Japan Highway Public Corp. will dismiss a senior branch official for his recent allegation in a monthly magazine that Japan Highway President Haruho Fujii hid a financial report showing the corporation had a negative net worth, sources said Friday.

The government-backed entity will convene a disciplinary panel to decide on the future of Sachio Katagiri, deputy head of the Shikoku branch. It will also file a libel suit against him and the publisher of the magazine, Bungei Shunju Ltd., the Japan Highway sources said.

Earlier Friday, Fujii reported to Chikage Ogi, minister of land, infrastructure and transport, the results of an in-house investigation into the allegation.

Fujii has denied that his organization prepared a financial report showing negative net worth. The investigation reportedly favors his claim.

According to its official financial report, released in June, Japan Highway’s assets eclipsed its debts by 5.76 trillion yen as of March 31.

The findings of the probe raised strong suspicions that a group of five or six people secretly concocted a story that the corporation’s financial report showed a negative net worth, a senior Japan Highway official said on condition of anonymity.

Japan Highway conducted hearings involving some 80 staff following Katagiri’s allegation. Katagiri, who has been in his post since June 1 after being moved from Japan Highway’s Tokyo headquarters, harshly criticized Fujii in the interview.

Katagiri’s transfer, considered a demotion, was apparently linked to office politics related to the privatization of Japan Highway as part of the government’s administrative reform drive.

Fujii denied the allegation in Diet testimony earlier this month.

But Nobuteru Ishihara, state minister in charge of administrative and regulatory reforms, raised doubts over the credibility of a planned analysis of the official financial report, noting that it will be done by Japan Highway and the Land, Infrastructure and Transport Ministry instead of being audited by an independent auditor.

“The thing about the financial statements . . . it is not just checking the accounts,” Ishihara said.

An investigation is insufficient unless it examines data and evaluations used as preconditions for accounting, he said.

Ishihara lashed out at Fujii, saying, “He should know he can’t afford to be involved in a mudslinging contest in his own company.”

In a separate news conference, Ogi revealed a plan to invite four major auditing firms to bid on a contract to simply check the official financial report instead of auditing it as initially planned.

The four major auditing firms reportedly rejected the bidding invitation, saying the ministry and Japan Highway have not provided clear auditing standards for Japan Highway and that one month is too short to properly audit it.

“Even experts may hold off on doing it if newspapers write about many things based on speculation even before a judgment is made on the credibility of the financial statements,” Ogi said.

She had initially wanted one of the four auditing firms to audit the official Japan Highway financial statements to verify them by the end of August. Critics meanwhile charge that the official Japan Highway financial statements inflate assets on the basis of accounting standards that are not common for private companies.

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