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Steelmaker NKK Corp., now known as JFE Engineering Corp., is suspected of using some 500 million yen in undeclared income to quell opposition to its construction of two waste incinerators.

Sources said Friday that NKK resorted to such tactics as paying off gangsters.

NKK allegedly falsely declared the money as deductible expenses in the three years to the end of March 2003. The sources said some of the cash went to underworld groups involved in protests targeting incinerator projects.

The Tokyo Regional Taxation Bureau has determined that NKK hid money that should have been declared as taxable income, the sources said.

The bureau also found about 400 million yen in income that went undeclared due to technical accounting errors and other reasons, and is believed to have ordered NKK to pay more than 100 million yen in tax and penalties, they said.

They said the amount is relatively small because NKK fell into the red in some of the three business years.

JFE Engineering said it had been subjected to tax inspections, but refused to elaborate.

The waste incinerators are in Miwa, Fukuoka Prefecture, and Saiki, Oita Prefecture. NKK received orders for the two in 2000, with the contract price for the one in Miwa at about 9.7 billion yen and the one in Saiki at 8.5 billion yen. Construction of both was completed last spring.

The sources said NKK reported paying 260 million yen to an event-planning company in Fukuoka as commission fees for gathering information on the Miwa garbage incinerator, but the money was actually used to buy off local protesters.

The firm padded construction expenses to a subcontractor for the construction of the garbage incinerator in Saiki, and used some 200 million yen to buy off opposition, the sources said.

The tax inspectors classified this money as entertainment and social expenses, and said it is subject to tax, the sources said.

The inspectors also found that the firm spent some 240 million yen as “payment for cooperation” to other companies participating in bidding for a separate public works project.

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