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More details are expected in the coming days and weeks on the alleged acts in Ghosn. Nissan said that this significantly included the underreporting of its earnings and the misuse of the company's assets. Ghosn has not yet responded to the allegations.
The allegations against Ghosn
Nissan announced Monday that it was conducting a multi-month investigation on Ghosn, 64, and another board member after receiving an emergency launcher report.
The company found that Ghosn and the other board member, Greg Kelly, had misrepresented Ghosn's income in deposits on the Tokyo Stock Exchange.
Prosecutors said the two men allegedly collaborated to under-report Ghosn's income of about 5 billion yen ($ 44 million) over a five-year period ending in March 2015. The maximum sentence under Japan for the filing of false financial statements is ten years imprisonment and a fine of up to 10 million yen ($ 89,000).
Nissan also revealed "many other major acts of misconduct", including personal use of the company's assets and misuse of its budget.
Until now, CNN has not been able to join Ghosn, Kelly or their representatives for comments on the allegations.
Meetings of Nissan, Mitsubishi and Renault Board of Directors
Following his arrest, Mr. Ghosn seems almost certain to be ousted from his leadership roles at Nissan, Mitsubishi and Renault.
Nissan chief executive Hiroto Saikawa said the company would meet Thursday to remove Ghosn and Kelly from the board.
Mitsubishi has announced the opening of an internal investigation and will ask the board of directors to "promptly dismiss" Ghosn as chairman.
Renault has adopted a more cautious attitude for the moment.
The French company said in a statement that after the Nissan announcement, the Renault board would meet "very soon" and expect "accurate information" from Ghosn.
The stocks in the three companies were devastated. Renault closed more than 8% in Paris on Monday. In Tokyo, Nissan dropped about 5% Tuesday, while Mitsubishi dropped about 7%.
Alliance in doubt
Nissan, Renault and Mitsubishi are well integrated. Many senior alliance leaders report to three separate CEOs, but Ghosn has managed to keep everything.
"It was the alliance," said Rebecca Lindland, senior automotive analyst at Cox Automotive. "He was the creative genius behind all this, and set the parameters to handle these disparate companies."
The three builders also share the property. Renault holds a 43.5% stake in Nissan, while Nissan holds a 15% stake in Renault. Mitsubishi entered the game in 2016, when Nissan bought 34% of its stock.
Car manufacturers might have a hard time competing solo if the alliance breaks down. The automotive industry is under intense pressure to develop electric cars and autonomous vehicles for the general public. Technology companies are eager to beat them to the limit.
The challenge of France
The arrest of Ghosn could have a special meaning for France. The French government owns 15% of Renault.
French President Emmanuel Macron said Monday that his administration was monitoring the situation closely.
"The state, as [Renault] shareholder, will be extremely vigilant about the stability of the alliance and the group, "said Macron.
American links
US authorities could also be involved.
Although Nissan and Renault are foreign companies, their shares are traded indirectly in US markets as US Depository Receipts, or ADRs. To sell this type of security, banks buy shares in foreign companies and then issue certificates to track the shares of companies. US investors may trade certificates as other securities.
According to David Chase, a former SEC attorney, this could open the door to the US Securities and Exchange Commission.
If the alleged misconduct of Mr. Ghosn had an impact on the financial statements of Nissan or Renault on which US investors relied – or if its behavior reveals internal compliance issues – this could be the basis of a lawsuit, said Chase.
Yoko Wakatsuki, Jethro Mullen, Charles Riley and Chris Isidore contributed to this report.
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