Lotte Group Chief Convicted On Corruption Charges

 A Seoul court yesterday found Lotte Group chairman Shin Dong Bin guilty of breach of trust and embezzlement and sentenced him to 20 months in prison, suspended for two years, leaving him free to try and revive the conglomerate after steep losses in China.

The ruling will come as a relief to the conglomerate at the end of a tough year during which it became the highest-profile corporate victim of a Beijing-Seoul spat over South Korea’s installation of a US missile defence system.

“We respect the court’s decision. Lotte Group executives and employees will further unite to contribute to economic progress and do our best to meet our social responsibility,” the company said in a statement.

Shin is the subject of another ongoing trial related to a bribery scandal involving former president Park Geun Hye. Prosecutors are seeking a four-year jail term and a fine of seven billion won (S$8.7 million) over his alleged involvement.

The court yesterday also sentenced his father and Lotte Group founder Shin Kyuk Ho, 95, to four years in prison. The elder Shin was accused of embezzling at least 128.6 billion won from the firm to benefit his relatives.

The wheelchair-bound nonagenarian founded the group in Tokyo in 1948 and built it into a sprawling giant that today has dozens of units focused on food, retail and hotels in South Korea and Japan.

Lotte Group is the fifth biggest of South Korea’s chaebol, the family-run conglomerates that have powered the country’s growth into the world’s 11th-largest economy, but are sometimes accused of murky business practices and overly-close ties with politicians.

Lotte has been a target of investigations since the founder’s two sons made headlines with a bitter public fight for control of the group, featuring personal attacks in which they accused each other of mismanagement, personality flaws and of manipulating their frail, aged father.

The punishments also underscore the resolve of President Moon Jae In, who took power after a corruption scandal felled his predecessor, to show less leniency toward crimes committed by chaebol owners.

In the meantime, yesterday’s ruling means Lotte, with 110.8 trillion won worth of assets, avoids a leadership vacuum for the time being as it navigates mounting China losses and an uncertain recovery.

Shunned in China, its key market, after it was pressed by Seoul to provide land for the Terminal High-Altitude Area Defence (Thaad) system, Lotte’s third-quarter China hypermarket sales were nearly wiped out to about US$278,000 (S$373,400) from around US$264 million a year earlier.

Nearly all Lotte Mart stores in China have been shut for much of the year, with the local authorities citing “safety issues”, and the group has now put the business up for sale.

Lotte’s businesses in South Korea, including its major duty-free operations that had counted on big-spending Chinese tourists, remain under pressure amid curbs on Chinese tour groups travelling to the country.

South Korea’s credit rating agencies have downgraded or cut their outlook for corporate bonds of the group’s flagship retailer Lotte Shopping and Hotel Lotte, citing hurdles in improving their financial stability. Plans for an estimated US$4.5 billion IPO of Hotel Lotte were also shelved amid the investigation.

Author: The Straits Times

Source: ST