Prosecutors are seeking to establish a criminal case by the end of the year against a secretary of former Economy, Trade and Industry Minister Toshihiro Nikai on suspicion of making false statements in political funds reports, sources said.

The allegation is linked to a finding by the prosecutors that a Liberal Democratic Party branch headed by Nikai, 70, a Lower House member, received funds totaling around ¥9 million from Nishimatsu Construction Co. under the names of the company's employees in the three years to 2008, the sources said.

Making or receiving a donation under a false name is banned under the Political Funds Control Law.

According to the sources, the policy secretary of Nikai did not hold a post in the LDP branch in Wakayama Prefecture but was in charge of negotiations with Nishimatsu.

Nishimatsu used its employees' names without their consent and donated about ¥3 million annually to the LDP branch from 2006 to 2008, they said.

The money was divided into portions of ¥50,000, the maximum amount for which a donor's name need not be disclosed in a political funds report, the sources said.

Prosecutors also suspect some of the Nishimatsu funds were sent via the LDP branch to an Osaka-based political organization managed by Nikai's 67-year-old brother, they said.

Mikio Kunisawa, 70, Nishimatsu's president at the time, has already resigned, and was found guilty of making illegal donations to a political body of Nikai's LDP faction and to the political fund management body of Democratic Party of Japan Secretary General Ichiro Ozawa.

If the secretary is indicted, the LDP will be implicated in a political fund scandal similar to those rocking the ruling DPJ.