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Tokyo public prosecutors launched an investigation Friday into an alleged breach-of-trust case involving the head of a Tokyo-based mutual aid organization for small enterprises.

Tadao Koseki, the 79-year-old head of KSD, is suspected of illicitly lending hundreds of millions of yen from KSD funds to firms run by his relatives, informed sources said.

Prosecutors earlier in the day raided KSD’s head office in Tokyo and other locations to search for evidence.

KSD has close ties with political and bureaucratic figures, with former vice labor ministers and former presidents of the House of Councilors traditionally serving as chairman and director, investigation sources said.

A KSD affiliate donated more than 130 million yen to a Tokyo chapter of the Liberal Democratic Party over a three-year period to 1998, the majority of which was funneled into an organization supporting a prominent ruling party politician, the sources said without naming names.

KSD was set up in 1964 to provide small business operators with workers’ compensation insurance. It became a public interest organization under the jurisdiction of the Labor Ministry in 1981. It collects more than 24 billion yen in premiums annually for its mutual aid insurance policies and currently has around 1.07 million policyholders.

Sources said Koseki had been loaning funds from KSD-affiliated firms and cooperatives to companies run by his relatives — with virtually no collateral secured.

Koseki had faced criticism in the past over his improper handling of funds and his use of public facilities owned by KSD as his own residence.

Labor Minister Yoshio Yoshikawa told a news conference after Friday morning’s Cabinet meeting that he would like to increase the monitoring of public corporations and other quasi-governmental bodies to ensure they are managed appropriately.

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