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Nissan's Ghosn crisis

Nissan startup unit spent $18m on Ghosn's homes in Rio and Beirut

Investigators offered plea bargain in exchange for evidence

Nissan Chairman Carlos Ghosn allegedly bought real estate via a unit ostensibly set up to fund startups. (Photo by Makoto Okada)

TOKYO -- A Nissan Motor affiliate is alleged to have paid $17.8 million for luxury homes in Rio de Janeiro and Beirut for its soon to be ousted chairman Carlos Ghosn, who was arrested on Monday on suspicion of financial misconduct, sources familiar with the situation said.

The transactions were done through a Dutch subsidiary, created around 2010, with 6 billion yen ($53.4 million at current rates) in capital, ostensibly set up for investment purposes. The sources said it was funded entirely by the Japanese automaker. The official line within Nissan was that the unit would invest in startups, though there is little evidence to support this claim.

The revelations come the day after Nissan accused Ghosn of "numerous... significant acts of misconduct." The statement was made following an internal investigation over several months, sparked by a tipoff from a whistleblower. He is accused of understating his compensation and misusing company assets and funds. He could not be contacted for comment. He is due to be dismissed as Nissan chairman on Thursday.

People involved with Nissan used a newly established plea bargain scheme in the investigation, according to sources familiar with the matter. The scheme, introduced in June, reduces or exempts criminal disposition in exchange for cooperating with prosecutors. Ghosn's case is the second known use of the scheme.

According to the sources, funds from the Dutch company were apparently used to purchase a condominium in Rio de Janeiro and a luxury home in Beirut, both of which were provided to Ghosn for his personal use. In addition, Nissan is said to have shouldered maintenance and renovation costs. The combined outlays are believed to have exceeded 2 billion yen.

These transactions were overseen by representative director Greg Kelly, according to the sources. Nissan alleged on Monday that "Kelly's deep involvement [had] also been confirmed."

Ghosn spent his early childhood in Rio, then moved to Beirut, where he finished high school. Nissan does not have any major operations in Beirut, and nor do its alliance partners, Renault and Mitsubishi Motors.

Ghosn and Kelly are accused of submitting a securities report claiming the chairman received roughly 5 billion yen in compensation from April 2010 to March 2015, when in fact he received double that.

The developing scandal has jolted Japan's government and investors, who fear the impact on the sprawling auto group.

"We recognize that it is important to maintain a stable relationship," Trade Minister Hiroshige Seko said of the Nissan-Renault-Mitsubishi alliance. "We hope the discussions will proceed constructively in a manner that is convincing to stakeholders."

Yoshihide Suga, the chief cabinet secretary, said he would "watch the situation closely." And Transport Minister Keiichi Ishii said he was "very surprised" about Ghosn's arrest.

The automaker's shares fell sharply on Tuesday, closing 5.45% lower on the day at 950.7 yen. Mitsubishi Motors, which is 34% owned by Nissan, closed down 6.85%.

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