South Korea

Lotte scandal: Prosecutors seek 10-year jail term for chairman of South Korean retail giant

Chairman Shin Dong-bin awarded lucrative deals or paid ‘wages’ worth millions of dollars to relatives who made little contribution to management, prosecutors said

PUBLISHED : Monday, 30 October, 2017, 5:17pm
UPDATED : Monday, 30 October, 2017, 10:57pm

South Korean prosecutors demanded a 10-year jail term Monday for the chairman of embattled retail giant the Lotte Group for embezzlement and breach of duty.

The country’s fifth largest conglomerate has been battered by boycott campaigns in China over South Korea’s deployment of a US missile defence system – for which it provided the land – and by criminal trials for members of its founding family.

Chairman Shin Dong-bin was charged with embezzling US$50 million and illegally offering relatives business favours that cost the group about $120 million.

Similar charges were levelled against his older brother and sister and their father, Lotte founder Shin Kyuk-ho – as well as the latter’s mistress.

“The family members tried to run the group as if it was their private property using all possible ways imaginable for such a long time,” the prosecutors said in a statement.

Dong-bin awarded lucrative deals or paid “wages” worth millions of dollars to relatives who made little contribution to management, they said, also urging he be fined 100 billion won ($89 million).

They sought jail terms ranging from five to seven years for his brother and sister and their father’s mistress. They will announce their demand for the sentence on the founder, who was too ill to attend court Monday, in November.

Judges are not bound by the prosecutors’ sentence recommendations.

The Seoul-based Lotte group, founded in Tokyo in 1948, has a vast network of businesses focused on food, retail and hotels in South Korea and Japan, with combined assets valued at more than $90 billion.

But it has suffered a crippling blow to its business in China after swapping a golf course it owned with the Seoul government for the deployment of the US Terminal High Altitude Defence (THAAD) system, seen by Beijing as a threat to its own military capabilities.

Since then Beijing has slapped a series of measures on South Korean firms seen as economic retaliation, while Chinese consumers waged boycott campaigns against Lotte.

Lotte last month announced a plan to sell its supermarket unit in China, where it had invested over $8 billion, amid snowballing losses.

Dong-bin is on trial separately over the corruption scandal that brought down former South Korean President Park Geun-hye, who was formally impeached in March.

He is accused of bribing Park’s powerful confidante, Choi Soon-sil, in a bid to seek policy favours from Park. Both Park and Choi are on trial for charges including bribery and abuse of power.