Nissan chair arrested in probe of financial misconduct

Nissan Motor’s chairman Carlos Ghosn has been arrested and will be dismissed for alleged under-reporting of his income and misuse of company funds, the company said Monday.

The Japanese automaker’s CEO Hiroto Saikawa confirmed that Ghosn was arrested after being questioned by prosecutors following his arrival in Japan earlier in the day.

It was a stunning development that will pose a daunting test for the Nissan-Renault-Mitsubishi alliance, one of the world’s biggest automakers.

The Yokohama-based company said the alleged violations involving millions of dollars by Ghosn, 64, and another executive were discovered during a months’ long investigation that was instigated by a whistleblower.

“Beyond being sorry I feel great disappointment, frustration, despair, indignation and resentment,” Saikawa said, apologizing for a full 7 minutes at the outset of the news conference. “I want to minimize the bewilderment and the impact on the operation and our business partners.”

Nissan said it was providing information to the prosecutors and cooperating with their investigation. The allegations also concern a Nissan representative director, Greg Kelly, who was also arrested.

Saikawa said Nissan’s board will vote Thursday on dismissing both Ghosn and Kelly, who he described as the “mastermind” of the alleged abuses.

“This is an act that cannot be tolerated by the company,” he said. “This is serious misconduct.”

Saikawa said three major types of misconduct were found, including underreporting income, using investment funds for personal gain and illicit use of company expenses.

Asked why the company had failed to spot the illicit activity for so long, Saikawa said it was because a “system in the company” allowed a lack of transparency that made the wrongdoing possible. Throughout the news conference he repeatedly said he was constrained by the ongoing investigation from disclosing many of the details of the case. But he promised to beef up corporate governance, adding that the problems may have happened because too much power was concentrated in one person.

“We need to really look back at what happened, take it seriously and take fundamental countermeasures,” he said.

Already at Nissan for 19 years, Ghosn signed a contract earlier this year that would have run through 2022. His compensation, high by Japan’s moderate standards for executive pay, has been an issue over the years.

According to NHK and the Kyodo News Service, Nissan paid Ghosn nearly 10 billion yen ($89 million) over five years through March 2015, including salary and other income from the company, but reported as if he only made 5 billion yen ($44 million), or half of what he had received.

Nissan’s annual securities report shows Ghosn received annual remuneration exceeding 1 billion yen ($8.9 million) until fiscal 2016, when shareholders voted against his pay package and his annual pay dropped to 735 million yen ($6.5 million) in 2017, down more than 30 percent.

Saikawa