Ghosn, Nissan charged by Japanese prosecutors for underreporting pay, Kyodo says

[TOKYO] Carlos Ghosn was indicted by Japanese prosecutors three weeks after his arrest for allegedly understating his pay at Nissan Motor Co, which will also face charges as a company, Kyodo reported.

In the first sign of blowback from the scandal for Nissan, the carmaker is set to be indicted for breaching Japan's financial instruments and exchange law by under-reporting Ghosn's compensation by about 5 billion yen (s$60.9 million), Kyodo reported. A Nissan spokesman declined to comment and prosecutor representatives said an announcement on indictment hasn't been made. Lawyers for Ghosn couldn't immediately be reached for comment.

The indictment of Nissan shows that the scandal that has sent shockwaves through the car industry is spreading beyond Ghosn and his aide. The charges also represent a victory of sorts for Nissan chief executive officer 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.

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.

Former representative director Greg Kelly, who is accused of aiding Ghosn in understating his income and misusing Nissan assets, was also indicted, Kyodo said.

Shares of Nissan declined 2.3 per cent at 2:10pm in Tokyo. They have lost about 5 per cent since Ghosn's arrest.

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

After indictment, 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 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 percent 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.

Mr Saikawa and other Japanese executives within Nissan have spoken strongly against a merger. Mr 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 summarizing 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. He declined further comment. 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