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Ghosn scandal: what we know

Carlos Ghosn, one of the world’s most influential executives is under arrest, in a shocking turn of events that raises questions about the future of the sprawling Franco-Japanese auto group he leads.

Details are starting to emerge about the allegations of financial misconduct against the leading titan, who has not yet issued a statement on his fate.

Ghosn

Here is what we know so far about the unfolding scandal:

– Ghosn in detention –
Japanese prosecutors confirmed Tuesday that they were holding Ghosn after arresting him a day earlier on suspicion of systematically under-reporting his salary over five years.

Nissan said it had been investigating Ghosn and Representative Director Greg Kelly for months, after a report from a whistleblower.

CEO Hiroto Saikawa said the company had uncovered years of financial misconduct including under-reporting of income and inappropriate personal use of company assets.

There has been no word from Ghosn or his representatives on the charges and no official confirmation on where he is being held. Sources told AFP he was being held at a detention centre in the capital belonging to Tokyo prosecutors.

Under Japanese law, Ghosn can be held for up to 23 days before being charged.

– Details on the allegations –
Prosecutors confirmed Ghosn had conspired with Kelly to report income of 4.9 billion yen ($44.5 million) over five years when his actual income for that period had been nearly 10 billion yen.

Several executives at Nissan were reportedly involved in falsifying financial documents under instructions from Kelly but they have been cooperating with prosecutors in a plea bargain deal in return for lighter penalties.

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Public broadcaster NHK reported board members received less compensation than financial statements showed, with Ghosn pocketing the difference.

Nissan also reportedly provided luxury residences to Ghosn in Brazil and Lebanon by making subsidiaries purchase the properties for billions of yen (tens of millions of dollars).

– Governments weigh in –
Japanese government officials scrambled to insist that the alliance of Nissan, Mitsubishi and Renault that Ghosn oversaw would not be affected by his astonishing downfall.

And France, which holds a 15 percent stake in Renault, said it would stay “vigilant” on the stability of the alliance as well as the French automaker.

French Economy Minister Bruno Le Maire said he had ordered an inquiry into Ghosn’s tax affairs immediately after learning of his arrest in Japan but that it showed up “nothing in particular about his tax situation”.

But the allegations leveled against Ghosn in Japan do not include tax evasion in France.

– Industry fallout –
Nissan and Mitsubishi have also said they will propose ousting Ghosn as chairman, with the board of the former set to meet Thursday. Renault said it would meet later in the day to discuss Ghosn’s fate.

The scandal caused shares in Nissan and Mitsubishi to plunge over five percent in Tokyo trade, a day after Renault shares dipped more than 12 percent in Paris.

– Who is ‘Le Cost Killer’? –
Ghosn, 64, was born in Brazil of Lebanese descent, and educated at elite colleges in France, where he started in industry at tyremaker Michelin.

He made his name as a turnaround specialist before he was parachuted into Nissan from Renault in 1999, swinging the axe on costs to bring the troubled Japanese firm rapidly back to profit.

A globetrotting polyglot who shook up corporate culture in France and Japan, Ghosn could seemingly do no wrong until disquiet began to mount in recent years over his high renumeration.

The French government objected to his multi-million pay packet, and Saikawa said too much authority had become vested in the chairman.

That, the Nissan CEO said, was “a dark side of the Ghosn era which lasted for a long time”.


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