A press release by the prosecutor's office in Tokyo said Mr Ghosn and Mr Kelly collaborated to under-report Mr Ghosn's income as 4.99 billion yen even though it actually was nearly 10 billion yen, submitting falsified securities statements to the regional finance bureau.
The executive compensation Ghosn received in fiscal 2017 totaled about ¥1.9 billion ($16.9 million) - about ¥700 million from Nissan; about ¥900 million from Renault, where he also serves as CEO; and about ¥200 million from Mitsubishi Motors as its chairman.
"By under-reporting his corporate salary, he basically deprived Nissan's shareholders of opportunities to judge if the amount of his salary was appropriate", Toru Ibayashi, executive director of Wealth Management at UBS Securities Japan, said of Nissan's allegations.
The Renault-Nissan-Mitsubishi alliance sold 10.61 million passenger cars and light commercial vehicles, making it the number-one automotive group worldwide.
Nissan Chairman Carlos Ghosn, who became one of the auto industry's most powerful executives by engineering a turnaround at the Japanese manufacturer, was arrested Monday and will be fired for allegedly underreporting his income and misusing company funds, the automaker said.
Brazilian-born, of Lebanese descent and a French citizen, Ghosn began his career at Michelin in France, moving on to Renault. It was under Ghosn's guidance that Nissan recovered from near collapse and formed an alliance with Japan's Mitsubishi and Renault. He told reporters that the investigation had identified "serious misconduct".
The Tokyo prosecutor's office had no comment on the reports about Ghosn.
Mr Saikawa said he would propose at a board meeting on Thursday to remove Mr Ghosn.
Another important lesson from Monday's news, Brenner says, is that "every company should have a succession plan, including an emergency succession plan".
Ghosn implemented tough cuts including closing Nissan plants and slashing 14-percent of the workforce.
Nissan's CEO Hiroto Saikawa planned to prospose to its board that Ghosn and Kelly both be removed from their posts.
Together, Renault, Nissan and Mitsubishi employ more than 470,000 people in almost 200 countries, according to the alliance's website.
In his 40 years in the auto industry, the praise Carlos Ghosn has won for turning around businesses has regularly been matched by criticism over the amount he has been paid to do it. Ghosn became president of Nissan in June 2000 and chairman in April 2017.
Ghosn was sent to Nissan in the late 1990s by Renault SA of France, after it bought a controlling stake of Nissan.
Saikawa said the scandal was a "negative outcome of the long regime of Mr Ghosn". Since 1999 Nissan has been part of the Renault-Nissan-Mitsubishi Alliance.
The infractions are said to have occurred "over many years".