Seoul court hands down suspended sentence for Lotte chairman

Lotte Group Chairman Shin Dong Bin arrives at the Seoul Central District Court to attend a final trial on charges of embezzlement, neglect of duty and tax evasion, in Seoul on Dec 22, 2017.
Lotte Group Chairman Shin Dong Bin arrives at the Seoul Central District Court to attend a final trial on charges of embezzlement, neglect of duty and tax evasion, in Seoul on Dec 22, 2017.PHOTO: EPA-EFE

SEOUL (REUTERS, BLOOMBERG, AFP) - A Seoul court on Friday (Dec 22) handed down to Lotte Group Chairman Shin Dong Bin a two-year suspension of a jail sentence related to corruption charges.

A judge at the Seoul Central District Court also sentenced his father and Lotte Group founder Shin Kyuk Ho, 95, to four years in prison in a verdict announced on Friday.

The wheelchair-bound nonagenarian founded the group in Tokyo in the late 1940s, before building it into a sprawling giant that today has dozens of units focused on food, retail and hotel businesses in South Korea and Japan.

But it has been a target of state probes since Shin's two sons made headlines with a fight for control of the group, featuring public mudslinging and personal attacks on each other.

The founder, three of his children, and his mistress were all in the dock on multiple charges at the Seoul Central District Court.

Shin Kyuk Ho was convicted of embezzling at least 128.6 billion won (US$119 million) from the firm to the benefit of his relatives and given a four-year sentence, although the court allowed him to remain free on health grounds pending an appeal - he has diseases of old age, including dementia.

He caused 77.8 billion won in damages to the group by renting out Lotte Cinema's shopping malls at discounted rates to his eldest daughter and mistress, the court ruled. The daughter was jailed for two years, while the mistress was given a suspended sentence.

Shin Dong Joo, the elder son of the founder, was acquitted.

Shin Dong Bin was indicted in a separate corruption case involving former South Korean President Park Geun Hye. The verdict for that trial is due Jan 26.

South Korean prosecutors have sought a four-year jail term for Shin Dong-bin on corruption charges related to a seven billion won (S$8.74 million) donation to a sports foundation controlled by a confidante of Park.

Lotte Group did not have an immediate comment.

The convictions and sentencing of executives at South Korea's fifth-largest conglomerate are among a series of penalties the government has delivered following sweeping probes of the country's largest family-controlled business groups, known as chaebol.

 

Lotte founder Shin Kyuk Ho's four-year term is shorter than that of Samsung Group's de-facto chief Lee Jae Yong, who was sentenced to five-year prison term in August in a bribery case linked to the country's biggest political scandal that led to Park's downfall.

Lee is appealing the sentence.

Friday's punishments meted out to Lotte also underscore the resolve of President Moon Jae In, who took power after the corruption scandal felled Park, to show less leniency towards crimes committed by owners of family-run conglomerates.

In the meantime, the ruling means Lotte, with 110.8 trillion won worth of assets, avoids a leadership vacuum for the time being as it navigates mounting China losses and an uncertain recovery.

Shunned in China, its key market, after it was pressed by Seoul to provide land for the Thaad missile defence system, Lotte’s third-quarter China hypermarket sales were nearly wiped out to about US$278,000 from around US$264 million a year earlier.

Nearly all Lotte Mart stores in China have been shut for much of the year with local authorities citing fire safety issues, and the group has now put the business up for sale.

But the sale is likely to be delayed past the end-2017 deadline Lotte had sought, Lotte Corp official Choi Min-ho said, without giving a reason.

BATTENING DOWN THE HATCHES

Lotte’s businesses in South Korea, including its major duty-free operations, that had counted on big-spending Chinese tourists, remain under pressure amid curbs on Chinese tour groups travelling to the country.

South Korea’s credit rating agencies have downgraded or cut their outlook for corporate bonds of the group’s flagship retailer Lotte Shopping and Hotel Lotte, citing hurdles in improving their financial stability.

Lotte, which shelved plans for an estimated US$4.5 billion IPO of Hotel Lotte amid the investigation, is now battening down the hatches as a difficult year draws to an end.

Lotte Shopping has frozen wages for its department store business this year for the first time since 2009, three Lotte officials said this week, declining to be identified as the matter was sensitive.

While Lotte confirmed wages had been frozen, the retail-to-chemical conglomerate declined further comment.

However, one of the officials from the department store business said: “Wages have been frozen due to various factors, but the Thaad issue was one of them.”