On October 19, 2016, South Korean prosecutors announced the indictment of 22 Lotte Group officials, including the chairman, for embezzlement, tax evasion, and other corporate malfeasance following a four month corruption probe.
The charges against Chairman Shin Dong-bin state that his actions cost Lotte over $156 million. However, the group argues that most of the allegations against him are related to events that occurred while his father was still in charge and that everything will be explained further at trial.
Mr. Shin has been accused of arranging for Lotte subsidiaries to pay large salaries to relatives who did not work there and skipping competitive bidding to give big contracts to companies owned by his relatives, among other financial crimes.
Due to the investigations and regulatory scrutiny, Lotte already had to cancel a potential initial public offering for their hotel unit and was unable to bid on Axiall Corp. in 2016. Following the indictment, Lotte has promised investors that they will move forward with increased transparency and will improve corporate governance. Their full proposal for the future has not yet been made public but it is believed they will now be able to resume plans for the hotel unit IPO.
Lotte Group runs a variety of retail locations as well as hotels, amusement parks, coffee shops, fast food restaurants, and more. They are the fifth largest family-run conglomerate in South Korea, known as a “chaebol,” and generate approximately $89 billion in revenue annually.
The indictment follows a string of other scandals for Lotte this year, including an earlier indictment in July of Shin’s elder half-sister for embezzlement and bribery. The investigation into corruption within Lotte has also been connected with the suicide of the group’s highest ranked executive outside of the Shin family, Lee In-won.
22-lotte-group-officials-indicted-by-south-korean-prosecutors (PDF)