South Korea’s Lotte founder, chairman guilty of corruption

Asian conglomerate reeling after whole spate of setbacks

SEOUL, South Korea — The 95-year-old founder of the Lotte Group and his son and group chairman were convicted on corruption charges on Friday but will avoid jail.

The Seoul Central District Court sentenced founder Shin Kyuk-ho to four years in prison but didn’t issue a warrant to arrest him in consideration of his age, court officials said on condition of anonymity, citing office rules.

The court also handed a 20-month prison term to his son and Lotte Group chairman, Shin Dong-bin, but suspended that sentence for two years, the officials said. The ruling allows him to stay free if he breaks no laws for two years.

Both the Shins and the prosecutors have one week to appeal, according to the court.

Prosecutors had indicted Shin Kyuk-ho, his mistress and all three of his children including Shin Dong-bin on embezzlement, tax evasion and other charges.

The five indicted people together allegedly evaded a total $76 million US in taxes and embezzled $46 million of company funds. The prosecutors said Shin family members also incurred $123 million of losses for Lotte companies by using their influence to control corporate funds and to make decisions favourable to themselves rather than to shareholders.

Lotte, one of South Korea’s largest conglomerates, with a major presence in Japan and Southeast Asia, has suffered a spate of setbacks.

Last year, its vice-chairman was found dead in an apparent suicide as authorities were expanding investigations into the company. Earlier, it was embroiled in a festering family feud over who would succeed Shin Kyuk-ho after the founder was demoted to a powerless role in the business.

Lotte faced apparent backlash to its business activities in China after agreeing to let one of its golf courses in South Korea be used as a site for deploying a contentious high-tech U.S. missile defence system. Beijing sees the system as a security threat.

Dozens of Lotte Mart discount stores in China were shut for a month each after surprise inspections found violations of fire-safety standards, the company said

Lotte began as a chewing gum company in Japan in 1948.

It now operates businesses in chemicals, food, shopping and hotels, including South Korea’s largest discount and department store chains. Its brands are well recognized across Asia.