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Lotte trials seen hampering group's Korea-Japan ties

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Lotte Chairman Shin Dong-bin   © Kyodo

SEOUL -- With three top figures in Lotte group's founding family headed for lengthy trials on corruption charges, the multinational's efforts to link its South Korean and Japanese sides together will likely be put on hold.

The Seoul Central District Prosecutors' Office on Wednesday indicted Lotte group Chairman Shin Dong-bin and his elder brother Shin Dong-joo -- formerly vice chairman of Lotte Holdings in Japan -- along with group founder Shin Kyuk-ho.

Five members of the founding family have now been charged in the case, including Shin Kyuk-ho 's daughter Shin Young-ja and his common-law wife Seo Mi-kyung. 

Shin Dong-bin is accused of embezzlement and breach of trust on sums totaling 175.3 billion won ($156 million). He remains group chairman and will fight the charges at trial.

Patriarch Shin Kyuk-ho also faces embezzlement and breach of trust counts. He allegedly evaded taxes on transfers of Lotte Holdings shares and improperly compensated relatives, among other wrongdoing. Shin Dong-joo is charged with embezzlement for receiving improper compensation from a group company in South Korea. 

Prosecutors have indicted 24 managers in all in a probe that began in June. Lotte's South Korean said in a statement it would cooperate in good faith during the legal proceedings.

Prosecutors had in September requested a warrant for Shin Dong-bin's arrest but were denied, so Lotte has avoided seeing its chief detained. But the trials are expected to take about two years to reach verdicts, creating a potentially long-term distraction from day-to-day operations.

Lotte's South Korea and Japan operations once did hardly any cooperation. But Shin Dong-bin, who won a family feud last year over management control, has sought to run both sides as a single business. These efforts had only just begun but were already attracting attention for their strategic potential.

There have been exchanges of personnel and collaboration on sales in countries besides Japan and South Korea. The Japanese side has supported the Korean half's duty-free store business and invested in its confectionary operations.

The group had envisioned listing Hotel Lotte -- the South Korean side's de facto holding company -- to raise funds for capital spending by the Japanese half. The corruption probe has set this plan back. The group aims for a listing next year, but the trials add "an element of uncertainty," a person familiar with the group said.

Now that Shin Dong-bin has been indicted without arrest, a ban on his travel outside of South Korea was lifted. But the legal proceedings could still slow down his pursuit of a unified group.

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