Police arrested a former official of a liquor retailer union Thursday on suspicion of damaging the group by losing most of the 14.4 billion yen in pension funds that had been invested in foreign bonds, sources said Thursday.

Police arrested Hideo Seki, 49, former secretary general of the All Japan Liquor Merchants Co-operative Association, and Takeshi Sunago, 44, a company executive alleged to have brokered the investment, alleging they damaged the association via a failed pension fund investment.

Seki has been charged with transferring 25 million yen from the pension fund into his own account to embezzle it between October and December 1999 when he was running the union's pension investments.

The union signed a contract in December 2002 via a British financial institution to buy highly speculative foreign bonds offered by a Canada-based investment firm after the union's mutual pension business did not perform well that year.

Investigators suspect the contract may have involved rebates, as Seki and Sunago allegedly concluded it without gaining approval from the administrative board.

They will investigate whether other senior union members were involved.

Seki and Sunago were allegedly involved in investing the 14.4 billion yen between January and May 2003. But the union was unable to get back most of the money from the British company because it collapsed in June 2004.

The association filed a suit with the Tokyo District Court on Dec. 22 against Seki and another union member, seeking 2 billion yen in compensation as part of the damages.

Seki is also suspected of involvement in embezzling money from the association's political arm, which registered around 82 million yen in unaccounted for funds in 2001 and 2002, by pretending he used the money as political donations. Seki also served as secretary general at the political arm.