Former President Lee Teng-hui, one of the towering figures of modern Taiwanese politics, was indicted Thursday on charges of embezzling from a state fund, becoming the island's second ex-leader to run afoul of the judiciary.

Prosecutor Chen Hong-ta said Lee and top aide Liu Tai-ying had been charged with embezzling $7.79 million from a secret diplomatic fund.

In a statement, prosecutors said Lee embezzled the money from a National Security Bureau fund to set up a think tank meant to serve his private office after he left political life.

"Lee Teng-hui pocketed $7.79 million for his own personal use through money-laundering," the statement said. "In order to set up the Taiwan Research Institute, he consulted with his advisers and decided to get the money from a National Security Bureau project fund."

Prosecutors began looking into the case after Lee stepped down in 2000, and three years later charged the NSB's chief accountant with corruption. Those charges were eventually dropped for lack of evidence.

Lee has repeatedly denied embezzling any NSB funds. His office had no immediate comment Thursday but said his lawyers would hold a news conference later in the day.

Still vigorous at 88, Lee served as Taiwan's president for 12 years starting in 1988, and became the island's first directly elected leader in 1996. He is widely credited with moving Taiwan's nascent democracy forward by giving crucial support for direct presidential and legislative polls.

Lee was expelled from the long-dominant Nationalist Party shortly after leaving office, primarily for helping to found a pro-independence group, the Taiwan Solidarity Union. Together with the main opposition Democratic Progressive Party, the TSU forms the core of the pan-Green alliance, which opposes Nationalist efforts to bring Taiwan closer to China.

Under current President Ma Ying-jeou _ a Nationalist _ Taiwan has made a series of landmark trade deals with the mainland, from which Taiwan split amid civil war in 1949. That has helped lower tensions across the 100-mile- (160-kilometer-) wide Taiwan Strait to their lowest level in more than six decades.

Chen Shui-bian, who ended the Nationalists' 50-year monopoly on power when he succeeded Lee, is currently serving a 17-year jail term after being convicted on wide-ranging corruption charges. Chen, from the DPP, won a second term in 2004 but infuriated China and alienated the United States _ Taiwan's most important foreign partner _ because of his pro-independence policies.

Chen alleges the Nationalists are persecuting him for his anti-China line, a charge that both Ma and the judiciary deny.