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The former head of KSD, a government-linked insurance group under criminal investigation for alleged lending irregularities, has voluntarily visited prosecutors to deny the allegations against him, sources close to the case said Monday.

Tadao Koseki, 79, is under investigation by the Tokyo Public Prosecutor’s Office on suspicion of misappropriating several hundred million yen of KSD’s funds by lending the money to its numerous affiliates without sufficient collateral.

KSD is a mutual aid society for small businesses under the supervision of the Labor Ministry.

Prosecutors on Oct. 6 searched the head office of KSD and related sites, including a branch of the Liberal Democratic Party in Tokyo.

KSD, through an affiliate, donated a total of 130 million yen from 1996 to 1998 to the LDP branch located in the same building as the affiliate.

Koseki is suspected of lending 500 million yen in KSD money to a religious organization to develop a cemetery project in Chiba Prefecture without reporting it.

According to the sources, Koseki told prosecutors that the loan to the religious organization did “not consist of breach of trust because the cemetery project was conducted as a benefit for KSD members, and part of the fund has been repaid.”

He also claimed there is “nothing” illegal about the donation to the LDP branch, the sources said.

On Oct. 10, Koseki submitted to the prosecutors’ office a letter of explanation in which he denied having misappropriated funds.

In 1998, the Labor Ministry advised KSD not to use state subsidies for political donations.

KSD chiefly operates insurance acceded by small and midsize company managers, under which compensation is paid to their employees in the event of industrial accidents.

KSD has some 1.07 million members. Annual premiums for the foundation’s mutual aid insurance are about 25 billion yen.

KSD was established in 1964 by Koseki, who once worked at a labor standards office. Its affiliates include a wedding parlor operator and mail-order trading company.

The foundation is believed to have close ties with politicians and bureaucrats, with a former administrative vice labor minister and a former president of the House of Councilors once serving on the KSD executive board.

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