Nissan said its Chairman Carlos Ghosn has been placed under arrest after he allegedly violated Japanese financial law.
The auto giant said in an earlier statement Monday that "over many years" Ghosn and board director, Greg Kelly, had been under-reporting compensation amounts to the Tokyo Stock Exchange securities report.
Nissan added that, in regards to Ghosn, "numerous other significant acts of misconduct have been uncovered, such as personal use of company assets." The company said Ghosn had also made inappropriate investments.
In a press conference Monday, Nissan Chief Executive Hiroto Saikawa, said both men had been arrested and this Thursday he would propose to the Nissan Board of Directors to remove them from their roles.
The chief executive revealed that a whistle-blower had passed information to Nissan's auditors who then began a wider investigation. The evidence was then passed to Japan's public prosecutor.
Saikawa said both Ghosn and Kelly clearly "masterminded" the allegations of misconduct but refused to say how many more people could be involved. He said that due to the secrecy of the operation, most other top executives at the firm had only learned of Ghosn's wrongdoing in the last few hours and that only "a few" people knew about the investigation.
Facing the press alone, the chief executive added that he felt the mistake had come after allowing a concentration of power in one individual. Saikawa said the misconduct went on for "a long period" and it looked like Kelly had been allowed to take control of internal operations, as he had the direct backing of Ghosn.
Nissan shares in Asia had already ceased trading on Monday when the news broke, but Renault shares — with Ghosn also being the CEO and chair of the French automaker — hit their lowest level in three years. Renault's stock was more than 13 percent lower shortly before 12:00 p.m. Paris time.
An alliance between Renault, Nissan, and Mitsubishi has been built up over the last two decades. Nissan and the French government each own 15 percent of Renault. In turn, the French auto firm holds a 43 percent stake in Nissan. In a statement Monday, the French President Emmanuel Macron said he would be extremely vigilant over the stability of the alliance between the two companies.
A brief reaction note from analysts at Citi Research on Monday said the volatile share price reaction showed how pivotal Ghosn is for any potential collapse of the Renault-Nissan structure. Citi added that while Renault's stock trades at about a 50 percent discount to its 10-year average, this discount would likely rise should Ghosn depart as he is "viewed as the chief architect of any solution."
Ghosn is considered a hugely influential executive within the global automotive industry. The cross-ownership alliance of Renault, Nissan, and Mitsubishi have all enjoyed an upswing in fortunes under his leadership. After successfully restructuring Renault in the late 1990s, Ghosn earned the nickname "Le Cost Killer."
Born in Brazil, Ghosn became the world's first person to run two companies on the Fortune Global 500 simultaneously when he assumed the CEO roles at both Renault and Nissan in 2005. He stepped down as Nissan CEO in 2017.
In June this year, Renault shareholders voted by a slim majority to approve a 7.4 million euro ($8.4 million) pay package for Ghosn's work in fiscal 2017. According to other securities filings, Ghosn earned 735 million Japanese yen ($6.52 million) from Nissan and 227 million yen from Mitsubishi for the same period.