Prosecutors have decided to bring criminal charges against former Kokudo Corp. Chairman Yoshiaki Tsutsumi over a false financial statement and allegations of insider trading at his now-crumbling empire, sources familiar with the case said Wednesday.

The Tokyo District Public Prosecutors Office feels there is enough evidence to prove that Tsutsumi, 70, played a role in a false financial report submitted to authorities in June last year that grossly understated Kokudo's stake in Seibu Railway Co., the sources said.

Although Kokudo owned 64.83 percent of shares in the railway, the statement said it had a 43.16- percent stake.

When the report was submitted, the top 10 Seibu Railway shareholders held more than 80 percent of the shares, a violation of Tokyo Stock Exchange rules.

Sources said Tsutsumi told prosecutors he shares responsibility for the false report.

Tsutsumi resigned as chairman of Seibu Railway in April 2004 to take responsibility for a scandal involving ``hush money'' to corporate racketeers. The latest scandal forced him to resign as Kokudo chairman in October last year.

In May last year, a Kokudo executive advised Tsutsumi that the company should sell shares in Seibu Railway to clear the TSE rule and avoid the risk of delisting. But Tsutsumi told the executive to wait until the stock price rose, sources said.

Tsutsumi and other executives are also known to have sold Seibu Railway shares to companies with business connections to the Seibu group. Those deals were completed before Seibu Railway went public last October about the false financial report. The stock price plummeted. Seibu Railway was eventually delisted.

Prosecutors consider the stock sales an act of insider trading, sources said.(IHT/Asahi: March 3,2005)