Slush funds of Lotte owner family found

A guest house of Lotte Group is seen in central Seoul, Monday. Prosecutors seized Lotte Group Chairman Shin Dong-bin’s personal safe there during their investigation into the group’s slush fund allegations. / Yonhap

By Kim Bo-eun

Prosecutors found key documents and a large sum of cash which they believe Lotte Group Founder Shin Kyuk-ho had stashed ahead of their group-wide investigation.

According to the Seoul Central District Prosecutors’ Office, Monday, investigators also found evidence that Shin and his son, group Chairman Shin Dong-bin, allegedly received 30 billion won each year from group affiliates.

The findings come amid the prosecution’s widening investigation into the nation’s fifth-largest conglomerate.

Since Friday, prosecutors have confiscated hard discs and documents through raids on 17 sites including the group’s headquarters, affiliates and residences of key executives, over the allegations that the owner family had created a slush fund from illicit transactions among its affiliates and through deals with subcontractors.

Prosecutors said they secured documents and 3 billion won in cash at the house of a group executive’s relative. The executive was in charge of managing the group founder’s funds.

In Friday’s raid, prosecutors searched the founder’s personal safe at his office on the 34th floor of Lotte Hotel in central Seoul but the safe was empty. The executive told prosecutors that he moved the documents and the money from the safe while the founder’s two sons started an ongoing succession fight last year.

Prosecutors also seized a personal safe belonging to the chairman at a Lotte Group guesthouse in central Seoul, where he is known to have stayed recently. But no key evidence was in it, according to the prosecution.

Prosecutors suspect Lotte had known in advance about the raid and attempted to hide evidence.

Lotte Homeshopping was found to have destroyed and removed key documents pertaining to its alleged illicit practices.

Prosecutors suspect the group raised the slush fund through its home shopping unit by underreporting its sales in transactions with other affiliates and suppliers.

They also found financial records of the owner family’s money transactions at the hotel. The prosecution also confirmed the founder received 10 billion won and the chairman, 20 billion won, each year from affiliates. “Group executives claim the money was dividends and salaries, but we suspect it may be a slush fund,” a prosecutor said.

Meanwhile, the prosecution also secured evidence that Lotte Group bribed a state-run real estate developer, the Korea Land & Housing Corp. (LH), in a bid to open a department store in Dongtan, Gyeonggi Province.

A consortium of Lotte and minor investors won the deal, which included competitors Shinsegae and Hyundai, although Hyundai offered the highest bidding price. Besides the bidding price, Hyundai scored the lowest points on all factors in a subjective evaluation on development planning and management, resulting in Lotte’s victory. Prosecutors suspect Lotte may have bribed LH officials.

According to reports, an LH executive was appointed as a judge and gave high points to Lotte in the final decision. In addition, four heads of companies in the Lotte consortium had previously worked for LH.

A lawmaker of the opposition Minjoo Party of Korea raised these suspicions during the National Assembly audit of LH last September and called for an inspection, but this failed to occur due to opposition from the ruling Saenuri Party.