Prosecutors indict 5 Lotte family members on corruption

SEOUL, South Korea – South Korean prosecutors said Wednesday they indicted the Lotte Group’s founder, his mistress and all of his three children on embezzlement, tax evasion and other charges.

Five family members including Lotte’s founder Shin Kyuk-ho, 94, and the group’s current chair, Shin Dong-bin, 61, together allegedly evaded a total $76 million in taxes and embezzled $46 million of company funds, Seoul Central District Prosecutors’ Office said in a statement.

Three others are the founder’s older son Shin Dong-joo, 62, his daughter Shin young-ja, 73, and his 57-year-old common-law wife Seo Mi-kyung.

The prosecutors said the Shin family members also incurred $123 million of losses to Lotte companies as the family used their outsized influence to control corporate funds and to make decisions favourable to them, not to shareholders.

When Lotte sold its businesses to the founding family members, they were sold at prices way below market value. But when Lotte bought businesses or stocks from its founding family, it had to pay premiums, the prosecutors said. For example, Lotte sold its lucrative popcorn business at its movie chains to the founding family members, allowing them to monopolize the profits from selling popcorns to moviegoers. The profit should have gone to Lotte Shopping, which operates one of the biggest movie theatre chains in South Korea, the officials said.

Lotte also paid a total 50.8 billion won ($45 million) as salaries from 2005 to 2016 to two of the founder’s children even though they did not hold any positions or have any duties with the company.

Founding families that control chaebol, the big businesses dominating the South Korean economy, have been convicted in the past. The chiefs of Samsung, Hyundai Motor and SK have been found guilty of white colour crimes but later received presidential pardons.

It is unusual for prosecutors to seek charges against the entire family of a major South Korean business.