Taiwan's former president Lee Teng-hui has been charged with embezzling $7.79 million of state funds, the BBC reports.

Prosecutors say Lee, 88, took money from a secret diplomatic fund, National Security Bureau, during his 1988-2000 presidency, in orer to set up a private think tank, of which he became honorary president.

"Lee Teng-hui pocketed $7.79 million for his own personal use through money-laundering," a prosecutors' 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."

Lee, the island's first directly elected leader, is the second former Taiwanese president to be charged with fraud: His successor, Chen Shui-bian, is serving a 17-year sentence for bribery.

He has denied taking the money from the bureau.