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Carlos Ghosn Officially Charged with Financial Misconduct. Here’s What Could Happen Next

Three weeks after his arrest, Carlos Ghosn has been indicted by Japanese authorities for underreporting his pay at Nissan Motor Co. (NSANY) and faces further allegations of financial misconduct.

Ghosn and former Nissan director Greg Kelly are accused of underreporting Ghosn’s income in Nissan’s securities filings by about 5 billion yen ($44 million) over a five-year period ending in March 2015, according to officials.

Prosecutors said Monday that they are re-arresting Ghosn and Kelly as they investigate whether the two men underreported Ghosn’s income by more than 4.2 billion yen ($38 million) for three fiscal years ending in 2018. This allows authorities to continue to hold them for questioning without bail.

Nissan is also indicted in the investigation, the company revealed in a statement, adding: “Nissan takes this situation extremely seriously. Making false disclosures in annual securities reports greatly harms the integrity of Nissan’s public disclosures in the securities markets, and the company expresses its deepest regret. Nissan will continue its efforts to strengthen its governance and compliance, including making accurate disclosures of corporate information.”

Since his arrest, Ghosn has been removed as chairman of Nissan and Mitsubishi Motors (MMTOF) and temporarily replaced as head of Renault (RNSDF). Ghosn’s arrest followed a months-long internal investigation at Nissan, of which Ghosn was apparently unaware.

The charges are a victory of sorts for Nissan CEO Hiroto Saikawa, who was once a close ally but became a driving force for the investigation of Ghosn, Bloomberg reports. After slowing U.S. sales and quality problems in Japan, Ghosn had been planning to replace Saikawa, the Wall Street Journal reports. Ghosn was going to take the idea of replacement to the board in late November but was waylaid by his arrest.

CNN reported Ghosn’s silence since his arrest is not so unusual in the Japanese legal system, where 99% of indictments eventually lead to conviction. It’s rare for anyone involved in an investigation to speak out, even to refute charges.

A trial in Japan typically takes place about 40 to 50 days after indictment, Bloomberg reports. The maximum punishment in Japan for filing a false financial statement is up to 10 years in prison and a fine of up to 10 million yen ($89,000). Nissan faces a fine of up to 700 million yen ($6.2 million).

The Wall Street Journal spoke with sources who said the alleged unreported compensation was deferred until after Ghosn’s retirement. A person familiar with the investigation added that Ghosn built up about $82 million in deferred pay over a period of nine years. A lawyer for Kelly said his client believed the future payments weren’t fixed amounts and so didn’t have to be reported in financial filings.

Before his arrest, Ghosn was working on a merger between Nissan and Renault, and some analysts wonder if the scandal was manufactured to halt it. On Friday, Nissan announced the recall of 150,000 cars in the Japanese market over concerns about brakes and steering.