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Embattled auto industry executive Carlos Ghosn had amassed so much power that he was able to hamstring Nissan Motor Co.'s legal and compliance departments, preventing effective in-house oversight and allowing him to hide alleged financial misdeeds for years, according to a new report from the Japanese carmaker.

Nissan's seven-member special committee for improving governance found that a “personality cult” had developed at the company, where “Mr. Ghosn was in a way deified within Nissan as a savior who had redeemed Nissan from collapse, and his activities were deemed impenetrable territory within the company.”

A whistleblower spurred Ghosn's ouster as Nissan's chairman. He now faces criminal charges alleging he misused company funds and underreported more than $44 million in income during a five-year span. Ghosn's apparent right-hand man, former Nissan director Greg Kelly, also faces charges in connection with the alleged scheme.

Corporate defense lawyers Brad Karp and Michael Gertzman of Paul, Weiss, Rifkind, Wharton & Garrison in New York are defending Ghosn. They did not respond to a request for comment. But Ghosn's representative at the U.S.-based public affairs and consulting firm of SKDKnickerbocker dismissed the report's findings.

“Like the other allegations made since November, those found in this so-called independent 'report' will be revealed for what they are: part of an unsubstantiated smear campaign against Carlos Ghosn to prevent the integration of the Alliance and conceal Nissan's deteriorating performance,” the representative stated. The alliance refers to Nissan's partnership with Japanese automaker Mitsubishi Motors Corp. and French automaker Renault.

The governance committee's report paints a picture of a dysfunctional corporate culture within Nissan, where Ghosn, Kelly and a “few particular persons” controlled virtually everything.

When directors, officers or other employees challenged Ghosn or Kelly or raised uncomfortable questions, they would face retribution, including being forced to transfer or resign, according to the report.  

“Even when the Legal Department or Internal Audit Office detected a problem, they could not pursue it further because Mr. Ghosn had appointed the responsible persons of such departments from a concentrated few particular persons including Mr. Kelly and had thereby created an appearance that the responsible persons of such departments accepted the requests,” the committee found.

The report recommends that Nissan “change its basic framework of governance” and adopt a “three board level committees system” that walls off operation, audit and supervision functions and prevents the overconcentration of authority.

The committee also noted that of Nissan's nine directors, only one is female. Five of the directors are Japanese and the other four are not. Meanwhile, all four of the company's statutory auditors are Japanese men.

“Considering the actual situation of Nissan's global business deployment, it is desirable that outside directors include persons from overseas,” the report states. “In addition, from the perspective of reflecting diverse opinions in management, gender should be given full consideration.”

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