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.