Lotte Chairman Jailed in Bribery Case That Toppled President

A Seoul court jailed Lotte Group Chairman Shin Dong-bin after convicting the tycoon of bribery for his role in a scandal that toppled South Korea’s former president, creating a vacuum atop the nation’s largest retail conglomerate.

Shin was sentenced to 30 months in prison after the Seoul Central District Court found him guilty of charges stemming from Lotte’s decision to give 7 billion won ($6.5 million) to a confidante of President Park Geun-hye, allegedly in exchange for government favors in providing a license to operate duty-free stores. Prosecutors had sought a four-year jail term.

He becomes the second head of a top conglomerate to be imprisoned for seeking to curry favor with impeached President Park by bribing one of her confidantes. The de-facto head of technology giant Samsung Electronics Co. was jailed last year in a related trial but he was unexpectedly released last week on appeal, in a ruling that was perceived as a setback to government pledges to curtail the power of the nation’s corporate elite.

Shin, who turns 63 on Wednesday, was also fined 7 billion won. He can appeal the ruling with the Seoul High Court.

The chairman, who’s been running the retail-to-chemicals giant as chairman since 2011, had been seeking to invest billions of dollars to expand overseas. Then, a series of crises struck.

Turmoil first erupted in 2015, when a family fracas spilled into public view as Shin’s older brother led a boardroom coup that failed. After that, Lotte grappled with corruption investigations and intensifying regulatory scrutiny, which took a toll on the group’s businesses, with Lotte canceling a potential $4.5 billion initial public offering of a unit and withdrawing a bid for chemical-maker Axiall Corp. in 2016. Last year, Lotte was caught in a diplomatic row with China after the company offered its land to the Korean government, which sought to install a controversial U.S. missile defense system opposed by China.

China used to be one of Shin’s biggest priorities as Lotte expanded in the world’s second-largest economy aggressively with investment plans that included developing a 3 trillion won theme-park project in Shenyang and increasing the number of stores in the country. As China-Korea relations soured, most of Lotte’s 112 marts and supermarkets in China were shut down by Chinese authorities for alleged fire-safety violations, and the Shenyang project was halted.

The group’s efforts to sell the stores in China have stalled as alleged fire-safety infractions have created uncertainty about whether a new owner could operate the stores, a company executive said.

Lotte fixed the fire-safety issues last year, but authorities haven’t moved forward with the company’s request for a reinspection, said the Lotte executive, who declined to be named because of internal policy.

Lotte is open to various sale possibilities and negotiating with several companies, a Lotte Shopping Co. spokesman said, adding that the company has the option to sell its entire China mart business to one company, or to split up the operations to sell to several firms. Goldman Sachs Group Inc., which Lotte hired five months ago for the sale of the China marts, declined to comment. China’s fire services department didn’t immediately respond to an emailed request from Bloomberg for updates on the Lotte stores.

Bloomberg | February 13, 2018
https://www.bloomberg.com/politics/articles/2018-02-12/how-china-is-getting-serious-about-financial-risk-quicktake-q-a