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TOKYO — Prosecutors in Japan on Monday indicted Carlos Ghosn, the former chairman of Nissan Motor, and the auto company itself on charges that they had violated financial laws by underreporting Mr. Ghosn’s compensation.

Mr. Ghosn, once among the auto industry’s most respected executives, was arrested three weeks ago by the Japanese authorities. The allegations have upended a carmaking empire that includes Nissan and Mitsubishi Motors in Japan and Renault in France.

In addition to the formal charges announced Monday, which cover allegations related to actions from 2011 to 2015, the authorities rearrested Mr. Ghosn on similar charges stemming from a subsequent period. Mr. Ghosn, 64, has been held in detention in Tokyo since his arrest on Nov. 19.

Motonari Otsuru, a lawyer for Mr. Ghosn, could not immediately be reached for comment.

In response to the indictment, Nissan said in a statement that it would strengthen its compliance efforts. It did not deny the charges.

“Nissan takes this situation extremely seriously,” the statement said. “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.”

On Tuesday, a Tokyo court approved keeping Mr. Ghosn in detention until Dec. 20.

Prosecutors also indicted Greg Kelly, a former Nissan human resources manager and a member of the company’s board. Mr. Kelly, through his lawyer, Yoichi Kitamura, has denied wrongdoing. Mr. Kelly, like Mr. Ghosn, was rearrested Monday, on allegations that he helped Mr. Ghosn underreport his compensation.

Nissan has said it uncovered misconduct by Mr. Ghosn that included underreporting his compensation and using company funds for personal expenses. In a news conference held the night Mr. Ghosn and Mr. Kelly were initially arrested, Hiroto Saikawa, Nissan’s chief executive, said Mr. Kelly “has been determined to be the mastermind of this matter, together with Carlos Ghosn.”

According to the indictment, Mr. Ghosn and Mr. Kelly understated Mr. Ghosn’s earnings from 2011 to 2015 by half in securities filings: 4.99 billion yen ($44.3 million) compared with 9.86 billion yen ($88.4 million), including bonuses. Nissan was indicted on charges of having misstated Mr. Ghosn’s compensation in filings with the financial authorities.

Nissan, which conducted an internal inquiry into the alleged financial underreporting, removed Mr. Ghosn as chairman shortly after he was arrested and removed Mr. Kelly as executive director.

Mr. Ghosn was also removed from a similar position at Mitsubishi Motors. He remains chairman of Renault, but the French company has appointed Thierry Bolloré, its chief operating officer, to assume Mr. Ghosn’s day-to-day responsibilities.

In a new arrest warrant issued Monday, Tokyo prosectors said Mr. Ghosn and Mr. Kelly conspired to understate Mr. Ghosn’s pay in securities filings from June 2016 to June 2018. In the fillings, Mr. Ghosn’s compensation for the period was reported as 2.9 billion yen ($25.7 million). Prosecutors said they were investigating allegations that Mr. Ghosn was actually paid 7.17 billion yen ($63.6 million).

Prosecutors have yet to address allegations contained in Nissan’s internal report that Mr. Ghosn misused company funds for personal use.

A Nissan spokesman confirmed that the company had barred Mr. Ghosn’s family from a home the company bought for him in Rio de Janeiro.

“We believe that they would attempt to remove or destroy evidence,” said Nicholas Maxfield, a Nissan spokesman at the company’s headquarters in Yokohama. “And some of that evidence would be fairly incriminating.”

Legal experts in Japan said it was common for prosecutors to indict companies alongside individuals in financial crime cases.

“In this case it makes perfect sense,” said David Litt, a professor at Keio University Law School in Tokyo. “It would have been very hard for him to hide this without a number of people in the company knowing about it.”

Use economic analysis to explain the issue with INCENTIVE COMPENSATION in the article?

Answer 1

Ans.

Nissan Motor boss Carlos Ghosn got share cost connected motivating force remuneration of around 4 billion yen ($35.6 million) over a five-year time span that went unreported in the automaker's securities reports. Nor did the reports notice pay assessed to be between 100 million yen to 150 million yen that Ghosn got from Nissan's abroad backups. Mr. Ghosn and Mr. Kelly downplayed Mr. Ghosn's income from 2011 to 2015 considerably in securities filings: 4.99 billion yen ($44.3 million) contrasted and 9.86 billion yen ($88.4 million), including rewards. Nissan was prosecuted on charges of having misquoted Mr. Ghosn's pay in filings with the monetary specialists.

Taking all things together, around 5 billion yen in pay went unreported over the five years starting with the financial year through March 2011. Nissan investors in June 2003 affirmed the presentation of an offer cost connected official remuneration plan called stock thankfulness rights (SAR), the estimation of which rises when the organization's offer cost increments. While investment opportunities progress toward becoming offers when workers practice them, SAR bundles pay money, the measure of which relies upon how much offers ascend from where they were at the time the rights were issued. Making false revelations in yearly securities reports significantly hurts the respectability of Nissan's open exposures in the securities markets.