TOKYO (AFP, REUTERS) - Tokyo prosecutors confirmed on Tuesday (Nov 20) that they had arrested auto industry titan Carlos Ghosn a day earlier on allegations he under-reported his income over the course of several years.
In a statement, prosecutors said Ghosn, 64, had reported income of 4.9 billion yen (S$70.6 million) over five years when his actual income for that period had been nearly 10 billion yen.
By mid-day Tuesday, Nissan Motor Co was the most-traded stock by turnover and tumbled 6.5 per cent to 940 yen, its lowest since July 2016.
The arrest of Ghosn sent shockwaves through the business world and threw into doubt the future of Japan's No.2 automaker and its global alliance with Mitsubishi and Renault.
Ghosn's alleged improprieties also raise questions over governance at the alliance in which the three partners' boards are all chaired by a single executive.
The news of Ghosn's arrest sparked concern in France, where the state owns a 15 per cent stake in Renault.
President Emmanuel Macron said Paris would be "extremely vigilant" about the stability of the firm and its three-way tie-up.
And French Finance Minister Bruno Le Maire said the government would "do everything as a shareholder represented on Renault's board to ensure operational continuity and stable governance at Renault."
On Tuesday there were still many unanswered questions about the allegations against a man long credited with an almost magical ability to turn around ailing auto companies.
The shock of his arrest was compounded by the harsh language levelled against him by Nissan CEO, Hiroto Saikawa, who in a late-night press conference on Monday accused Ghosn of accruing too much power.
"Too much authority was given to one person in terms of governance," he told reporters at Nissan's headquarters in Yokohama .
"I have to say that this is a dark side of the Ghosn era which lasted for a long time." Saikawa said he was still thinking through whether Ghosn was "a charismatic figure or a tyrant." .
Ghosn’s long tenure appeared to have had a “negative impact” on day-to-day operations, Saikawa explained, adding that the company needed to improve its weak corporate governance.
Following a Bloomberg News report in March that Renault and Nissan were in talks to merge under a single stock, Saikawa told the Nikkei in April that he saw “no merit” in combining the companies, adding such a move would have side effects.
Bloomberg News again reported that the Japanese automaker was resisting a combination unless it could gain more clout in key areas as top managers believed Nissan had better engineering capabilities to lead crucial operations such as product development.
The top task was to ensure the alliance lasts for generations, Saikawa said in May.
Nissan's CEO also said on Monday a months-long investigation prompted by a whistleblower had uncovered years of financial wrongdoing, including under-reporting of Ghosn's salary and misuse of company assets.
Prosecutors said in a statement that Ghosn and Representative Director Greg Kelly conspired to understate Ghosn's compensation over five years starting in fiscal 2010 as being about half of the actual 9.998 billion yen (US$88.9 million).
The Asahi newspaper cited unnamed sources as saying a company employee gave prosecutors information on Ghosn in return for lighter treatment, the second instance of a plea deal in Japan - a system introduced in June.
There has been no comment from Ghosn or Kelly on the allegations and Reuters could not contact them for comment.
Despite his international renown and rock-star status, particularly in Japan, where Ghosn was a rare foreign-born executive, the 64-year-old was not without detractors.
He earned admiration but also anger for his ruthless restructuring at firms like Nissan, and was nicknamed "Le Cost Cutter" in France.
And his pay packet was regularly the subject of criticism, including at Renault, where it sparked a spat with shareholders.