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THE INVESTOR
April 26, 2018

The Boardroom

Court to rule on corporate crime allegations against Lotte chief

  • PUBLISHED :December 17, 2017 - 12:49
  • UPDATED :December 17, 2017 - 12:49
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[THE INVESTOR] A Seoul court is set to hand down its verdict on the head of South Korean retail giant Lotte this week over a string of alleged irregularities in the management of the business group, industry and legal sources said on Dec. 16.

Lotte Group Chairman Shin Dong-bin was indicted in October last year on charges of embezzlement over suspicions he paid 50 billion won (US$45.8 million) in wages to members of his family when they did not actually work for its affiliates.

Prosecutors also suspect him of breach of trust and of inflicting 130 billion won in losses on Lotte units by forcing them to cover the losses of other subsidiaries.
Shin Dong-bin

Shin has denied the accusations, shifting the responsibility to his father and group founder Shin Kyuk-ho for making key business decisions.

The Seoul Central District court will deliver its judgment on Dec. 22. The prosecution has demanded a 10-year jail term and a 100 billion won fine against the chairman.

The court will also rule on a number of former company officials and Shin family members, including his father and his brother, Shin Dong-joo, over their involvement in the alleged crimes.

A guilty verdict, if handed down by the court, could be a major blow to the country‘s fifth-largest conglomerate, which has been moving to establish a holding firm system.

In October, the business group set up the holding firm Lotte Corp. as part of its efforts to solidify Shin’s leadership and boost the group‘s managerial transparency amid a series of setbacks from home and abroad.

Earlier on Dec. 14, prosecutors demanded another four-year jail term for chairman Shin in a separate bribery case related to a massive political scandal that led to impeachment and arrest of former President Park Geun-hye. The court ruling on this case is slated for late January.

Lotte Group is said to have incurred about 2 trillion won in damages in recent months due to a Seoul-Beijing diplomatic spat over South Korea’s deployment of a U.S. missile defense system.

Lotte became a key target of Beijing‘s ire when it provided its golf course to the Seoul government in March as the host site of the Terminal High Altitude Area Defense (THAAD) system, which China sees as a security threat.

Eighty-seven of its 112 Lotte Mart discount stores suspended operations in the neighboring country, and sales at the handful of stores that managed to stay open dipped more than 80 percent. The conglomerate decided in September to give up and announced it would sell off its local chain.

Founded in Japan in 1967, Lotte grew into one of South Korea’s major chaebol, driven by its success in the retail, food and amusement businesses. The group‘s operations include chemicals, duty-free, finance and construction, and it has a global workforce of 125,000.

Shin Dong-bin, chairman of Lotte Group, arrives at the Seoul Central District Court in the capital on Dec. 14, 2017. The prosecution asked for a four-year term for the business tycoon on charges that he gave bribes to foundations run by Choi Soon-sil, a close confidante of former President Park Geun-hye, expecting business favors in return. (Yonhap) Shin Dong-bin, chairman of Lotte Group, arrives at the Seoul Central District Court in the capital on Dec. 14, 2017. The prosecution asked for a four-year term for the business tycoon on charges that he gave bribes to foundations run by Choi Soon-sil, a close confidante of former President Park Geun-hye, expecting business favors in return.

By Park Ga-young and newswires (gypark@heraldcorp.com)
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