A former head of the failed Chogin Tokyo credit union, already under arrest on obstruction charges, is now suspected of embezzling 1 billion yen from the company, sources close to the case said Friday.
Chong Gyong Saeng, 64, was arrested Nov. 8 on suspicion of disrupting the Tokyo Metropolitan Government's financial inspection of the company in 1998 by withholding data on loan recipients, the sources said.
Investigators are expected to serve him a fresh arrest warrant next week when his detention period for the original charges expire, they said, adding that other former officials are also being investigated.
Also arrested on suspicion of disrupting the probe were Chong's successor, Sin Byong Jung, 54, and two former employees of the credit union, which mainly served pro-Pyongyang Korean residents in the Tokyo area until it collapsed in 1999.
According to the sources, Chong and several other credit union officials opened fictitious accounts under the names of companies and individuals between 1995 and 1998 and had Chogin transfer some 100 million yen each to the accounts by saying they were loans.
The funds were immediately withdrawn from the accounts, with 70 percent of the total believed to have been used to falsely show that interest on the union's bad loans had been repaid, the sources said.
How Chong and the others allegedly used the remaining 30 percent of the funds remains unknown.
The former officials allegedly forged promissory notes for the credit union with the names of companies and individuals that received the "loans" and used them as collateral. When settlement dates for the notes came, they allegedly replaced them with new notes, the sources said.
The union went bankrupt in May 1999 with 53.4 billion yen in excess liabilities. Chong stepped down following the collapse and was succeeded by Sin.
The union's capital deficit for the year to March reached 193 billion yen.