OSAKA -- Osaka and Kyoto prefectural police jointly raided the main office of the Tokufukai welfare business group and more than 20 other locations July 16 over allegations that the group committed fraud involving a massive amount of government subsidies.

The Tokufukai group is believed to have illicitly funneled 1.5 billion yen in state financial assistance to its business expansion schemes. The money is also suspected of being used to repay the personal loans of Mitsuharu Naruse, 75, Tokufukai's former secretary general, who effectively controls the group, according to informed sources. Of the 1.5 billion yen, more than 100 million yen has disappeared, they said.

Naruse founded Tokufukai in 1969 to operate kindergartens in Osaka Prefecture. It currently runs 11 kindergartens, six nursery facilities and two nursing homes in Hokkaido, Osaka, Tokyo, Mie and Kyoto prefectures. Naruse resigned in 1992 when the group was found to have misappropriated government subsidies, although he continued to have significant influence over the business, the sources said.

According to investigators, Haruhisa Naruse, 45, son of the Tokufukai founder and acting head of the group, and two other executives manipulated the system that national and municipal governments use to subsidize overtime work. They allegedly forged a report to government authorities that 11 nurses were working at No. 2 Tokufukai Nursery in Hirakata, Osaka Prefecture, although only three were actually working there. The group is suspected of defrauding the governments of 10 million yen in official assistance in 1994 and 1995 by forging reports.