A Snow Brand Food Co. division chief assigned to investigate allegations of false labeling of meat to get state subsidies by its Kansai Meat Center was directly involved in the fraud he was to probe, sources said Thursday.

The sources said the division chief was assigned to the in-house probe after the company's headquarters received reports of the mislabeling in November.

Snow Brand Food at a news conference on Jan. 23 said its internal examinations of books and other documents last November found no evidence of irregularities.

The division chief, who was not named, now heads the firm's delicatessen ham and meat operations, according to Snow Brand Food officials.

He visited the Kansai Meat Center in Itami, Hyogo Prefecture, in November, and the center chief at the time denied any wrongdoing. He returned to Tokyo the same day with a report that there was no proof of fraud.

However, he did not visit Nishinomiya Reizo, a warehouse company in Nishinomiya, Hyogo Prefecture, where Australian beef was stored and allegedly labeled as Japanese beef to take advantage of a government subsidy system introduced after the mad cow disease scare sent beef consumption plummeting.

According to a report by Snow Brand Food's investigation panel, the company, acting on a meat business section chief's recommendations, had 12.6 tons of imported beef processed at a Hokkaido meat processing company on Nov. 3 and sold the beef to a meat industry group.

The division chief was consulted in advance by the section chief about the scheme and was involved in the shipment of the meat to Hokkaido, the report said.

A Snow Brand Food spokesman said the company did not know about the division chief's involvement in the fraud at the time of his business trip to the Kansai Meat Center. The spokesman said the division chief is undergoing police questioning.

Snow Brand Food is a subsidiary of Snow Brand Milk Products Co.

Before the latest scandal broke, the Snow Brand group was struggling to recover from the blow dealt it by a food-poisoning case. More than 14,000 people complained of illness after consuming contaminated Snow Brand milk products in the summer of 2000, and one death has been blamed on the incident.

State to buy old cows

The Agriculture, Forestry and Fisheries Ministry formally decided Thursday to use public funds to buy old cattle that farmers are unable to sell due to public fear of mad cow disease, ministry officials said.

The brain-wasting infection is likely to develop in cows aged 60 months and over, which has prompted farmers to refrain from selling old cows on the meat market.

The ministry, which plans to spend 20 billion yen on the program, briefed the Liberal Democratic Party on the plan in a meeting the same day.

The ministry plans to launch the plan today and continue it for a year. A total of 370,000 cattle -- 300,000 milk cows and 70,000 raised for beef -- will be targeted, the officials said.

Industry associations for livestock farmers and dairy farmers nationwide will purchase the cattle, but the cost will ultimately be shouldered by the government, according to the officials.

The cattle to be purchased by the associations will be slaughtered for sale on the market after screening for the brain-wasting illness. The government will pay slaughterhouses 10,000 yen for each cow to encourage them to take on the task, the officials said.

Although the government expects to put the meat on the market, it will be disposed of if it does not sell, according to the officials.

In Japan, cows whose milk yields have deteriorated due to age have been butchered and sold on the meat market.

But since the disease was discovered in Japan last September, consumers have shunned beef, particularly domestically produced beef.

The first case of mad cow disease was confirmed in Japan in a Holstein Sept. 10 last year at a farm in Shiroi, Chiba Prefecture. Two more cows have since been found with the disease, which is formally known as bovine spongiform encephalopathy. All of them were older than 60 months.