TOKYO -- Japanese prosecutors are grilling Nissan Motor executives as part of the investigation into alleged misconduct by Carlos Ghosn, the carmaker's disgraced outgoing chairman, and are considering charges against the Japanese automaker itself.
Ghosn was arrested in Tokyo on Monday and faces charges of understating his compensation by 5 billion yen ($44 million) over five years starting in fiscal 2010. Of this sum, 4 billion yen was in share-price-linked bonuses known as stock appreciation rights, sources said. As chairman, Ghosn determined the allocation of these rights to each executive, but he did not report what he awarded himself.
The allegations followed an internal investigation by the company, which said this week it had shared the information with prosecutors. Over 10 Nissan executives have voluntarily submitted to questioning by prosecutors, including CEO Hiroto Saikawa and former Chief Operating Officer Toshiyuki Shiga. Shiga was instrumental in carrying out Ghosn's Nissan Revival Plan, announced in 1999, and served as COO from 2005 to 2013.
Prosecutors are apparently interviewing current and former executives to confirm details about Ghosn's compensation, the circumstances behind the lack of reporting, and internal controls. They are also expected to demand answers regarding a Dutch subsidiary used to buy luxury homes overseas for Ghosn's personal use.
Prosecutors are looking into whether they have a case against Nissan as well. Both individuals and corporations are criminally liable for misrepresentation of securities reports under Japan's Financial Instruments and Exchange Act.
People close to the matter said Wednesday that two Nissan officials working under arrested Representative Director Greg Kelly are suspected of being the key figures who executed the alleged financial misconduct by Ghosn.
The two, one a non-Japanese and the other Japanese, are cooperating with Tokyo prosecutors under a plea bargain.
However Nissan is not part of the plea bargain arrangement, made possible by a new law introduced in June. Sources with knowledge of the investigation said the company could now be charged for the same violations under the financial instruments act, on the basis that the compensation had not been included in Nissan's corporate securities reports.
The non-Japanese executive is a 54-year-old senior vice president who worked for many years at Nissan's U.K. unit and in the legal department at the group's Yokohama headquarters, sources said. He is currently in a position close to the chairman's office. The other official worked for many years as Ghosn's chief of staff.
The senior vice president had managed a Nissan subsidiary in the Netherlands since 2010 at the request of Kelly. He handled contract signing and other paperwork when this subsidiary, set up for investing in venture businesses, acquired luxury residences for Ghosn in Brazil and Lebanon.
The longtime chief of staff was in charge of payments, such as transferring money for real estate purchases. The senior vice president was also instructed by Kelly to find out whether the practice of underreporting Ghosn's income ran afoul of Japanese law. Ghosn and Kelly apparently tried to conceal their wrongdoing by having trusted deputies handle illicit purchases and income underreporting. Kelly often issued verbal orders to avoid leaving a paper trail.
Sources say that Ghosn is also suspected of having family vacation costs worth hundreds of thousands of dollars paid for by the company.
Ghosn's wrongdoing was uncovered by a whistleblower inside Nissan. In the ensuing several months, the automaker conducted a secret internal probe, during which the cooperation of the two officials was secured.
The pair offered detailed insight into the wrongdoings of the chairman and received guarantees of lighter charges for themselves, according to sources.
The Tokyo District Court on Wednesday approved a prosecutors' request to hold Ghosn and Kelly until Nov. 30. The two will remain at a detention center in Tokyo.
With another court approval, the pair's detainment could be extended to Dec. 10, by which date prosecutors must decide whether to indict the executives.
The diversion of investment money and the improper use of expenses could also be subject to breach of trust under corporate law, and prosecutors are likely gathering information to support that case.