Systematic malpractices
The prosecution launched an investigation into the allegation of professional negligence ordered by Lotte Group founder Shin Kyuk-ho and chairman Shin Dong-bin. It is said that the former is also involved in a tax evasion of more than 600 billion won as a mastermind.
This investigation has to do with the fact that the Lotte Group has been highly aggressive in M&A since the mid-2000s. During the past 10 years, the group acquired more than 30 companies for 14 trillion won or so. According to the prosecution, Lotte Group subsidiaries were engaged in malpractices during the course for financing purposes.
At the same time, many of the subsidiaries, such as Lotte Shopping and Lotte Data Communication Company, are regarded as having intentionally incurred losses by share disposal so that the owners of the group can increase their shareholdings with ease. In addition, the founder and the chairman allegedly gave direct orders so their personal real estate properties can be bought at high prices by subsidiaries. Those properties include some shops in Lotte Department Stores, too.
According to insiders, the investigation is likely to take a long period of time as so many Lotte Group subsidiaries are complexly intertwined with one another and the group itself has a somewhat opaque corporate governance structure. “The group’s defense is quite well-organized,” said a high-ranking prosecutor.