Prosecutors raided the Osaka branch of medium-size construction firm Kumagai Gumi Co. on Tuesday in connection with suspected bid-rigging for a sewer project ordered by Wakayama Prefecture.
A joint venture led by Kumagai Gumi won the contract in November 2004 with a bid of 1.65 billion yen.
The public works project involves a shield-tunneled sewer system for areas along the Kinokawa River, investigative sources said.
Investigators from the Osaka District Public Prosecutor's Office searched Kumagai Gumi's Kansai branch in Miyakojima Ward to collect evidence.
An investigation learned that a former Wakayama Prefecture chief treasurer, Satoaki Mizutani, 60, played a key part in rigging the bids for public works projects, the sources said.
Mizutani resigned as chief treasurer -- the No. 3 post in the prefecture -- after he was arrested Oct. 12 on suspicion of involvement in rigging bids for Wakayama tunnel projects.
He was served a fresh arrest warrant Thursday for allegedly playing a part in rigging bids for the sewerage project.
Wakayama Gov. Yoshiki Kimura resigned over the scandal last week.
Investigative sources said Chikanori Hioki, an adviser to major construction company Obayashi Corp., brokered bids by contractors for the sewerage project. Hioki, 64, has been arrested and charged with rigging bids for the tunnel projects.
The sources said Mizutani is suspected of having Kumagai Gumi, through Hioki, include a local contractor in its joint venture.
The local contractor, based in Kainan, Wakayama Prefecture, is known to be a strong backer of Kimura, the sources said.
The Penal Code sets penalties of up to two years in prison or a fine of up to 2.5 million yen for manipulating public auctioning or bidding.