Tokyo prosecutors on Saturday arrested an executive of Mizutani Kensetsu Co. and an executive of a firm with which the major heavy machinery and engineering firm does business, prosecution officials said.

The arrests came after prosecutors raided Mizutani Kensetsu on suspicion of evading several hundred million yen in corporate taxes in connection with a land purchase in Fukushima Prefecture.

Arrested were Shigeyuki Nakamura, a 55-year-old director of Mizutani Kensetsu, and Fumio Obi, a 58-year-old director of Obi Kensetsu K.K.

The prosecutors, in cooperation with tax authorities, searched the company’s headquarters in Kuwana, Mie Prefecture, and other locations, including a land development company in Fukushima Prefecture that sold the land to Mizutani Kensetsu, investigative sources said.

The company came under investigation in December after an affiliate allegedly defrauded the government of subsidies.

The prosecutors plan to examine the flow of money amid allegations the company amassed a slush fund for political lobbying, the sources said.

Other sources familiar with the case said Mizutani Kensetsu purchased a strip of land in Iwaki, Fukushima Prefecture, in September 1998 from the developer for housing construction.

After abandoning the construction plan in July 2003, Mizutani sold the land to another company in the prefecture for less than a tenth of the original purchase price. It registered the difference as a loss, raising suspicion it was trying to evade corporate tax, the sources said.

Mizutani was searched in December by Tokyo prosecutors on suspicion of fraud by engineering firm Nikki Kensetsu Co., which allegedly defrauded the government of 150 million yen in subsidies.

Mizutani, established in 1933, is a major shareholder of Nikki Kensetsu and a former chairman served as Nikki’s director on the board with the right to represent the company until June 2005.

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