A Tokyo court has rejected a request from prosecutors to extend the detention of Carlos Ghosn, increasing the possibility that the ousted Nissan chairman could be released on bail before Christmas. 

Japanese prosecutors said the ruling was unusual and immediately appealed against the decision on Thursday, saying the release of one of the world’s most famous car executives could hinder their investigation. Hours later, however, the Tokyo District Court rejected their appeal.

Mr Ghosn and Greg Kelly, another Nissan board member and a close aide to the former chairman, have been held at a detention centre in Tokyo since November 19 after they were arrested and charged with understating Mr Ghosn’s pay by $44m over a five-year period. 

A separate investigation by the carmaker has alleged that its former boss used company funds for personal expenses. Both Mr Ghosn and Mr Kelly remain directors at Nissan. 

The Japanese lawyer for Mr Ghosn was not immediately available for comment but one person familiar with his defence said he was likely to seek bail after the rejection of the appeal.

Legal experts said the court would probably put restrictions on Mr Ghosn’s movement upon release to avoid the chance of him leaving the country.

Mr Ghosn, who remains chairman and chief executive of French carmaker Renault, maintains his innocence, according to a person familiar with his legal defence. Mr Kelly’s lawyer, Yoichi Kitamura, has also said he believed his client would be found innocent at trial. 

Mr Kitamura said he would request bail for Mr Kelly on Friday.

Following the court decision, Shin Kukimoto, deputy chief prosecutor, said the Tokyo District Public Prosecutors Office would take “appropriate measures”. 

“We felt an extension was necessary but it was rejected so I think there will be an impact on our investigation,” Mr Kukimoto said. 

Under Japanese law, Tokyo prosecutors would have been able to extend Mr Ghosn’s and Mr Kelly’s detention for another 10 days if the Tokyo District Court had approved the request. 

It is not the first time a Japanese court has rejected an extension request after reforms to the country’s justice system but authorities often deny bail to defendants who have not confessed. 

Prosecutors re-arrested Mr Ghosn this month on new charges that he understated his pay by $38m for the past three fiscal years through March 2018 with the help of Mr Kelly.

Since the new charges were on the same allegation over falsified financial statements that covered different years, the court probably decided further detention was not necessary, according to Yasuyuki Takai, a prosecutor turned defence lawyer.

“They’ve already detained [Mr Ghosn and Mr Kelly] for a total of 30 days so that should have been sufficient to investigate the eight-year fiscal period,” Mr Takai said.

Nissan said in a statement that “the decisions made by the Tokyo Public Prosecutors Office are based on their own investigations and on information provided by Nissan”.

The court decision came after Donna “Dee” Kelly, Mr Kelly’s wife, broadcast a video statement urging Japanese prosecutors to release her husband so that he can receive surgery for a spinal ailment. 

Ms Kelly said her husband was “lured” to go to Japan by another Nissan executive despite health concerns, and drawn into an internal power struggle at the Japanese car group led by Hiroto Saikawa, chief executive.

“Greg has been wrongly accused as part of a power grab by several Nissan executives headed up by the current CEO, Saikawa,” she said in the video which was provided to the Financial Times by Mr Kelly’s lawyer in the US.

“Greg and Mr Ghosn fully believe they did not break the law. The truth of this will come out,” she added, indicating that she would say more in the coming days. 

Her comments were first reported by the Wall Street Journal. 

Nissan said its internal investigation had uncovered “ample evidence of serious misconduct” by Mr Ghosn and Mr Kelly. 

“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,” it said.

Ms Kelly said she had provided Tokyo prosecutors with medical records of her husband’s conditions, which include numbness, tingling and shooting pains. She said his health had deteriorated after he was forced to sleep on a futon on the floor of his cell initially without his normal pillow to support his neck. 

Tokyo prosecutors said Mr Kelly was receiving proper care.

Mr Kelly, who lives in Tennessee after giving up most of his operational duties at Nissan, was scheduled to have back surgery in the first week of December. Ms Kelly said his conditions could become permanent if he did not undergo the procedure in the next two months.

“We are asking the prosecutors to release Greg and allow him to get the treatment that [he] needs,” Ms Kelly said in the video. “With Christmas less than 10 days away, my Christmas wish would be for Greg to be home with his family, recovering from his surgery.”

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