Greatest Crisis since Foundation
On June 11, the Seoul Central District Public Prosecutor's Office launched an investigation into the Lotte Group’s slush fund allegations by summoning its employees. According to the public prosecutor’s office, the group raised a slush fund of billions of won during the course of the construction of the second Lotte World in the previous government while being given illegal preferential treatment with regard to a change in the use of land in Busan City for the Busan Lotte Town Tower and its business in the domestic beer market.
On the previous day, the public prosecutor’s office raided the headquarters of the group located in Sogong-dong, Seoul along with its subsidiaries such as Hotel Lotte and Lotte Shopping, too. The 34th floor of the Lotte Hotel in Seoul, which is a residence and office of Lotte Group general chairman Shin Kyuk-ho, and Lotte Group chairman Shin Dong-bin’s house in Jongno-gu were searched as well.
The group is shocked with even its heads being included in the targets of the investigation. Depending on investigation results, Lotte Duty Free’s business extension, the M&A deals the group is currently working on and the initial public offering of Hotel Lotte scheduled for next month can take a direct hit.
In the meantime, humidifier sterilizer victims and civic organizations in South Korea are showing no tolerance at all in spite of the recent apology of the Lotte Group. Its subsidiary Lotte Mart produced and sold humidifier sterilizers containing polyhexamethylene guanidine (PHMG) from 2005 and hundreds of people who used the products, including pregnant women, children and infants, died of lung diseases six years later. In this regard, the prosecutor’s office has asked for a warrant to arrest Lotte Corporation CEO Roh Byeong-yong, who was the head of sales at the company between 2004 and 2007.