Lotte Group scrutinized by prosecutors over possible irregularities

By Park Sae-jin Posted : June 10, 2016, 10:28 Updated : June 10, 2016, 10:28

[Yonhap Photo]

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Prosecutors stormed into the offices of South Korea's fifth largest family-run conglomerate, Lotte Group, to secure evidence about illegal funding or business activities in a groupwide raid that came on top of a protracted family feud and a bribery scandal.

TV footages showed investigators carrying boxes stacked with documents, computer hard drives and accounting books out of a Lotte Group building in central Seoul.

Lotte officials said 17 places including the houses of group executives have been scrutinized. The prosecutors office said some 200 investigators have been sent out to find evidence related to possible embezzlement and other irregularities by group officials.

"Our offices were raided by investigators armed with warrants. We are looking into the situation find out what's going on. We do not know what the prosecutors charged us with," a group spokeswoman told Aju News, adding the group-wide raid targets Hotel Lotte, Lotte Homeshopping and several other key subsidiaries.

The raid came days after the group suspended a crucial deal roadshow aimed at attracting foreign investors in connection with the listing of its hotel and duty-free operating unit.

The planned road show in Hongkong this week was put off because of a sudden investigation by prosecutors who have raided Hotel Lotte's duty-free business department and the house of Shin Young-ja, the daughter of group founder Shin Kyuk-ho. She is suspected of taking kickbacks related to duty-free shops.

An IR conference for the initial public offering (IPO) of Hotel Lotte on June 29 has been pushed by group chairman Shin Dong-bin. Market estimates on the offering ranged from 4.6 trillion (3.8 billion US dollars) to 5.7 trillion won. Hotel Lotte has promised to expand its duty-free and other businesses.

The group has sought to refresh its image tainted by a family feud through a series of roadshows in New York, London, Singapore and Hong Kong.

The group has been engulfed in a protracted fraternal feud as its ailing founder, Shin Kyuk-ho, 94, was in his dotage without making a clear decision on his successor. His younger son, Shin Dong-bin, now holds the support of South Korean and Japanese shareholders, but his elder brother, Shin Dong-joo, has refused to give up his bid for managerial control of the retail and hotel giant.

The feud began in late 2014 when Dong-bin seized control of Lotte Holdings, the group's Tokyo-based holding company, in a bid to succeed his father.

In July last year, the ailing father fired his younger son, but Dong-bin fought back by sacking his father, insisting his father cannot name an heir because he has been mentally incompetent with age. Since then, the two sons have continued to challenge each other's claims to the empire.

Under the command of Dong-bin, Lotte Shopping, the group's key unit, posted a 22 percent on-year drop in its first-quarter operating profit due to weaker operating performance in its hypermarket and home shopping businesses.

Aju News Lim Chang-won and Park Se-jin
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