterdam.

      That he would misuse company funds while making obscene amounts of money must anger Nissan shareholders, employees, and suppliers to no end. What’s remarkable is that this went on for so long without the Board and management becoming aware. It took an internal whistleblower to take down this naked emperor.

      Ghosn achieved results at the expense of suppliers, and as you point out, it has affected the reliability of Nissan vehicles as consumer surveys have repeatedly shown. An industry poll of parts suppliers ranked Nissan the worst among North American OE vehicle manufacturers to do business with, which must be affecting Nissan’s ability to source cutting edge, quality parts. Blame Renault Purchasing for that.

      Whether the Alliance dissolves or not, it may be too late for Nissan to recover from years of placing profits over all else.

  11. Jayrdee said:

    This doesn’t surprise me one bit.

    I mean, have you seen the Versa and Juke?! They’re hideous! Lol.

  12. nlpnt said:

    Time to dust off the iDX.
    Besides the coupe, how about a five-door, Sunny California-esque hatchback/wagon? Offer a lifted-and-cladded version to build volume and amortize the body dies, if you must.

    • Cesariojpn said:

      Aside from Jalopnik readers, America doesn’t want a station wagon.

      • Okiera29 said:

        America does want station wagons, why else would SUV sales and mini van sales still be so strong? America just wants a cool looking station wagon. The magnum sold well till Chrysler’s reliability issues killed it.

  13. Mazluce said:

    Reading the comments I was relieved that my thoughts were be echoed here. It made me happy to see him finally go. Maybe this is the turning point for this great company.

  14. Michael said:

    Now I hope the Mitsubishi board of directors does the same for Mitsubishi North America upper management since they have zero direction and are far disconnected with the market…

  15. Cesariojpn said:

    It must be bad if he’s being FiredFired as mentioned in the lead. Thats double of being just fired.

  16. MattD said:

    This is unlikely to affect Nissan’s car development in the near future. Ghosn’s imprint is still all over Nissan and it’s executive team. (sorry, I firmly believe the iDX is dead — only to be resurrected in a stolen-design Peugeot e-prototype)

    But, it does remove the driving force for the Nissan-Renault-Mistubishi perma-merge, which I think is a good thing. Renault continuously took away a lot of the things that made Nissan, well, Nissan — and in return Nissan got nothing, with no power over Renault’s trajectory at a high level. BUT this could be very good news for Mitsubishi, as Nissan owns the stake in their company, not Renault.

    Basically, my hope is that this kills the desire for a full merger, keeps the French Government involved in Renault (and subsequently stops Nissan from allowing a full takeover) and then gives some autonomy back to the Japanese automakers.

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