We demand the resignation of the director of the National Security Bureau over the scandal which has rocked the island and jeopardised national security

Legislator Mu Min-chu

The existence of the fund was reported this week by news magazine Next - its offices were subsequently raided by government officials, accusing it of revealing state secrets and jeopardised national security.

MPs of all parties on Friday formed a "secretive accounts review committee" to investigate whether there was malpractice or corruption.

As the fund was reported to have been set up when long-term leader Lee Teng-hui was in office, lawmakers also want to know the exact role of the former president.

Two funds

Earlier this month, the Control Yuan government watchdog said the National Security Bureau had a secret fund from which an accountant embezzled $5.48m

But Next magazine and the China Times newspaper have now published documents revealing the existence of another fund allegedly set up by Mr Lee using accumulated budget surpluses.

NSB director Tsai Chao-min said the revelations were the bureau's "worst crisis"

The Next story showed how interest generated by the funds was used to subsidise Taiwan's espionage networks in mainland China and elsewhere.

The magazine said that, from their accounts, the former Kuomintang government (KMT) paid $11m to South Africa in 1994 in return for a three-year extension of diplomatic ties.

It was in 1997 that South Africa switched its recognition from Taipei to Beijing, which insists Taiwan is part of China.

Revelations of the confidential papers could make us international orphans, and might even cost some lives

National Security Bureau director Tsai Chao-min

Legislator Mu Min-chu of the opposition Kuomintang party said: "We call on President Chen Shui-bian to apologise and clarify the secret accounts."

Ms Mu said: "We demand the resignation of Tsai Chao-min, director of the National Security Bureau, over the scandal which has rocked the island and jeopardised national security."

Spy networks closed

The United Daily News said Mr Tsai told NSB officers that the stories about the fund were the bureau's "worst crisis".

"Revelations of the confidential papers could make us international orphans, and might even cost some lives," he was quoted as saying.

Some of Taiwan's intelligence partners have already warned that individuals could have been compromised and Taipei officials admit they have begun closing down spy networks in China, Hong Kong and Macau.

Lee Ching-an of the People First Party added: "We will do our best to look into whether [former President] Lee was involved in any malpractice, irregularities and corruption in this big black hole."