• Kyodo

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Public prosecutors arrested Hirotoshi Honda, president of racing car engine maker Mugen Co., and the firm’s former auditor Tuesday on suspicion of evading some 1 billion yen in corporate taxes.

The Saitama District Public Prosecutor’s Office began a criminal investigation earlier Tuesday and questioned Honda, 61, the eldest son of the late Soichiro Honda, the legendary founder of Honda Motor Co., before arresting him.

Hirotoshi Honda is well known as a specialist in high-performance race car engines, and Mugen, whose technical expertise has won high international acclaim, has supplied engines for Formula 1 race cars since 1992.

They arrested Norio Hirokawa, 60, the company’s former auditor, for allegedly conspiring with Honda to conceal income and evade taxes.

The prosecutors, along with investigators from the Kanto Shinetsu Regional Tax Bureau, searched Mugen’s headquarters in Asaka, Saitama Prefecture, and Honda’s home in Tokyo’s Shinjuku Ward. The prosecutors said they suspect Honda conspired with Hirokawa to hide over 2.84 billion yen in Mugen income by transferring money to a company named MG Estate under the guise of payments for machine-leasing and other transactions in the three business years to October 2000.

They say 1 billion yen in corporate taxes were evaded in this way.

Honda is a board member of MG Estate, which has been renamed GE Seirijigyosha.

According to prosecution sources, investigators believe Hirokawa recommended shifting the funds and manipulating accounts. Some of the hidden funds was used to buy land in Tokyo, they said.

Honda earlier filed a criminal complaint with the Tokyo District Public Prosecutor’s Office, accusing Hirokawa of embezzlement and breach of trust and claiming the auditor carried out the series of transactions without his consent.

“Since the tax bureau began its investigation, we have cooperated fully with the investigative authorities and will do the same in the future,” a Mugen spokeswoman said.

The tax bureau began investigating Mugen in July 2001.

Honda started racing car manufacturing as a “hobby” at his home after majoring in industrial design at Nihon University.

He founded Mugen, which means “limitless,” in March 1973, and the firm has been involved in manufacturing, supplying and developing engines for Formula 1 and other racers. Cars powered by Mugen engines have so far won four F-1 races. According to a credit research agency, Mugen reported sales of about 6.8 billion yen in the business year to Oct. 31, 2001.

Honda Motor and Mugen previously cooperated in the development of F-1 engines, and until 1999, Honda had a 40 percent stake in Mugen.

“President Honda (of Mugen) pursued his company’s management independent of Honda Motor,” a Honda Motor official said. , indicating the automaker currently has nothing to do with Mugen.

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