Former Renault-Nissan chairman and CEO Carlos Ghosn. Picture: TOSHIFUMI KITAMURA/AFP
Former Renault-Nissan chairman and CEO Carlos Ghosn. Picture: TOSHIFUMI KITAMURA/AFP

Japanese prosecutors rearrested Nissan Motor’s former chair Carlos Ghosn on fresh, more serious allegations of financial misconduct, dealing a blow to the car titan’s efforts to end his month-long stay in jail and seek bail.

In the latest twist in the drama that has shocked the global car industry, prosecutors said on Friday Ghosn is suspected of inflicting financial damage to Nissan from his own unprofitable investments. The rearrest gives prosecutors the right to detain Ghosn for at least a further 10 days and possibly longer, while potentially hurting his chances for bail after that.

Ghosn’s lawyers declined to comment.

While the charges against Ghosn had so far been related to a relatively arcane point of accounting — whether retirement payments were properly booked — the new accusations are for a misdeed that has an actual victim: Nissan. The prosecutors’ allegations are now more aligned with those of Nissan, which has accused Ghosn of misusing company assets and ousted him as chair shortly after his arrest.

“It’s a very serious charge,” said Colin Jones, a professor of law at Doshisha University in Kyoto. “If there was a conviction, I think it would mean that there’s been a judgment that it’s more than just typical self-dealing corporate malfeasance but something that really harmed the company and was particular malevolent in terms of the amount of planning that went into it.”

The latest development is a big reversal from events late on Thursday when the Tokyo district court refused to entertain prosecutors’ plea to extend the jail detention of Ghosn. That had raised the prospect that his lawyers may be able to seek bail and get him out of prison to await trial.

The arrest of the high-flying executive has rocked the world’s biggest auto alliance, raising questions over whether the decades-long partnership between Nissan and French partner Renault SA will survive his downfall. Renault has kept Ghosn as chair and CEO, saying it needs evidence of wrongdoing before moving to replace him.

Investment losses

Ghosn was originally arrested on November 19 at Tokyo’s Haneda airport, and he and Nissan were indicted on December 10 for falsifying securities reports that under-reported his income by tens of millions of dollars. Ghosn has denied wrongdoing.

The new arrest warrant states that Ghosn conducted an “aggravated breach of trust” by allegedly transferring obligations on his own personal investment losses worth about ¥1.85bn ($16.6m) to Nissan, inflicting financial damage on the carmaker.

The new allegations would be in violation of Japan’s Companies Act and are seen as a more serious charge than under-reporting income, part of the Financial Instruments and Exchange Act. Japan’s Companies Act states that such a charge could carry a maximum prison sentence of up to 10 years. Prosecutors searched Ghosn’s home after the latest rearrest, TV Asahi reported.

Ghosn’s lawyers have previously denied such suspected wrongdoing, which was reported by the Asahi newspaper last month but wasn’t part of the original indictment last week. Ghosn has acknowledged consulting Nissan about the collateral related to the derivatives contract, but didn’t transfer the losses to the carmaker, Motonari Otsuru, a lawyer representing the former chair, told Bloomberg on November 28.

By detaining him longer, prosecutors are making it more difficult for Ghosn to start mounting a defence. Japan’s prosecutors have faced criticism for a lack of clarity and communication on how they are handling the case, with Ghosn held in detention without charge for longer than would be permitted in the UK for a suspected terrorist.

Asked about international criticism for the long detention, justice minister Takashi Yamashita said that, in general, detention “is being carried out properly as legally prescribed, and the criticism is unwarranted”, Kyodo reported.

Ghosn has been widely credited with saving Nissan from failure and bringing it together with Renault to create a formidable auto union. His arrest came after a months-long investigation by Nissan into his conduct and compensation that was largely kept from its French partner. That lack of transparency and concern that Nissan will use Ghosn’s absence to push for more power within the alliance has heightened tensions between the two carmakers.

Nissan ‘coup’ allegation

Nissan has also accused Ghosn of misusing company funds, including over homes from Brazil to Lebanon. Nissan CEO Hiroto Saikawa — a one-time protege of Ghosn — has emerged as a driving force in the carmaker’s investigation into the alleged wrongdoing by Ghosn and his aide Greg Kelly, who is also indicted in the case.

The arrests were the result of a coup by executives including Saikawa, Kelly’s wife, Dee Kelly, said in a video released on Wednesday.

Saikawa was asked by reporters on the day Ghosn and Kelly were arrested whether a coup was under way at Nissan. He replied: “That is not my understanding. I didn’t make such an explanation and think you should not think of it that way.”

Bloomberg