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Nissan's Ghosn crisis

Ghosn and Nissan charged with underreporting of pay

Tokyo Stock Exchange considers placing shares on alert list

Tokyo prosecutors charged Ghosn and Kelly, as well as Nissan, over the misstatements of the executives' pay. 

TOKYO -- Tokyo prosecutors on Monday charged Carlos Ghosn, the former chairman of Nissan Motor, his right-hand man Greg Kelly, and Nissan the company, over misstating Ghosn's income for years.

Ghosn and Kelly, a former Nissan representative director, were arrested on Nov. 19 on suspicion of understating Ghosn's compensation by a total of 5 billion yen ($44 million) in five annual reports through the fiscal year ended March 2015.

Tokyo prosecutors also rearrested Ghosn and Kelly on Monday on suspicion of violating financial laws by underreporting Ghosn's compensation by another 4 billion yen for the three years through March 2018.

Following the indictment of Nissan, the Tokyo Stock Exchange began considering whether to designate Nissan shares as "security on alert," which it does when there are management issues and significant false reporting in financial documents. Securities on alert run the risk of being delisted. 

The shares are traded as usual, but the TSE monitors improvements in internal controls. The designation is removed once the changes are approved. Olympus was under such supervision from 2012 to 2013, as was Toshiba from 2015 to 2017.

Ghosn and Kelly deny the charges. If the court approves, Ghosn can be detained for another 20 days for the investigation of the rearrest, which may draw renewed international criticism of his prolonged incarceration.

According to sources familiar with the matter, Ghosn deferred part of his compensation from the fiscal year ended March 2010, when individual disclosure of executive remuneration became mandatory, and kept it from being included in Nissan's annual report.

Ghosn's total compensation, including the deferred compensation that went unreported, increased from year to year, according to people familiar with the matter. For each of the financial years ended March 2017 and March 2018, his compensation was around 2.4 billion yen. Ghosn had explained that it reflected the amount of work he did.

The gap between total pay and the amount reported in the annual report also grew. In fiscal 2018, the amount stated was 735 million yen, whereas the deferred payments that were not recorded amounted to 1.6 billion yen.

Nissan released a statement Monday afternoon in response to the charges against the company. The automaker apologized to all parties, stating that it was taking the charges "very seriously."

"The falsification of our annual reports could damage the credibility of disclosures within the securities market," the statement read. The company also vowed to "improve governance as well as follow compliance rules including appropriate disclosure."

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