[THE INVESTOR] A Seoul local court was to decide by late Wednesday on the prosecution’s request to issue an arrest warrant for Lotte Group Chairman Shin Dong-bin over accusations that he inflicted financial damage worth 176 billion won ($160 million) to the company by abusing his power as an heir to the nation’s fifth-largest conglomerate.

The chairman attended a court hearing held to determine the warrant’s validity in the morning. He apologized for causing public concern.

Last week, the prosecution indicted him on suspicions that he shifted damage from failed merger and acquisition attempts to some Lotte affiliates, and offered exclusive operation rights of Lotte’s retail businesses to his family members to create a fortune.

 

Shin and his lawyers refuted the prosecution’s claim by saying the chairman is not responsible for the allegations, as such cases happened when his father, Lotte founder Shin Kyuk-ho, was still in control of the group.

The prosecution, however, highlighted that the case is about the owner family seeking to profit by abusing their power within the group over a long period. The chairman is responsible for the allegations, considering his exclusive position as an heir to the retail giant, the prosecution said.

Lotte fears that the chairman could lose control of the retail giant’s operations both in Korea and Japan if the court approves his arrest before and during the trials.

If the court approves the request, Shin will be the first Lotte chief to be put behind bars in Lotte’s 70-year history.

Shin is the head of Lotte Holdings, a Tokyo-based company that controls Lotte’s operations in Korea. If the court approves the request, board members of Lotte Holdings could oust him from the leadership post, and have a Japanese executive replace him, they said.

Having a Japanese executive leading Lotte Holdings could also put the retail giant’s Korean operations under Lotte Japan’s control. Lotte Holdings is jointly led by Shin and company President Takayuki Tsukuda.

Shin’s elder brother Shin Dong-joo, meanwhile, is reportedly seeking an opportunity to take control of Lotte. The eldest son of the Lotte founder also faces charges related to allegations that he pocketed some 40 billion won from Lotte affiliates that he had no actual business relations with, apart from his name on their board.

Meanwhile, in an apparent attempt to regain customers’ loyalty, Lotte Department Store said that it has terminated contracts with two fast food stores and one restaurant operated under a limited corporation owned by Lotte founder’s mistress Seo Mi-kyung.

The company Euki Development, owned by Seo and her daughter Shin Yoo-mi, has been running nine stores in Lotte Department Stores in Seoul and Busan.

Seo is suspected of evading some hundreds of billions of won in gift taxes. She has been ignoring the prosecution’s summonses. The prosecution has indicted her without detention. 

By Cho Chung-un/The Korea Herald (christory@heraldcorp.com)