Police have questioned two senior officials of the General Association of Korean Residents in Japan (Chongryun) in connection with a suspected embezzlement case involving the failed Chogin Tokyo credit union, according to sources close to the case.

The former head of Chogin Tokyo, Chong Gyong Saeing, 64, and several others are suspected of embezzling about 1 billion yen from the credit union by fabricating loans.

Investigators suspect that more than 20 percent of funds thought to have been embezzled by Chong and the others went to Chongryun, the pro-Pyongyang group of Korean residents here.

The two Chongryun officials have denied the charges, the sources said.

Chong was arrested Nov. 8 on suspicion of obstructing the 1998 financial inspection of the union by the Tokyo Metropolitan Government by withholding data on loan recipients.

Police are conducting final investigations into the case based on suspicions that the two senior Chongryun officials took a leading role in diverting the funds, the sources said.

One of the two senior Chongryun officials questioned by police on a voluntary basis is a 66-year-old official who serves as a central standing committee member and who previously headed Chongryun's financial bureau, they said.

According to the sources, Chong and others established more than 20 corporate and individual accounts under false names between 1994 and 1998.

They are suspected of embezzling the roughly 1 billion yen by pretending that Chogin provided tens of millions of yen each in loans to the names on the accounts, the sources said.

Suspicions of involvement by the two senior Chongryun officials surfaced after Chong and others told investigators that they were asked by senior Chongryun officials to manipulate funds, the sources said.

The false loans were totally withdrawn shortly after being deposited into the accounts, and around 70 percent of the funds were used to make interest payments while the rest is believed to have gone to Chongryun, they said.

Police plan to serve a fresh arrest warrant on Chong and several others on suspicion of embezzlement as early as Wednesday, according to the sources.