Lotte raided over slush funds
The entrance of Lotte Group’s headquarters in central Seoul is seen, Friday. Prosecutors raided the building as well as other group affiliates and residences of key executives to collect evidence of the group’s alleged slush funds and illegal lobbying activities. / Korea Times photo by Bae Woo-han
By Kim Bo-eun
The prosecution raided Lotte Group’s headquarters in central Seoul, as well as the group’s affiliates and the homes of key executives, Friday, searching for evidence of slush funds and illegal lobbying of government officials to earn approval for construction of the skyscraper Lotte World Tower.
Some 200 investigators of the Seoul Central District Prosecutors’ Office confiscated computer hard drives and accounting books from 17 raided sites including the offices and residences of Lotte Group Chairman Shin Dong-bin and founder Shin Kyuk-ho.
The offices of seven affiliates including Lotte Hotel, Lotte Shopping, Lotte Homeshopping, Lotte Data Communication and Lotte Cinema were also included in the raid.
Many group executives had their homes raided and were also banned from overseas travel.
The prosecution suspects the nation’s fifth-largest conglomerate created slush funds through transactions among its affiliates, as well as through deals with subcontractors.
“We are looking into high-profile Lotte officials’ alleged embezzlement and breach of trust,” a prosecutor said.
It is said that the prosecution had been preparing to launch investigations into the group’s alleged irregularities since the beginning of this year, based on documents secured in tax audits that arose out of a rivalry between the founder’s two sons over management rights last year.
The rivalry disclosed the conglomerate’s murky management structure, which raised suspicions that substantial amounts of the group’s profits were being sent to Lotte’s shareholding firms in Japan. Lotte Hotel, the virtual holding company of Lotte Group, remains unlisted.
Prosecutors are also looking into another allegation that the group lobbied key government and military officials in order to attain approval for construction of Lotte World Tower.
Its construction plans for the 123-story skyscraper and malls in Jamsil, southeastern Seoul were finalized in 2009, but a controversy arose over possible safety risks that the building could pose to military aircraft taking off and landing at a nearby military airport in Seongnam, Gyeonggi Province.
The mega complex plan received approval in 2011 after the government decided to slightly alter the direction of a runway at the airport, but suspicions were raised that the pro-business Lee Myung-bak administration granted favors to Lotte Group.
Lotte is presumed to have been the greatest beneficiary under the Lee administration, as its affiliates and the total amount of its assets doubled during Lee’s five-year term.
Investigations are likely to expand into alleged improper ties between Lotte and key figures in the Lee administration.
The prosecution had earlier raided Lotte Hotel’s offices on June 2 over allegations that Lotte Foundation Chairwoman Shin Young-ja and her son received bribes from Jung Woon-ho, CEO of the cosmetics company Nature Republic, to allow the brand to open counters in its duty free shops. Shin is the eldest daughter of the group founder.
Shin and Lotte Hotel denied the allegations.
The scandal forced Lotte Hotel to delay the listing of its shares on the local bourse, which it had been planning for the end of this month.