Police said Mr Huynh Ngoc Sy and his deputy Le Qua should be prosecuted for 'power abuse", Thanh Nien newspaper reported.

Mr Sy was in charge of the East-West Highway Project, the largest infrastructure development in southern Ho Chi Minh City.

In March, a court in Tokyo issued a suspended jail sentence to Masayoshi Taga, former president of Tokyo-based Pacific Consultants International (PCI), after convicting him of bribing Mr Sy.

PCI gave a total of US$820,000 ($1.2 million) in bribes to Mr Sy to secure contracts, the Japanese court ruled.

Vietnamese police concluded that Mr Sy and Mr Qua allegedly misused for personal benefit a state-owned office that had been designated by local officials for use by the roads project, Tuoi Tre newspaper reported.

PCI allegedly paid a total of US$80,000 'rent' for the office but Qua kept the money, dividing it among himself, Sy and other staff, Thanh Nien reported.

The officials have already repaid 1.1 billion dong (S$88,000), the report said. Vietnamese prosecutors will review the police findings and decide whether to bring a formal court indictment against the officials.

PCI has been fined and three other former executives of the firm, in addition to Taga, have been given suspended prison terms by the Japanese court.

In March Vietnam pledged to use aid loans from Japan - its biggest bilateral donor - effectively, after the two sides signed an agreement to resume the flow of aid suspended during the PCI scandal. -- AFP