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A slush-fund scandal has hit the construction industry again. Tokyo public prosecutors on Tuesday arrested the president of Nishimatsu Construction Co. on suspicion of instructing a former vice president and three others to bring ¥70 million into Japan without reporting it to customs authorities between February 2006 and August 2007. The president stepped down from his position on the same day he was arrested.

Investigators say the former vice president and the three suspected accomplices, who were arrested Jan. 14, had actually brought in ¥100 million since October 2005 but that the statute of limitations expired on ¥30 million of the amount.

This is only part of the story. Nishimatsu is suspected of having created a ¥1 billion slush fund by receiving kickbacks from business partners and subcontractors linked to its overseas operations. The ¥100 million is thought to be part of the slush fund. Nishimatsu may have chosen to collect money abroad, thinking it would be difficult for investigators to detect. Investigative authorities need to find out, first, what Nishimatsu used the ¥100 million for.

One of the former vice president’s suspected accomplices is said to have visited the special investigation squad of the Tokyo District Public Prosecutors Office toward the end of 2007 after quitting Nishimatsu and described the creation of Nishimatsu’s slush fund overseas. It is reported that he told the squad that he gave more than ¥400 million in bribes to Thai officials in connection with the construction of a flood-control tunnel for which Bangkok city authorities placed an order in 2003 with a consortium formed by Nishimatsu and a Thai general contractor.

Investigative authorities need to find out who ordered the creation of the flush fund and unravel how Nishimatsu used it.

As head of Nishimatsu’s control headquarters, the former vice president is also suspected of becoming involved in political donations made by two political organizations headed by former Nishimatsu employees. Investigators also should determine whether the donations, which amounted to some ¥480 million over 12 years through 2006, were legal.

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