Nissan Chairman Ghosn arrested in Japan for alleged financial misconduct

YOKOHAMA (Reuters) - Nissan Motor Co Chairman Carlos Ghosn was arrested on Monday for alleged financial misconduct and will be fired from the board this week, a dramatic fall for a charismatic leader hailed for rescuing the Japanese carmaker from close to bankruptcy.

Ghosn is also chairman and chief executive of Nissan's French partner Renault and one of the best known figures in the global car industry, and his departure will raise questions about the future of the alliance.

Nissan said that an internal investigation, triggered by a tip-off from a whistleblower revealed Ghosn engaged in wrongdoing including personal use of company money and under-reporting for years how much he had was earning.

Former Nissan Chairman Carlos Ghosn:

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Former Nissan Chairman Carlos Ghosn
FILE: Carlos Ghosn, chief executive officer of Nissan Motor Co., gestures as he speaks during a news conference in Yokohama, Kanagawa Prefecture, Japan, on Thursday, May 12, 2016. Ghosn, the chairman of Nissan Motor Co., is set to be arrested in Tokyo over a suspected breach of Japanese financial trading law, the Asahi newspaper reported. Photographer: Kiyoshi Ota/Bloomberg via Getty Images
FILE: Carlos Ghosn, chairman of the alliance between Renault SA, Nissan Motor Co. and Mitsubishi Motors Corp., poses for a photograph following a Bloomberg Television interview on the opening day of the World Economic Forum (WEF) in Davos, Switzerland, on Tuesday, Jan. 23, 2018. Ghosn, the chairman of Nissan Motor Co., is set to be arrested in Tokyo over a suspected breach of Japanese financial trading law, the Asahi newspaper reported. Photographer: Simon Dawson/Bloomberg via Getty Images
FILE: Carlos Ghosn, chairman of the alliance between Renault SA, Nissan Motor Co. and Mitsubishi Motors Corp., speaks during an interview at Nissan's headquarters in Yokohama, Japan, on Thursday, Sept. 19, 2018. Ghosn, the chairman of Nissan Motor Co., is set to be arrested in Tokyo over a suspected breach of Japanese financial trading law, the Asahi newspaper reported. Photographer: Junko Kimura-Matsumoto/Bloomberg via Getty Images
FILE: Carlos Ghosn, chairman of the alliance between Renault SA, Nissan Motor Co. and Mitsubishi Motors Corp., pauses during a Bloomberg Television interview at the Paris Motor Show in Paris, France, on Tuesday, Oct. 2, 2018. Ghosn, the chairman of Nissan Motor Co., is set to be arrested in Tokyo over a suspected breach of Japanese financial trading law, the Asahi newspaper reported. Photographer: Marlene Awaad/Bloomberg via Getty Images
French President Emmanuel Macron (L) listens to Renault CEO Carlos Ghosn during a visit of the Renault factory in Maubeuge northeastern France, on November 8, 2018. - Macron is on a week-long tour to visit the most iconic French landmarks of the First World War, ahead of celebrations for the 100th anniversary of the November 11, 1918 armistice. (Photo by Etienne LAURENT / POOL / AFP) (Photo credit should read ETIENNE LAURENT/AFP/Getty Images)
Renault CEO Carlos Ghosn waits for the French President to arrive for a visit of the Renault factory in Maubeuge northeastern France, 08 November 2018. - Macron is on a week-long tour to visit the most iconic French landmarks of the First World War, ahead of celebrations for the 100th anniversary of the November 11, 1918 armistice. (Photo by Etienne LAURENT / POOL / AFP) (Photo credit should read ETIENNE LAURENT/AFP/Getty Images)
Chairman and CEO of Renault-Nissan-Mitsubishi Carlos Ghosn looks on during a visit of French President at the Renault factory, in Maubeuge, northern France, on November 8, 2018. - Macron is on a week-long tour to visit the most iconic French landmarks of the First World War, ahead of celebrations for the 100th anniversary of the November 11, 1918 armistice. (Photo by Ludovic MARIN / AFP) (Photo credit should read LUDOVIC MARIN/AFP/Getty Images)
French President Emmanuel Macron (L) and Renault CEO Carlos Ghosn visit the Renault factory in Maubeuge, northeastern France, on November 8 , 2018. - Macron is on a week-long tour to visit the most iconic French landmarks of the First World War, ahead of celebrations for the 100th anniversary of the November 11, 1918 armistice. (Photo by Etienne LAURENT / POOL / AFP) (Photo credit should read ETIENNE LAURENT/AFP/Getty Images)
Chairman and CEO of Renault-Nissan-Mitsubishi Carlos Ghosn looks on during a visit of French President at the Renault factory, in Maubeuge, northern France, on November 8, 2018. - Macron is on a week-long tour to visit the most iconic French landmarks of the First World War, ahead of celebrations for the 100th anniversary of the November 11, 1918 armistice. (Photo by Ludovic MARIN / AFP) (Photo credit should read LUDOVIC MARIN/AFP/Getty Images)
French Economy Minister Bruno Le Maire (L) and Renault CEO Carlos Ghosn wait for the French President to arrive for a visit of the Renault factory in Maubeuge northeastern France, 08 November 2018. - Macron is on a week-long tour to visit the most iconic French landmarks of the First World War, ahead of celebrations for the 100th anniversary of the November 11, 1918 armistice. (Photo by Etienne LAURENT / POOL / AFP) (Photo credit should read ETIENNE LAURENT/AFP/Getty Images)
French President Emmanuel Macron (C) and Renault CEO Carlos Ghosn (L) pose with employees of the Renault factory after a visit in Maubeuge, northeastern France, on November 8, 2018. - Macron is on a week-long tour to visit the most iconic French landmarks of the First World War, ahead of celebrations for the 100th anniversary of the November 11, 1918 armistice. (Photo by Etienne LAURENT / POOL / AFP) (Photo credit should read ETIENNE LAURENT/AFP/Getty Images)
French President Emmanuel Macron (L) listens to Renault CEO Carlos Ghosn during a visit of the Renault factory in Maubeuge northeastern France, on November 8, 2018. - Macron is on a week-long tour to visit the most iconic French landmarks of the First World War, ahead of celebrations for the 100th anniversary of the November 11, 1918 armistice. (Photo by Etienne LAURENT / POOL / AFP) (Photo credit should read ETIENNE LAURENT/AFP/Getty Images)
French President Emmanuel Macron (L) listens to Renault CEO Carlos Ghosn during a visit of the Renault factory in Maubeuge northeastern France, on November 8, 2018. - Macron is on a week-long tour to visit the most iconic French landmarks of the First World War, ahead of celebrations for the 100th anniversary of the November 11, 1918 armistice. (Photo by Etienne LAURENT / POOL / AFP) (Photo credit should read ETIENNE LAURENT/AFP/Getty Images)
Chairman and CEO of Renault-Nissan-Mitsubishi Carlos Ghosn gives a press conference during the press days of the Paris Motor Show on October 3, 2018. (Photo by ERIC PIERMONT / AFP) (Photo credit should read ERIC PIERMONT/AFP/Getty Images)
Carlos Ghosn, chairman of the alliance between Renault SA, Nissan Motor Co. and Mitsubishi Motors Corp., right, speaks beside Dieter Zetsche, chief executive officer of Daimler AG, during a news conference at the Paris Motor Show in Paris, France, on Wednesday, Oct. 3, 2018. The auto industry -- a slice of it at least -- converges in France this week for the biennial Paris Motor Show, where executives are showing off electric cars for the masses, robo-cars for the future and the self-proclaimed quickest car in the world. Photographer: Marlene Awaad/Bloomberg via Getty Images
Carlos Ghosn, chairman of the alliance between Renault SA, Nissan Motor Co. and Mitsubishi Motors Corp., speaks during a Bloomberg Television interview at the Paris Motor Show in Paris, France, on Tuesday, Oct. 2, 2018. The auto industry -- a slice of it at least -- converges in France this week for the biennial Paris Motor Show, where executives are showing off electric cars for the masses, robo-cars for the future and the self-proclaimed quickest car in the world. Photographer: Marlene Awaad/Bloomberg via Getty Images
Chairman and CEO of Renault-Nissan-Mitsubishi Carlos Ghosn presents the Renault K-ZE for the Chinese market during a world premiere as part of an Renault 'electric evening' on October 1, 2018 on the eve of the first press day of the Paris Motor Show. (Photo by ERIC PIERMONT / AFP) (Photo credit should read ERIC PIERMONT/AFP/Getty Images)
Chairman and CEO of Renault-Nissan-Mitsubishi Carlos Ghosn presents the Renault K-ZE for the Chinese market during a world premiere as part of an Renault 'electric evening' on October 1, 2018 on the eve of the first press day of the Paris Motor Show. (Photo by ERIC PIERMONT / AFP) (Photo credit should read ERIC PIERMONT/AFP/Getty Images)
Carlos Ghosn, chairman of the alliance between Renault SA, Nissan Motor Co. and Mitsubishi Motors Corp., gestures whiles speaking during a Bloomberg Television interview in London, U.K., on Wednesday, Sept. 12, 2018. Ghosn is the chairman of the alliance and all the three member companies, and also the chief executive officer of Renault. Photographer: Simon Dawson/Bloomberg via Getty Images
Carlos Ghosn, chairman of the alliance between Renault SA, Nissan Motor Co. and Mitsubishi Motors Corp., speaks during Bloomberg's Sooner Than You Think technology conference in Paris, France, on Wednesday, May 23, 2018. Paris is playing host this week to a global gathering of tech executives and entrepreneurs at the Bloomberg conference and at Viva Tech, a three-year-old event for startups, as the French establishment unites behind a push for more tech investment in the city. Photographer: Marlene Awaad/Bloomberg via Getty Images
PARIS, FRANCE - MAY 22: PSA CEO, Carlos Tavares (L), and Renault CEO Carlos Ghosn (R) attend a strategic meeting of the car industry sector at the French Ministry for Economy on May 22, 2018 in Paris, France. This meeting of the strategic committee was the opportunity to propose to the State in the form of a sector contract for the years 2018 to 2022, a set of reciprocal commitments. (Photo by Vincent Isore/IP3/Getty Images)
PARIS, FRANCE - MAY 22: CNPA head, Francis Bartholome, Faurecia CEO, Patrick Koller, PSA CEO, Carlos Tavares, Renault CEO, Carlos Ghosn, Valeo CEO Jacques Aschenbroich and Michelin CEO, Florent Menegaux, attend a strategic meeting of the car industry sector at the French Ministry for Economy on May 22, 2018 in Paris, France. This meeting of the strategic committee was the opportunity to propose to the State in the form of a sector contract for the years 2018 to 2022, a set of reciprocal commitments. (Photo by Vincent Isore/IP3/Getty Images)
CANNES, FRANCE - MAY 11: Carlos Ghosn (L) and Caroline Ghosn (R) attend the screening of 'Ash Is The Purest White (Jiang Hu Er Nv)' during the 71st annual Cannes Film Festival at Palais des Festivals on May 11, 2018 in Cannes, France. (Photo by Stephane Cardinale - Corbis/Corbis via Getty Images)
CANNES, FRANCE - MAY 11: Renault CEO Carlos Ghosn (L) and his wife Carole Ghosn attend the screening of 'Ash Is The Purest White (Jiang Hu Er Nv)' during the 71st annual Cannes Film Festival at Palais des Festivals on May 11, 2018 in Cannes, France. (Photo by George Pimentel/WireImage)
FILE: Thierry Bollore, chief competitive officer of Renault SA, left, and Carlos Ghosn, chairman of Renault SA, pose for a photograph following a news conference to announce the automaker's full year earnings in Paris, France, on Friday, Feb. 16, 2018. Renault SA and Nissan Motor Co. are in talks to merge, seeking to solidify their two-decade-old alliance under a single stock as an unprecedented shift toward electric and shared cars transforms the industry, people with knowledge of the matter said. Our editors select the best archive images on the two companies. Photographer: Christophe Morin/Bloomberg via Getty Images
Carlos Ghosn, chairman of Renault SA, looks on ahead of a news conference to announce the automaker's full year earnings in Paris, France, on Friday, Feb. 16, 2018. Ghosn pledged to cement the French automakers partnership with Nissan Motor Co. and Mitsubishi Motors Corp. after agreeing to stay on as chairman and chief executive officer for the next four years. Photographer: Christophe Morin/Bloomberg via Getty Images
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Nissan CEO Hiroto Saikawa said too much power had been concentrated on Ghosn, a rare foreign executive who enjoyed corporate superstar status in Japan for reviving the ailing Japanese brand.

"Looking back, the concentration of power was something we need to deeply reflect on," he said, confirming the arrest of Ghosn in Japan.

Saikawa said he could not give specifics on the personal use of company money, but said that the wrongdoing was serious and unacceptable and had gone on for years. Ghosn could not be reached for comment.

"To have so greatly violated the trust of many, I feel full of disappointment and regret," Saikawa told a news conference.

"It is very difficult to express this.... It's not just disappointment, but a stronger feeling of outrage, and for me, despondency."

French President Emmanuel Macron said the government, the French carmaker's top shareholder, will be vigilant about Renault and its alliance with Nissan.

Saikawa said he would propose at a board meeting on Thursday to remove Ghosn and Representative Director Greg Kelly.

Kelly could also not be reached for comment.

Renault shares tumbled 11 percent in Paris to be among the worst performing stocks in Europe. Nissan's German-listed securities plunged 10 percent.

RELATED: 10 cars being discontinued in 2018

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10 cars discontinued in 2018
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10 cars discontinued in 2018

1. Alfa Romeo 4C Coupe: Discontinued after 2018.

Source: The Drive

(Photo By Raymond Boyd/Getty Images)

2. Cadillac ATS Sedan: Discontinued after 2018.

(Photo: Cadillac) 

3. Cadillac ATS Coupe: Discontinued after 2019.

Source: Fox News

(Photo: Cadillac) 

4. Chevrolet City Express: Discontinued after 2018.

Source: Motor Trend

(Photo: Chevrolet) 

5. Chevrolet Sonic: Expected to be discontinued as early as 2018.

Source: Wall Street Journal

(Photo: Chevrolet) 

6. Ford Fusion: To be discontinued by 2020.

(Photo: Ford) 

7. Ford Taurus: To be discontinued by 2020.

(Photo: Ford) 

8. Ford Fiesta: To be discontinued by 2020.

(Photo: Ford) 

9. Ford C-Max Hybrid: Discontinued after 2018.

Source: Automotive News

(Photo: Ford) 

10. Ford Focus sedan: Discontinued after 2018.

Source: Automotive News

(Jeff Kowalsky/Bloomberg via Getty Images)

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CUTTING COSTS

Known as "Le Cost Killer" for overseeing turnarounds including cuts at Renault, Ghosn has remained popular in Japan despite the massive job cuts that he brought and recent controversy over his lucrative pay package.

Japanese media reported that Ghosn had reported around 10 billion yen worth of annual compensation as around 5 billion yen for several years.

Ousting Ghosn, 64, is bound to raise questions about an alliance that he personally shaped and had pledged to consolidate with a deeper tie-up, before eventually stepping back from its operational leadership.

"The initial share price reaction shows how pivotal he is,” Citi analyst Raghav Gupta-Chaudhary said on Monday.

The current alliance structure has long undervalued Nissan shares held indirectly by Renault investors, he added.

“Ghosn is viewed as critical for value unlock.”

Renault owns 43.4 percent of Nissan, while Nissan owns 15 percent of Renault, with no voting rights in a partnership that began in 1999. Since 2016, Nissan has held a 34 percent controlling stake in its smaller Japanese rival, Mitsubishi.

GOVERNANCE IN QUESTION

The news is likely to raise questions about Nissan's accountability at a time when Japan has been pushing companies for better governance.

"The problem of governance was significant," Saikawa said.

The Asahi newspaper reported on its website that prosecutors had begun searching the offices of Nissan's headquarters and other locations on Monday evening.

Spokesmen for Renault and the Renault-Nissan-Mitsubishi Motors alliance did not immediately return calls and messages seeking comment on the arrest reports.

Brazilian-born, of Lebanese descent and a French citizen, Ghosn began his career at Michelin in France, moving on to Renault. He joined Nissanin 1999 after Renault bought a controlling stake and became its CEO in 2001. Ghosn remained in that post till last year.

In June, Renault shareholders approved Ghosn's 7.4 million euro (6.57 million pounds) compensation for 2017. In addition to this, he received 9.2 million euros (8.17 million pounds) in his final year as Nissan chief executive.

(Reporting by Chris Gallagher, Elaine Lies, Maki Shiraki, Kiyoshi Takenaka in Tokyo and Laurence Frost in Paris; Writing by Ritsuko Ando; Editing by Muralikumar Anantharaman/Keith Weir)

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