A Japanese court on Thursday rejected prosecutors' request to extend the detention of former Nissan Chairman Carlos Ghosn, setting the stage for the possible release of the top auto executive.
Ghosn's arrest in Tokyo last month on allegations of financial misconduct has rocked the global car industry and put strains on the alliance he presided over between Nissan (NSANY) and Renault (RNSDF).
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The Tokyo District Court on Thursday also denied a request from prosecutors to extend the detention of Greg Kelly, a former Nissan director who is accused of helping Ghosn under-report his compensation in the company's securities filings for years.
The Tokyo public prosecutors' office declined to comment. The court also rebuffed a move by prosecutors late Thursday to challenge the rejection of the extension.
A Nissan spokesman declined to comment on the court's decision, saying the pair's detention was a matter for prosecutors.
Ghosn and Kelly have been in detention since November 19. They were indicted last week on charges that they under-reported Ghosn's income between 2010 and 2015, and prosecutors received court approval to continue holding them over additional allegations that the misreporting continued into 2017.
Since his arrest, Ghosn has been stripped of his role as chairman at Nissan and Mitsubishi Motors (MMTOF). Renault has appointed interim management but kept Ghosn on the payroll.
Nissan, which has also been indicted in the case, said the alleged misconduct was first brought to its attention by a whistleblower, which led to an internal investigation that uncovered serious problems. The company alerted prosecutors and began cooperating with them.
Despite the court decision Thursday, Ghosn and Kelly's indictments mean they will still have to seek bail in order to be released. The prosecutors' office said it wasn't yet aware of a bail application by either of the men.
The office of Ghosn's lawyer in Tokyo didn't respond to a request for comment.
The bail process makes it uncertain whether they will be let out of jail before the new year, said Kana Sasakura, a criminal law professor at Konan University in Kobe.
Releasing them before trial would make it easier for their lawyers to prepare a defense, Sasakura added, but it depends on the judge hearing their bail applications.
"Some judges are pretty liberal about custody issues whilst others are not," she said. "We will still have to see."
Ghosn has retained lawyers to represent him but has issued no public statement. Japanese media have reported that he denies any wrongdoing.
Kelly's wife, Donna "Dee" Kelly, appeared in a video published online Wednesday by The Wall Street Journal in which she said that her husband has been "wrongly accused as part of a power grab by several Nissan executives" led by CEO Hiroto Saikawa.
In response to her comments, a Nissan spokesman said that "the cause of this chain of events is the misconduct led by Mr. Ghosn and Mr. Kelly."
"During the internal investigation into this misconduct, the Prosecutors Office began its own investigation and took action," the spokesman said.
Kelly's wife also said her husband was "lured to Japan and betrayed" by one of his Nissan colleagues.
The Nissan spokesman said the company can't comment on "the sequence of events leading to Kelly's detention by the Prosecutors Office, who acted at their discretion."
Nissan also confirmed that Saikawa met with the acting CEO of alliance partner Renault in Amsterdam on Wednesday. Nissan's spokesman said the talks between Saikawa and Thierry Bollore were "positive" and "productive."
The spokesman added that Nissan was still hoping to share the findings of its internal investigation into Ghosn with Renault's board. So far, Nissan has only briefed lawyers for Renault.