KSD affiliate received 8.5 bil. yen from Labor Ministry+.

TOKYO, Dec. 1 Kyodo

An affiliate of KSD, a scandal-hit quasi-public organization providing insurance to small businesses, received about 8.5 billion yen from the Labor Ministry to set up a private university in return for its financial support for former Labor Minister Masakuni Murakami, sources close to the case said Friday.

The affiliate, KGS, was paid the money from fiscal 1998 to the current fiscal year for backing Murakami in the House of Councillors election in 1998, the sources said.

KGS was headed until October by Tadao Koseki, the former president and founder of KSD who was indicted last month on charges of embezzlement along with two other former KSD executives.

The three men have since been served fresh arrest warrants by prosecutors on suspicion of breach of trust.

The four-year university, called Monotsukuri (Manufacturing) University, is currently being built in Gyoda, Saitama prefecture, north of Tokyo. It is expected to open next April.

The late Prime Minister Keizo Obuchi expressed support for establishing the university in a policy speech to the Diet in January this year.

The sources said Koseki set up KGS in March 1996 to promote the university project.

In June the same year, some 100 Diet members formed a group to back the project under Murakami.

Obuchi served as a key figure in the group, and two former prime ministers -- Noboru Takeshita, who died earlier this year, and Yasuhiro Nakasone -- were listed as advisers.

The ministry started considering financial support for KGS in February 1997 at the urging of the lawmakers' group.

Meanwhile, it has been learned that Saitama Prefecture and Gyoda city provided a total of about 6.1 billion yen to an organization under Koseki charged with preparing for establishment of the university.

In addition to the 8.5 billion yen support, the ministry has provided KGS with about 280 million yen for research expenses.