Lotte heiress arrested in South Korea amid bribery probe

Shin Young Ja appears before the Seoul Central District Prosecutors' Office in Seoul, on July 1, 2016. PHOTO: EPA

SEOUL (BLOOMBERG) - South Korean prosecutors arrested a sister of Lotte Group's chairman on charges of bribery and embezzlement, as regulators stepped up investigations into corruption allegations against the conglomerate's founding family members.

Shin Young Ja, 73, was arrested and taken into custody around 3 a.m. Thursday, according to Yonhap News Agency. The arrest came shortly after a Seoul Central District Court judge issued a warrant on charges of bribery and embezzlement, a court spokesman said.

Shin, a director at Hotel Lotte, is accused of accepting kickbacks from Nature Republic for giving the cosmetic maker preferential treatment in Lotte's duty free shops, according to a company filing last month. Lotte has denied the allegation.

The eldest daughter of Lotte's founder is also suspected of embezzling more than 4 billion won (S$4.7 million) from a company owned by her son, according to Yonhap. Shin has not commented on the embezzlement charges.

A Lotte spokesman declined to comment on the arrest. Nature Republic has said it will not comment on an ongoing investigation.

The arrest of the founding-family member comes as prosecutors widened their investigations into South Korea's fifth largest conglomerate, which has 89 units generating more than 100 trillion won in annual revenue.

Amid allegations of slush funds and embezzlement, the group scrapped a potential US$4.5 billion (S$6 billion) share sale for Hotel Lotte, its lodging and duty free business. At the time, it was set to be the world's biggest IPO this year. Lotte also shelved plans to list its Malaysian petrochemicals business amid the widening investigations at the parent.

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

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