SOUTH KOREAN ECONOMY

Lotte Group vice-chairman found dead just hours before facing probe into alleged kickbacks and tax evasion

His death deepens the crisis at Korea’s fifth-largest family run conglomerate, which generates more than US$86 billion in annual revenue

PUBLISHED : Friday, 26 August, 2016, 1:13pm
UPDATED : Friday, 26 August, 2016, 9:49pm

Lotte Group vice-chairman Lee In-won was found dead hours before he was scheduled to be questioned by South Korean prosecutors in connection with an investigation into corruption at one of the country’s largest conglomerates.

Fire and police officials said Lee was found dead in Yangpyeong, outside Seoul, shortly after 7am on Friday. Police officials weren’t available to comment on a Yonhap News report that authorities found what appeared to be a suicide note in his car nearby.

Lee, the group’s highest-ranking executive outside the founding family, was scheduled to meet with South Korean prosecutors who are investigating allegations of slush funds, embezzlement and tax evasion. His death deepens the crisis at Korea’s fifth-largest family run conglomerate, which has 93 units generating more than 100 trillion won (US$86 billion) in annual revenue.

Lotte Group, which also has operations in Japan, said in a text message that it had confirmed the death and that it was “hard to believe that vice-chairman Lee, who has devoted himself to create the foundation for Lotte, is deceased”.

Lee, 69, was second to chairman Shin Dong-bin in Lotte’s hierarchy and supervised the overall management and core businesses of Lotte Group. He also served as a key bridge between the founding family and Lotte’s various units by “accurately understanding the minds” of Shin and his father, group founder Shin Kyuk-ho, according to Lotte’s official biography.

Lee started his career at Lotte Group in 1973 and worked his way up to becoming chief executive at Lotte Shopping before moving to group headquarters and working closer with the founding family.

“He kept pushing for expanding Lotte Group’s businesses to achieve the high rates of growth,” the Lotte bio says. “Lee always underscored the sense of ethics to Lotte workers as it is directly linked to the improvements of corporate value.”

Lee, who is survived by his wife and a son, was supposed to be the latest in a series of Lotte executives being summoned by Korean prosecutors. On Thursday, prosecutors questioned Hwang Gak-gyu, Lotte’s head of strategy planning division.

In July, prosecutors arrested Shin Young-ja, sister of Lotte Group’s chairman, on charges of bribery and embezzlement. Shin is accused of taking kickbacks from a cosmetics maker for preferential treatment of its products in Lotte duty-free shops, as well as allegedly embezzling more than US$3.5 million from a company owned by her son. Shin has denied the allegations.

Prosecutors could not be reached for comment on a Yonhap report that the pace of the investigation may be reconsidered in light of Lee’s death.

The crisis has taken a toll on Lotte’s business. Amid the allegations, Lotte Group earlier this year scrapped what would have been at the time the world’s largest IPO. It was set for a US$4.5 billion share sale of Hotel Lotte, its lodging and duty free business.

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The corporate corruption allegations surfaced as Lotte reeled from a bitter family feud over control of the business empire. In June, Shin Dong-joo, the former Lotte Holdings vice-chairman, failed for the third time to oust his chairman brother during a shareholder meeting.

The Lotte investigation is among a dozen high-profile corruption cases that have erupted in South Korea this year, including allegations that a senior prosecutor accepted bribes from the founder of the country’s largest online game maker.