Lotte chief faces corruption ruling, possible jail time

Lotte

21/12/2017 23:00

* Seoul court to rule on corruption charges against Shin 
Dong-bin 
    * Prosecutors sought 10-year jail term for Lotte Chairman 
Shin 
    * Lotte's dept stores freeze wages partly on China woes 
-officials 
 
    By Joyce Lee 
    SEOUL, Dec 22 (Reuters) - A South Korean court will rule on 
corruption charges against the chairman of Lotte Group on 
Friday, with the threat of a lengthy jail term that could stymie 
the firm's ambitions and cap an already turbulent year for its 
business in China and at home. 
    Prosecutors have sought a ten-year jail term for Shin 
Dong-bin on charges of embezzlement and breach of trust 
following a high-profile prosecution probe since 2016 into the 
fifth-biggest conglomerate of South Korea.  urn:newsml:reuters.com:*:nS6N1M400V 
    Shin denies the charges. His lawyers say he was not involved 
in decision-making for two of the three breach of trust charges, 
while a third was a legitimate business decision. He was unaware 
of the issue behind the embezzlement allegations, they say.  
    The court ruling could see Shin immediately jailed, handed a 
suspended sentence or found innocent. The latter two would 
enable him to continue running Lotte and its 110.8 trillion won 
($102.6 billion) worth of assets for the foreseeable future. 
    He is expected to be detained immediately if the court hands 
him a jail term of over three years.  
    "In the case of a guilty verdict, it could halt Shin's drive 
to grow Lotte from a domestic-oriented company into a global 
group and weaken his position in Lotte's Japan-based holding 
company," said Park Ju-gun, head of research firm CEO Score. 
    There are already major doubts about Lotte's growth outlook, 
with its decade-long push into China lying in tatters after it 
became the highest-profile corporate victim of a spat between 
Beijing and Seoul over South Korea's installation of a U.S. 
missile defence system.  urn:newsml:reuters.com:*:nL4N1MR6B7 urn:newsml:reuters.com:*:nL4N1LN20L     
    Shunned in China, its key market, after it was pressed by 
Seoul to provide land for the THAAD missile defence system, 
Lotte's third-quarter China hypermarket sales were nearly wiped 
out to about $277,793 from around $264 million a year ago.  
    Nearly all Lotte Mart stores in China have been shut for 
much of the year over alleged fire safety issues, and the group 
has now put the business on the block.  urn:newsml:reuters.com:*:nL4N1MN1AO  
    But the sale is expected to be delayed past the end-2017 
deadline Lotte had sought, Lotte Corp  004990.KS  official Choi 
Min-ho said, without giving a reason.  
     
    BATTENING DOWN THE HATCHES 
    Lotte's businesses in South Korea, including its major 
duty-free operations, that had counted on big-spending Chinese 
tourists, remain under pressure amid curbs on Chinese tour 
groups travelling to the country.  urn:newsml:reuters.com:*:nL3N1NY20K 
    South Korea's credit rating agencies have downgraded or cut 
their outlook for corporate bonds of the group's flagship 
retailer Lotte Shopping  023530.KS  and Hotel Lotte  HTLOT.UL , 
citing hurdles in improving their financial stability. 
    Lotte, which shelved plans for an estimated $4.5 billion IPO 
of Hotel Lotte amid the investigation, is now battening down the 
hatches as a difficult year draws to an end. 
    Lotte Shopping has frozen wages for its department store 
business this year for the first time since 2009, three Lotte 
officials said this week, declining to be identified as the 
matter was sensitive.  
    While Lotte confirmed wages had been frozen, the 
retail-to-chemical conglomerate declined further comment.  
    However, one of the officials from the department store 
business said: "Wages have been frozen due to various factors, 
but the THAAD issue was one of them."  
 ($1 = 1,079.9400 won) 
 
 (Reporting by Joyce Lee, additional reporting by Heekyong Yang 
and Haejin Choi; Editing by Adam Jourdan and Himani Sarkar) 
 ((jungyoon.lee@thomsonreuters.com; +82 2 3704 5609; Reuters 
Messaging: jungyoon.lee.thomsonreuters.com@reuters.net)) 
 
Keywords: LOTTECORP CHIEF/