Lotte Duty Free troubled by bribery scandal
By Lee Hyo-sik
Lotte Duty Free, Korea’s largest duty free store operator, is struggling to contain the fallout from an escalating bribery scandal involving the daughter of Lotte Group founder Shin Kyuk-ho.
Lotte Foundation Chairwoman Shin Young-ja, who also holds board seats at eight Lotte units, allegedly received kickbacks from Jung Woon-ho, the head of Nature Republic, in return for providing favors to the cosmetics brand in opening its shops at duty free stores.
This has already forced Lotte Hotel, which owns Lotte Duty Free, to delay the listing of its shares on the local bourse, causing a setback to its plan to secure funds and expand its duty free business at home and abroad.
The allegation is also feared to derail the hotel’s bid to regain a license for its duty free store at the Lotte World Tower in southern Seoul, which is scheduled to close on June 30. It failed to renew the license last November.
Shin is suspected of receiving millions of dollars from Jung, who has been jailed for committing a number of illicit acts, in exchange for helping the low-cost cosmetics secure prime locations at Lotte Duty Free stores. On June 2, the prosecution raided Lotte Hotel and Shin’s residence to secure evidence.
“We cannot deny the fact that the company has been troubled by the bribery allegations,” a Lotte Duty Free official said. “For now, we are closely monitoring the prosecution’s investigation.”
Even though Shin was found to be involved in illicit dealings with Jung, Lotte Duty Free never offered any favor to Nature Republic, the official said. “Shin exerts no influence over how our duty free stores are managed. We did not offer any undue favors to Jung or anyone else.”
In 2015, the duty free business generated 1.33 trillion won in sales last year, accounting for 85 percent of Lotte Hotel’s revenue.
Lotte Duty Free planned to use trillions of won raised through the Lotte Hotel initial public offering (IPO) to expand its operations abroad and acquire foreign luxury brands. But the ongoing controversy has made it difficult for the group to take its hotel unit public any time soon.
Lotte Duty Free also fears that it could face a harder time in December when applying for a license to resume the operation of its duty free shop at the Lotte World Tower.
“It is very important for us to secure a license for the Lotte World Tower store. We will take all possible measures to reopen the shop in December,” the official said. “We are hoping that the ongoing investigation clears all the suspicions surrounding Lotte Duty Free and confirms that it does business in accordance with the laws.”