Tokyo Prosecutors Formally Charge Carlos Ghosn With Underreporting Income By $80 Million

After languishing in an austere Tokyo jail cell for three weeks, former Nissan and Mitsubishi executive Carlos Ghosn has finally been formally charged by Japanese prosecutors with knowingly underreporting his income by some $44 million between 2010 and 2015. The charges, which came on the last day that Ghosn could be detained without charge under Japanese law, weren't the only legal action taken against the former executive: He was also rearrested, along with former Nissan director Greg Kelly, on charges they conspired to underreport Ghosn's income by $38 million between 2015 and the present day, according to the Financial Times.

Monday's indictment is the first official indication of the charges facing Ghosn, though a steady stream of media leaks had suggested that Ghosn would be charged for underreporting his income by as much as $100 million between 2010 and this year. Last week, a Tokyo judge granted prosecutors an extension, allowing them to hold Ghosn for an additional 10 days before charges would need to be filed.

Ghosn

Separately, an internal Nissan probe that was reportedly triggered by a whistleblower's complaint is being carried out in connection with Ghosn's alleged misuse of company funds to buy luxury homes and also possibly reports that he shifted trading losses onto Nissan's books during the financial crisis.

Prosecutors also indicted Nissan for filing false financial statements, meaning that the Japanese carmaker could face fines of up to $700 million for underreporting Ghosn's income, according to Reuters.

Though, unsurprisingly, Nissan tried to deflect the blame on to Ghosn by claiming that the executive had masterminded the scheme. According to Kelly and Ghosn's attorneys, Ghosn's income was reported in accordance with advice from outside consultants.

Nissan said it took the situation seriously, and that it planned to cooperate with investigators. However, legal experts quoted by Reuters said Nissan CEO Hiroto Saikawa might find it difficult to extricate himself from the situation now that prosecutors are formally moving against his company.

Analysts and legal experts have said it could be difficult for Nissan and its Chief Executive Hiroto Saikawa to avoid the fallout, whether it turns out that other executives had knowledge of Ghosn’s misconduct, or that the company lacked internal controls.

"Now suddenly the issue of CEO Saikawa becomes bigger. It becomes difficult to overlook Saikawa’s role in all of this. That becomes the main focus now," said prominent lawyer and former prosecutor Nobuo Gohara.

Though speculation about the straining relationship between Nissan and its 'alliance' partner Renault has subsided since Ghosn's arrest, Reuters said the indictments should revive it, as reports about Nissan's dissatisfaction with Renault's influence over the much-larger Japanese carmaker are once again trickling out into the media.

Putting aside rumors that Ghosn's downfall was orchestrated by Saikawa and other senior Nissan officials who had grown tired of Ghosn's untrammeled influence over the firm (according to media reports published over the weekend, Ghosn had been seeking to oust Saikawa at the time of his arrest), the backlash against Ghosn and his family has taken on an unmistakably personal dimension. Over the weekend, the company sought to bar the Ghosn family from accessing the home in the Copacabana neighborhood of Rio De Janeiro. However, a Brazilian court overruled Nissan and ordered that they must be allowed in.