Death of Lotte executive seen putting South Korea's corruption probe at risk

Shin Dong-bin, chairman of Lotte Group, wipes his tears with a hankerchief during the funeral for Lee In-won, the group's vice chairman at an undisclosed location in South Korea, Aug 27.
Shin Dong-bin, chairman of Lotte Group, wipes his tears with a hankerchief during the funeral for Lee In-won, the group's vice chairman at an undisclosed location in South Korea, Aug 27.PHOTO: EPA

SINGAPORE/SEOUL (BLOOMBERG) - The death of Lotte Group's No 2 executive, a key figure in an investigation into corruption at one of South Korea's largest conglomerates, is a blow to prosecutors who are likely to face increasing pressure to wrap up their probe soon or drop the case, according to law professors.

Vice chairman Lee In Won was found dead on Friday (Aug 26) in the scenic county of Yangpyeong, east of Seoul, just hours before he was scheduled to be questioned by prosecutors investigating allegations of slush funds, embezzlement and tax evasion at the group. The police have tentatively concluded the death was a suicide, said Kim Yeong Ju, chief of the investigation division at Yangpyeong Police Station.

"Lee was a key guy in the investigation, a person who spent more than 40 years at Lotte and who could have given evidence to prosecutors," said Kim Sang Kyum, a professor at Dongguk University Law School in Seoul. "There is a high possibility that the probe will fizzle out, if prosecutors fail to get critical evidence after Lee's death."

Mr Lee, 69, started with Lotte in 1973 and climbed up the corporate ladder to become the group's highest-ranking executive outside the founding Shin family. Second only to chairman Shin Dong Bin in Lotte's hierarchy, Lee supervised overall management and core businesses, according to the company's official biography.

Lotte has said it's cooperating with prosecutors and declined to comment on the allegations.

Mr Lee's untimely death is likely to stymie prosecutors' efforts to determine and verify how the alleged slush funds were used and to whom they were distributed, according to Professor Kwon Jae Yeol.

"These investigations are like a puzzle and if one of the pieces goes missing it's very difficult for it to go any further," said Mr Kwon, who teaches at Kyung Hee University Law School in Seoul. "Prosecutors could also lose public support, which might be more swayed by sympathy. There is a high chance this investigation will become obsolete."

Prosecutors didn't respond to requests for comment. A Yonhap report on Friday quoted an unidentified prosecutor saying that while the investigation would continue, the pace of the probe is likely to be affected.

Mr Lee's death, if confirmed as a suicide, wouldn't be the first time that a key figure in a corruption investigation committed suicide and led to a high-profile probe coming to an abrupt end.

Last year, former head of a construction firm Keangnam Enterprises Ltd Sung Wan Jong was found dead on a hiking trail with a suicide note listing names of government officials Mr Sung alleged to have bribed. He had been under investigation for allegedly embezzling government funds that were directed at investments overseas. The investigation ended about a month after Mr Sung's body was found.

In 2009, former President Roh Moo Hyun jumped off a cliff in his retirement home village in southern South Korea after he was questioned by prosecutors investigating allegations of bribery. The investigation was dropped immediately after his suicide.

"Like in other similar cases before, we are worried that this investigation may come to close before they are able to fully uncover any wrongdoings," said Ahn Jin Geol, director at People's Solidarity for Participation Democracy, a corporate governance activist group in Seoul.

In addition to being a close aide to the chairman, Lee 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.

"Prosecutors started the investigation all geared up to find evidence of any wrongdoings by the Shin family," said Kim Sang Jo, executive director at the Solidarity for Economic Reform and an economics professor at Hansung University in Seoul.

"Much of those ambitions seem to have withered and now with Lee's death, prosecutors will probably try to find a way to exit the investigation. They will probably wrap it up with what they've found so far.'"