December 28, 2017 10:00 am JST

Lotte's acting head receives suspended sentence over father's embezzlement

Shin Dong-bin to remain in charge of conglomerate instead of going to prison like his father

KENICHI YAMADA, Nikkei staff writer

SEOUL The Lotte group's leader received a suspended prison sentence on Dec. 22 for embezzlement in a decision that will likely allow him to continue holding the reins of the South Korean conglomerate's local and Japanese arms.

The Seoul Central District Court gave Chairman Shin Dong-bin a 20-month sentence, suspended for two years, for abetting the crimes of his father, founder Shin Kyuk-ho. The elder Shin was found to have embezzled corporate funds, paid excessive compensation to his common-law wife and daughter, and caused losses to the group by granting a company run by relatives the right to run concessions at affiliated movie theaters. He was sentenced to four years in prison.

The court determined that Shin Kyuk-ho, who effectively controlled the group until around 2015, was the main offender. Though Shin Dong-bin did not benefit financially from the crimes, the court concluded that he bears responsibility for tacitly tolerating them.

Shin Dong-joo, Shin Kyuk-ho's oldest son and former vice chairman of Japan's Lotte Holdings, was found not guilty of embezzlement.

Prosecutors are considering appealing the ruling, Yonhap News Agency reported.

SCANT RELIEF Lotte's South Korean arm said management and employees will do their best to fulfill their social responsibilities. Lotte Holdings, of which Shin Dong-bin is vice chairman, said it will take appropriate action once details of the ruling are confirmed.

The South Korean group switched to a holding company structure in October as a step toward untangling the web of cross-shareholdings believed to have encouraged misconduct. The ruling touched on this issue, saying Lotte should ne given the chance to bring its management transparency up to international standards and contribute to the nation's economic development. South Koreans have interpreted the suspension of Shin Dong-bin's sentence as acknowledgement of Lotte's reform efforts.

The decision to keep Shin out of prison came as a relief for Lotte. Samsung Electronics Vice Chairman Lee Jae-yong, de facto head of the Samsung conglomerate, was sentenced to prison on corruption charges in August.

But Shin's guilty verdict worsens an already difficult environment. He also faces charges related to the corruption scandal that also ensnared Lee and led to the ouster of then-South Korean President Park Geun-hye. China's ban on South Korea-bound group tours in retaliation for Seoul's decision to host an advanced U.S. missile defense system has dealt a blow to Lotte's hotel business. And compliance may become a bigger issue for the conglomerate as it expands abroad.

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