According to NHK and the Kyodo News Service, Nissan paid Ghosn almost $89 million over five years through March 2015, including salary and other income from the company, but reported as if he only made 5 billion yen ($44 million), or half of what he had received.
Nissan Chairman Carlos Ghosn has been arrested on charges of under-reporting income, news agencies have reported, citing Japan's Yomiuri newspaper.
After Renault sealed an alliance with Nissan in 1999, Ghosn used similar methods to revive the ailing Japanese brand, leading to "business superstar" status in Japan, blanket media coverage and even a manga comic book on his life.
The scandal abruptly threw into question Mr Ghosn's future as leader of the Renault-Nissan-Mitsubishi alliance, which sold 10.6 million cars past year, more than any other manufacturer.
Based on a whistleblower report, Nissan Motor Co., Ltd. (Nissan) has been conducting an internal investigation over the past several months regarding misconduct involving the company's Representative Director and Chairman Carlos Ghosn and Representative Director Greg Kelly.
CEO Hiroto Saikawa said the company had uncovered years of financial misconduct including under-reporting of income and inappropriate personal use of company assets.
It's a shock announcement for what had been seen as one of the key architects of Nissan's turnaround and the ongoing success of the Renault-Nissan-Mitsubishi Alliance.
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The scandal will result in him being formally dismissed by the Nissan board on Thursday, the company said. Ghosn is reportedly a French citizen, which could complicate the investigation.
Also, while Ghosn may have been the face of Nissan, his departure's impact on business overall could be limited, as in recent years he did not appear to have been heavily involved in daily operations.
The fact that Ghosn and Mitsubishi Motors CEO Osamu Masuko were close allies also helped form the partnership. "I have never tolerated any wavering from that principle, I will never accept any interference", he once said.
"Nissan's lengthy over-reliance on Mr. Ghosn's expertise could be described as a negative".
French President Emmanuel Macron listens to Carlos Ghosn, the CEO of French auto maker Renault, left, at the Renault stand during an official visit at the Paris Motor Show, in Paris, France, Oct. 3, 2018.
Previous year he denied a report the alliance was planning to pay hidden bonuses to its executives by setting up a company in the Netherlands.
In his 40 years in the auto industry, the praise Ghosn has won for turning around businesses has regularly been matched by criticism over the amount he has been paid to do it. The actual amount he made was hundreds of millions of yen more, say people familiar with the matter.
Renault's shares, listed in Paris, plummeted after Nissan confirmed reports of its chairman's alleged misconduct.