Auditors at Kansai Electric Power Co. were aware that officials had received improper gifts even before a general shareholders meeting in June, and had raised questions on how management had dealt with the issue, sources close to the matter said Thursday.

The latest revelation has brought to light the auditors’ inadequacy, having failed to publicize the issue and perpetuated the cover-up, despite their responsibility to monitor management.

The power company disclosed Wednesday that 20 officials had received about ¥320 million worth of gifts since 2006 from Eiji Moriyama, the late former deputy mayor of Takahama. Moriyama served as an adviser to a Kansai Electric subsidiary for more than 30 years before his death at age 90 in March.

It is likely the auditors will be considered co-conspirators in the cover-up, as information was not shared among all board members.

Ichiro Matsui, the mayor of the city of Osaka, which is a top shareholder in Kansai Electric, urged the top management of the utility to resign, saying, “They should create a new organizational structure.”

According to the sources, multiple auditors who heard rumors immediately prior to the general shareholders meeting had questioned a person involved in the matter, subsequently learning that executives had received gifts totaling ¥318.45 million from Moriyama.

“I heard that there was quite a heated exchange between the auditors and management” about the matter, another source said.

President Shigeki Iwane himself did not report the issue to the board of directors until it garnered media coverage. He was criticized after the first news conference last Friday regarding the money problem for refusing to disclose details, citing the need to protect personal information, and was pushed to hold another news conference Wednesday.

An internal probe led by a group of lawyers and executives found that information related to nuclear plant construction had been provided to Moriyama for many years. Kansai Electric claimed that it was “not a repayment,” but a report of the probe released Wednesday deemed it to possibly have had a negative influence on negotiations for plant work contracts and invited collusion.

A former senior Kansai Electric Power Co. official in charge of its nuclear business admitted Thursday to receiving an improper gift about 20 years ago from an ex-deputy mayor of a town hosting one of its nuclear plants.

The admission indicates that collusion between the utility and the Takahama, Fukui Prefecture, politician began much earlier than 2006, as reported by Kansai Electric.

The former senior Kansai Electric official said that he received “an outrageous gift” after meeting Moriyama for the first time in the late 1990s, although he did not divulge what was received.

The former senior official said he returned the gift to Moriyama, an influential figure connected with lawmakers, about six months later, enraging the former deputy mayor.

“I heard he played a crucial role in building our nuclear plant (in Takahama). I also heard he was an extremely difficult person to deal with,” the ex-Kansai Electric official said.

“I thought it was not right (to receive the gift) based on common sense. I did not seek any advice from others (regarding my decision to return it), and it was difficult,” he said.

Meanwhile, former senior officials of Fukui Prefecture have revealed they also got the gifts from Moriyama. Gov. Tatsuji Sugimoto said Thursday he intends to launch an investigation on the matter.

During Wednesday’s news conference, the utility revealed that gifts given to officials included cash, gold, suits, coupons and U.S. currency.

An independent investigative panel to be launched by the utility will look at the scandal over a more extended period. The utility’s report Wednesday was based on a limited time period in view of the statute of limitations under tax regulations and the availability of individuals for interviews.

Of the 20 Kansai Electric officials who received gifts from Moriyama, three were also given cash and coupons worth ¥3.9 million in total from two companies — one of which is a local construction firm that was hired for projects at the Takahama nuclear complex, the utility said.

An investigation by tax authorities launched last year has found that Moriyama received a ¥300 million commission from the local construction company and the commission may have been used to fund the gifts for Kansai Electric officials. According to Kansai Electric, Moriyama was deeply involved in the bidding process and construction of reactors Nos. 3 and 4 at the Takahama nuclear plant, which began operation in 1985. He served as deputy mayor from 1977 to 1987.

After retiring from the municipal government, he worked for Kanden Plant Corp., the utility’s subsidiary in Osaka.

Kansai Electric Chairman Makoto Yagi, who received gifts from Moriyama between 2006 and 2010, pledged at a news conference Wednesday to implement measures to prevent similar incidents after a full investigation.

Both Yagi and Kansai Electric President Shigeki Iwane said they do not plan to step down from their posts.