TOKYO—The chairman of Nissan Motor Co. Japan was arrested Monday. The Tokyo District Public Prosecutor Office (Special Investigation Section) had investigators raid the offices of Nissan headquarters in Yokohama, which is south of Tokyo. They then called in chairman Carlos Ghosn on a ‘voluntary basis’ for questioning regarding possible violations of Japan’s Financial Instruments and Exchange Act. After interrogating Ghosn, they arrested him late in the evening, on at least one violation of the law, that of falsely reporting his revenue on a financial statement.
According to sources close to to the investigation, Ghosn reported his salary and income as nearly 9.7 million dollars in 2016, but then reported his income as 6.5 million dollars for 2017, over 30% less than the previous year. Japan’s financial laws make it a crime to put false data in a firm’s corporate financial statement. It should be noted that executives at other companies who have technically committed the same violations of the law (falsifying financial statements) have often not been arrested or prosecuted. However, the Japanese authorities seem to have decided that an unpopular CEO falsifying his executive salary is someone worthy of being handcuffed.
Ghosn was born in Brazil and joined French carmaker Renault in 1996 before he became chief operating officer for Nissan in 1999. He became president of Nissan in June 2000 and chairman in April of 2017. Nissan announced today that it would take immediate action to remove Ghosn as company chairman and representative board member.
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The company also announced that an internal probe had found Ghosn guilty of serious ‘wrongdoings’ including the use of company funds for personal usage.
Ghosn’s high salary had drawn much criticism and attention. In Japan even companies listed in the first section of the Tokyo Stock exchange draw ire for awarding top executives salaries in excess of a million dollars.
Early reaction to the news on Japan’s social media was not sympathetic to Ghosn. “Underreporting a 100,000,000 yen or so is a big deal! He shouldn’t earn that much to begin with.”
There were also some sarcastic remarks. “Way to go Tokyo Prosecutors! Why don’t you go after and arrest politicians like Shinzo Abe for corruption next?”
Other commentators remarked on how similar Ghosn is in appearance to the character “Mr. Bean” played by Rowan Atkinson. They noted that if he got caught falsifying his income, he was just as clumsy as the fictional character.
There is some speculation on why the Tokyo Prosecutor’s are taking what seems to be a hard-line with Ghosn. In recent years, the Tokyo District Public Prosecutor Office has had their reputation tarnished by failing to go after high-ranking politicians, bureaucrats and corporate executives. The prosecutors failed to indict the biographer of Prime Minister Shinzo Abe, who had been accused of rape, after a high-ranking police officer—also a friend of the Prime Minister—intervened in the investigation. In 2016, when it became apparent that Toshiba executives had engaged in accounting fraud of over 1 billion dollars, the prosecutors refused to make any indictments, despite the recommendations of Japan’s Securities Surveillance and Exchange Commission. They twice dropped the case against the executives of Tokyo Electric Power Company, who were accused of criminal negligence resulting in injury and death, after the triple nuclear meltdown in March of 2011. A prosecutorial review board overturned their decision and three top TEPCO executives are now on trial, with a civilian lawyer functioning as the prosecution.
By going after a high-profile and slightly disliked figure like Ghosn—and arresting him rather than simply indicting him—the Tokyo Prosecutors appear to be trying to varnish their diminished reputation as Japan’s elite crime-fighting agency. If Ghosn was a Japanese citizen and a well-liked Japanese executive, it seems unlikely that he would have to endure the humiliation of an actual arrest. However, in the court of public opinion, Ghosn is already guilty—of earning too much money, and possibly not being honest about it. It is also believed that his high salary earned him enmity within the company, which motivated a whistleblower to come forward with their grievances.
Nissan in a press release commented on the chain of events so far.
“Based on a whistleblower report, Nissan has been conducting an internal investigation over the past several months regarding misconduct… [of] Chairman Carlos Ghosn. The investigation showed that over many years Ghosn has 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 has also been confirmed.”
Nissan named another executive, Representative Director Greg Kelly, as also engaging in underreporting of revenue. Nissan stated they had been providing information to the Japanese Public Prosecutors Office and fully cooperating with their investigation.
