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Park Geun-hye

Duty-free giants that targeted Chinese visitors embroiled in South Korea’s presidential scandal

SK and Lotte last year lost some of their licences to run duty-free businesses and were seeking to win them back in December

PUBLISHED : Thursday, 24 November, 2016, 1:39pm
UPDATED : Thursday, 24 November, 2016, 9:54pm

South Korean prosecutors on Thursday raided the finance ministry and the headquarters of two of the country’s most powerful companies in connection with a snowballing corruption scandal engulfing President Park Geun-hye.

SK – the South’s third-largest conglomerate – and the number five Lotte have been accused of making huge donations to foundations controlled by Park’s secret confidante, Choi Soon-sil, to win lucrative state licences for duty-free businesses.

Prosecutors raided the Seoul headquarters of the two groups and the finance ministry to confiscate documents relating to the duty-free operations, the Yonhap news agency reported. Prosecutors confirmed the raids took place but did not provide further details.

SK and Lotte last year lost some of their licences to run the duty-free businesses, which largely target the growing number of Chinese visitors to South Korea, and were seeking to win them back at another auction scheduled in December.

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Choi is accused of using her personal ties with Park to coerce donations from big firms to two non-profit foundations which were then used for Choi’s personal gain.

SK, which runs the country’s top wireless operator, donated 11.1 billion won (US$9.4 million) and Lotte, a retail and food giant, gave 4.9 billion won to the foundations.

The raid came a day after prosecutors searched the headquarters of Samsung Group over allegations it had bribed Choi to win state approval for a controversial merger it sought last year.

The merger of two Samsung units was seen as crucial to ensure a smooth generational power transfer within the company’s founding family but was criticised by many for causing financial damage to shareholders.

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The deal went through after Seoul’s state pension fund – a major Samsung shareholder and also the target of a raid on Wednesday – approved it.

Park is facing allegations her government offered policy favours to the firms that offered contributions to Choi’s foundations. Prosecutors say Park colluded with Choi to extract money from the companies and will question the president as part of a criminal investigation.

The ever widening scandal has seen several heads of the country’s top firms, including Samsung and Hyundai, interviewed by prosecutors, shedding light on unhealthy ties between the government and conglomerates that have endured for decades.