Prosecutors probing alleged tax evasion by engineering firm Mizutani Kensetsu Co. have questioned a former secretary to a retired Diet member who once served as a Cabinet minister and was a top executive of the ruling Liberal Democratic Party, according to sources familiar with the investigation.

An alleged slush fund created through the tax evasion is believed to have been used to funnel money to politicians and organized crime groups.

The former secretary, 50, is believed to have known former Mizutani Kensetsu Chairman Isao Mizutani, 61, who was arrested last month and was recently served a fresh arrest warrant over the tax evasion case.

The special investigation squad from the Tokyo District Public Prosecutor’s Office is believed to have questioned the secretary over Mizutani’s relations with politicians, the sources said.

On Friday, the prosecutors filed an additional tax evasion charge against Shigeyuki Nakamura, 55, a former representative director of the company, and Mizutani Kensetsu itself.

The prosecutors are considering filing an additional tax evasion charge against Mizutani when his detention expires Tuesday. They will then fully investigate how the alleged slush fund was used.

The sources said the former secretary was working for the lawmaker when he was a Cabinet member, and had financial relations with Mizutani Kensetsu through an affiliate and other bodies.

The former lawmaker has retired from politics, and his name was not disclosed.

According to the indictment, Nakamura conspired with Mizutani and hid about 680 million yen in corporate income in the business year to August 2004 by booking a bogus loss related to a land transaction in Kuwana, Mie Prefecture, and faking uncollectible loans to evade taxation.

Combined with another tax evasion charge for the business year to August 2003, the total taxable income allegedly hid by the Mie-based Mizutani Kensetsu in the two business years amounts to more than 3.8 billion yen, evading about 1.1 billion yen in corporate income tax.

The prosecutors suspect the slush fund was used to lobby politicians and to pay off organized crime groups, in addition to paying off Mizutani’s loans.

The prosecutors have already questioned senior officials of Maeda Corp., a Tokyo-based contractor that placed orders to Mizutani Kensetsu for construction projects by Fukushima Prefecture and Tokyo Electric Power Co. They have also questioned Fukuishima prefectural officials and Tepco employees.

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