Prosecutors accuse Lucia Hiriart of siphoning funds from sales of government properties through the NGO she ran to pay off Pinochets living expenses

Lucia Hiriart, the widow of Chilean dictator Augusto Pinochet, is under investigation for allegedly swindling the Chilean treasury of millions of dollars by selling properties designated as community centers.

A report by Chilean prosecutors also accuses Hiriart, 93, of siphoning funds from the NGO she ran, CEMA Chile, to pay General Pinochets living expenses in the United Kingdom while he was under house arrest following his arrest in 1998.

Chiles minister of public property, Vctor Osorio, told the Guardian that prosecutors are preparing to file formal charges over allegations that CEMA Chile misappropriated millions of dollars in government funds.

During her 43 years at the head of the organisation, Hiriart oversaw the sale of dozens of government properties which had been donated to the foundation. Chilean officials say that profits from the sales were transferred abroad or simply disappeared.

Among the questionable transactions include the transfer of US$100,000 to Hiriart in London while her husband was under house arrest. The money was paid in two disbursements of US$50,000, one in 1998 and one in 1999.

The CEMA Chile foundation was founded in 1954 as a vehicle for charitable works by the countrys first ladies. Hiriart took over following the bloody 1973 military coup that put her husband in power, acting as the groups president and then president-for-life until she resigned the position last week.

The organisation was originally conceived as a community centre for farm workers, but Hiriart changed the focus to womens centers with a focus on quilting and cake-baking classes. CEMA Chile still has dozens of centers across the country that are run by volunteers, but according to investigators the group has largely become a vehicle to buy, sell and rent properties.

If you look at their work, the CEMA Chile foundation operates like a real estate company, Osorio told the Guardian. He called the property sales a misappropriation of public funds and a direct violation of the terms by which the properties were ceded to CEMA Chile.

We are still tallying the total of properties but we calculate the first group of 118 properties to have a value of US$123m and thats just a percentage of the overall total, Osorio said.

In July, Chilean police raided the organisations Santiago headquarters, copying computer hard drives and searching for accounting records.

Despite repeated requests, CEMA Chile officials refused to comment. A spokesperson told the Guardian: Given all the judicial charges we are not giving interviews.

Profits from the real estate sales are thought to exceed $10m but the investigation has been hampered by the fact that most records prior to 1996 are missing.

Investigators described the book-keeping at the foundation as chaotic; many properties were listed with a value of just $1, but one property was sold for US$1.2m.

It is very difficult to know where the CEMA money was deposited and into which account. The book-keeping was destroyed, said Alejandra Matus, author of a bestselling biography of Hiriart. There is no evidence whatsoever about what they did with the money for 10 or 15 years. Theres lots of missing money and missing information.

Prosecutors suspect that profits from the real estate transactions may have been laundered through Riggs Bank, the scandal-plagued and now defunct Washington DC bank where the Pinochet family held dozens of secret accounts worth an estimated $8m.

So far, investigators have discovered four transfers between accounts at Riggs Bank and CEMA Chile.

In his final years, Pinochet was investigated for tax evasion, but until the CEMA Chile probe Hiriart has faced much less scrutiny.

Under her leadership CEMA became politically powerful, with a million members and military-style hierarchy. The board of directors had just three seats one for each of Pinochets daughters.

As the controversy has grown over recent weeks, CEMA Chile unilaterally returned six properties to the government with little explanation. All this confirms that we are on the right path to recuperate these public properties in the hands of this entity, said Osorio.

The most recently recovered property, in the northern Chilean city of Copiapo, was immediately designated as new offices for an organisation representing families of political prisoners who disappeared under the Pinochet regime.

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