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Choi Kyung-hwan |
After announcing changes to the nation's tax code, Deputy Prime Minister and Finance Minister Choi Kyung-hwan told reporters that the government is closely monitoring activity at Korea's fifth-largest conglomerate.
Choi said that if necessary, state agencies will look into Lotte's governance structure and cash flows among its units.
"I am so disappointed (with Lotte Group)," the finance minister said. "Lotte's founding family members must stop fighting over managerial control. Instead, they should make every effort to overhaul the group's opaque governance structure. If it doesn't, the government will take the necessary steps (to force Lotte to do so)."
Choi's remarks are the latest in a series of moves by policymakers and politicians to deal with the fallout of an escalating succession war at Lotte Group.
The government, and ruling and opposition parties have agreed to examine Lotte's cross-shareholding structure that enables the owner family to control all affiliates with only a small number of shares.
The Fair Trade Commission has launched a probe to check the group's ownership of its overseas subsidiaries after it was found that the conglomerate's founder used overseas affiliates to exert control over local companies.
The National Tax Service has also been conducting an audit of Daehong Communications, Lotte's public relations unit, and plans to expand its investigation to other affiliates.
The Financial Supervisory Service (FSS) said Thursday that unlisted units of Lotte Group violated disclosure rules by not revealing information about their majority stakeholders.
The regulator asked four Lotte companies — Hotel Lotte, Lotte Corp., Lotte Aluminum and Lotte Logistics — to correct and resubmit their business reports by including information on their two largest shareholders: Lotte Holdings and L2 Investment based in Japan.
The four are unlisted on the local bourse but have to file a report detailing their businesses with the FSS every quarter according to relevant laws because they issued corporate bonds here to raise funds.
They are required to give information concerning their stakeholders.
"We asked Lotte units to rewrite and submit their reports by Aug. 17. We will thoroughly check them this time to see whether any information is missing," an FSS official said. "After confirming that the four companies did not include data on their stakeholders in the first-quarter report, we asked them to file the report again."
The official said the regulator will consider whether to impose fines on or other punitive measures on Lotte units for not abiding by disclosure codes.
According to the FSS, the companies included only the names of Lotte Holdings and L2 Investment, but no other details about their stakeholders, such as their ownership ratios, financial health and CEOs.
Dong-bin said to control L-Investment firms
Lotte Group said Thursday that Lotte Group Chairman Shin Dong-bin, the youngest son of group founder Shin Kyuk-ho, has been appointed to CEO of all 12 L-Investment firms in Japan, which hold a combined 72.65 percent stake in Lotte Hotel, the de facto holding firm of Lotte Group in Korea.
This has placed Dong-bin in a better position against his father and his older brother Dong-joo in the ongoing family feud over the control of the 90 trillion won business empire.
The group said Dong-bin became CEO of all 12 companies on July 31. Previously, Kyuk-ho and Japan Holdings CEO Tsukuda Takayuki were registered as CEOs of the paper companies.
Dong-bin, who also heads Lotte Holdings that owns a 19.07 percent stake in Lotte Hotel, has further solidified his control of the group. Lotte Hotel holds a 8.8 percent share in Lotte Shopping and has a considerable stake in other key units.
"The chairman was to become CEOs of L-Investment companies after he was appointed to the CEO of Lotte Holdings on July 15," a group official said. "The news is nothing unusual."