Why was the Renault-Nissan-Mitsubishi Chairman set up to take such a HUGE fall so fast!

 

Ghosn was arrested in an airport in Japan shortly after landing in the country, and has been kept in jail since.    PHOTO BY NEWSPRESS

 

Why was the Renault-Nissan-Mitsubishi Chairman set up to take such a HUGE fall so fast!

Was Carlos Ghosn ousted in a palace coup?

Renault-Nissan-Mitsubishi alliance faces uncertain future as prosecutors probe ‘personal use of company assets’

AUOTWEEK

Nissan chairman Carlos Ghosn, arrested early last week while returning to Japan by plane, has reportedly denied charges of alleged financial misconduct under which he was arrested, Japanese news broadcaster NHK reports. Ghosn and a colleague, Greg Kelly, were both charged with underreporting Ghosn’s salary to Japanese tax authorities, as well as with using company funds and assets for their own personal use. The two are alleged to have conspired to underreport Ghosn’s income from the automaker by 5 billion yen of the total 10 billion yen over the course of five years, which translates to approximately $88 million.

Kelly has denied the allegations as well, according to NHK, indicating that the remuneration was approved by the proper executives of the automaker.

“The former chairman’s compensation was discussed with those in the related department and carried out appropriately. I was not just following the former chairman’s orders, but working for the good of the company,” Kelly reportedly told NHK.

Ghosn and Kelly were both fired from Nissan on Thursday of last week, days after a lengthy late-night press conference by Nissan CEO Hiroto Saikawa, who spent considerable time highlighting the seriousness of Ghosn’s alleged transgressions and the “long regime of Mr. Ghosn.”

“The investigation showed that over many years, both Ghosn and Kelly have been reporting compensation amounts in the Tokyo Stock Exchange securities report that were less than the actual amounts, in order to reduce the disclosed amount of Ghosn’s compensation,” Nissan said in a statement shortly after Ghosn’s arrest.

“Also, with regard to Ghosn, numerous other significant acts of misconduct have been uncovered, such as personal use of company assets, and Kelly’s deep involvement has also been confirmed.”

The charges immediately struck some industry observers as strange: The reported charges include Ghosn using residences in Brazil and Lebanon owned by the automaker without reporting this benefit as part of his income, according to Japan Times. According to the publication, prosecutors from Tokyo working on the case believe that the costs of the residences should have been reported in securities reports as part of the income Ghosn was receiving from the automaker.

Japan Times also reports that Nissan officials (other than Ghosn and Kelly) have struck a plea agreement with prosecutors in Tokyo in which prosecutors could choose to file lesser charges or refrain from indicting suspects in the investigation if they cooperated.

The charges against Ghosn were viewed with surprise and skepticism by several industry analysts and publications, as in practice CEOs routinely use residences, offices, and jets owned and serviced by automakers, and it is the automakers rather than individuals that file financial reports regarding those assets to tax authorities in various countries. The charges against Ghosn, therefore, seem strange in that a months-long internal investigation and whistleblower report were needed to determine that Ghosn was using Nissan-owned residences and transportation — not a mystery to anyone, especially Nissan which is paying for them — without reporting those perks as income. Among other issues, this raises the question of whether all other CEOs or Japanese automakers are reporting their use of company jets, cars and residences as income to Japanese tax authorities, and whether similar investigations are currently being pursued against them by Tokyo prosecutors.

A number of industry analysts voiced skepticism of the whole matter, interpreting the surprise arrests as a poorly masked palace coup simply meant to remove Ghosn and to block the initiatives he set into motion. Saikawa’s few positive comments about Ghosn during the exceptionally long press conference on the night of his arrest, a year after Ghosn installed Saikawa as Nissan CEO, also appeared to speak volumes about what was truly taking place, with Saikawa at one point having to deny that his arrest was a coup d’etat. For a press conference merely about Ghosn’s alleged underreporting of his personal use of Nissan owned homes and transportation, a significant amount of time was devoted to discussing Ghosn’s power within Renault-Nissan and other unrelated “negative aspects” of his long tenure as well as “the concentration of power in one individual,” rather than the strictly paper-filing crimes with which he was actually charged by prosecutors.

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Skepticism of the charges against Ghosn coincides with reports that he had been planning a formal merger between Renault and Nissan, a merger that had received considerable pushback from the Nissan board. Expected within months, the merger would have solidified a complex alliance between Renault, Nissan and Mitsubishi in which Renault currently owns 43 percent of Nissan, while Nissan, a larger and more profitable automaker, holds a nonvoting 15 percent stake in Renault. Nissan also owns 34 percent of Mitsubishi — a controlling stake — acquired following Mitsubishi’s brush with financial collapse in the wake of a fuel economy scandal. Renault, whose biggest shareholder is the French government, holds no stake in Mitsubishi. But despite its smaller size and profits, Renault holds a significant amount of decisionmaking power at Nissan.

The Renault-Nissan alliance now faces an uncertain future without Ghosn; executives from the two automakers convened for a meeting in the wake of Ghosn and Kelly’s arrests.

“The board acknowledged the significance of the matter and confirmed that the longstanding Alliance partnership with Renault remains unchanged and that the mission is to minimize the potential impact and confusion on the day-to-day cooperation,” Nissan said in a statement.

The Renault-Nissan alliance heads for uncharted waters with Ghosn now appearing to be out of the picture, giving the minority that had been against closer ties between the two auto giants a much more significant platform.

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