More Lotte affiliates raided in slush fund investigation

The lobby of Lotte Chemical headquarters in Seoul, which the prosecution raided in its investigation of Lotte Group’s alleged slush fund creation, Tuesday. / Yonhap

By Lee Kyung-min

The prosecution conducted a second round of raids on 10 Lotte Group affiliates and the homes of key executives, Tuesday, as part of its widening group-wide investigation into allegations of slush fund creation, suspicious intra-group deals, breach of trust and embezzlement.

The raids on the affiliates of the nation’s fifth-largest conglomerate come only four days after the first round on Friday, when seven other affiliates were searched.

Seoul Central District Prosecutors’ Office investigators went to 15 sites and confiscated computer hard drives, account books and financial transaction records among affiliates including land purchases.

The affiliates included Lotte Engineering and Construction (E&C), Lotte Chemical, Lotte Chilsung, Lotte.com and Korea Seven. Prosecutors also raided two resorts operated by Lotte Hotel, on Jeju Island and Buyeo, South Chungcheong Province.

Some executives were banned from overseas travel and had their homes searched, including Lotte Chemical CEO Huh Soo-young.

Prosecutors suspect the affiliates have already attempted to hide or destroy evidence of the allegations, as they found the desk drawers of some affiliate executives empty. Others were keeping copies of documents at home, according to the prosecution.

Those affiliates previously held shares in the two resorts, which Lotte Hotel acquired in August 2013. Prosecutors suspect the group’s owner family raised a slush fund through fabricated deals during the acquisition.

Based on material seized earlier, the prosecution suspects that Lotte E&C raised a large slush fund through asset and property transactions among its affiliates.

Considering that Lotte E&C built Lotte World Tower in Jamsil, southeastern Seoul, the investigation might expand further into the group’s alleged lobbying of key government and military officials to attain approval for the skyscraper.

Construction was approved in 2009 despite noise concerns from local residents as well as possible safety risks to military aircraft landing and taking off at a nearby military airport in Seongnam, Gyeonggi Province.

It is alleged that in 2008 Lotte offered 1.2 billion won to a former senior Air Force official, surnamed Cheon, who headed a fighter jet maintenance firm. Prosecutors are looking into whether part of the money was used to bribe senior military officials at that time to help the company get permission to build the tower.

The Lee Myung-bak administration approved the project on the condition that the direction of the airport runway would be changed slightly so that aircraft flight paths would be moved sufficiently away from the tower, with Lotte paying for the alteration.

Speculation is that the investigation may include key policymakers during the Lee administration, under which Lotte Group received favors many favors.