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The Korea Herald
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THE INVESTOR
March 29, 2024

The Boardroom

Lotte’s founding family begins trial

  • PUBLISHED :March 20, 2017 - 17:23
  • UPDATED :March 21, 2017 - 14:32
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[THE INVESTOR] The founding family of Lotte Group stood trial on March 20 on charges of embezzlement and corrupt management of their businesses, marking the first time that the feuding members have appeared in court together.

The trial came five months after prosecutors first charged Chairman Shin Dong-bin and four other family members in October last year. Following the opening trial on March 20, the court plans to hold hearings three times a week regarding the charges of embezzlement and tax evasion.

Chairman Shin appeared alongside his father and group founder Shin Kyuk-ho and his brother Shin Dong-joo, as well as his sister Shin Young-ja and his father’s third partner Seo Mi-kyung.

Chairman Shin Dong-bin faces charges of unfairly giving his family salaries worth 50.8 billion won ($45.3 million). He is also accused of causing Lotte Shopping 77.4 billion won in damages by handing over concession stand operations for Lotte Cinema to a company run by Seo and her daughter at a low price, and causing 47.1 billion won in damages to affiliate companies by using them to invest in the faltering Lotte PS Net.

Lotte founder Shin Kyuk-ho is accused of embezzling company funds as well as 85.8 billion won of tax evasion. He also faces charges of colluding with Chairman Shin in the Lotte Cinema charges and selling unlisted stocks to affiliates at inflated prices totaling 9.4 billion won.

Shin Dong-joo is accused of accepting unmerited salaries worth 39.1 billion won, while Shin Young-ja and Seo Mi-kyung are involved in the Lotte Cinema charges.

The founding family’s trial is just one of several predicaments for the retail giant.

On March 19, Lotte Duty Free’s CEO Jang Sun-wook was brought in for questioning by prosecutors regarding the company’s contributions to foundations run by former President Park Geun-hye’s confidante Choi Soon-sil. In addition to 4.5 billion won contributed by Lotte to the Mir Foundation and K-Sports Foundation, Lotte had given an additional 7 billion won to the K-Sports Foundation before having the money returned ahead of a prosecutors’ raid on the company.

If Lotte is found to have contributed the money in exchange for political favors, it would help prosecutors build a case for bribery against former President Park.

Lotte Group is also currently facing backlash from Beijing and Chinese consumers for providing land to install an anti-missile battery here. Since Lotte’s land swap deal with the Defense Ministry, anti-Korean sentiment has been growing in China, which strongly opposes the installment of the Terminal High Altitude Area Defense system on the peninsula. Lotte has suffered hacking attempts on its websites and large-scale boycotts of its products among Chinese consumers. In addition, the Chinese government has actively carried out safety inspections on Lotte properties in China, leading to widespread closures of Lotte’s supermarkets there.

As of March 19, 67 of 99 Lotte Mart branches in China were closed after receiving safety inspections. Other branches have chosen to close voluntarily because of protests outside the stores. News reports estimate that 90 out of the 99 stores are currently unable to operate normally.

As Lotte Mart continues to see losses in China, Lotte’s revenue from tourist attractions such as Lotte World and sales at duty-free shops that were mostly fueled by Chinese tourists have also fallen drastically. In addition to negative consumer sentiment, inbound tourism from China has declined after the Chinese government’s ban on travel agencies selling travel packages to Korea went into effect March 15.

According to Lotte Duty Free, sales during the first weekend after the ban dropped 30 percent compared to the same period last year. 

By Won Ho-jung/The Korea Herald (hjwon@heraldcorp.com)



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