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Lotte Group chairman Shin Dong-bin

Lotte Group chairman Shin Dong-bin, 62, was sentenced to 20 months in prison suspended for two years for involvement in management improprieties by the group’s ruling family. On Dec. 22, Hon. Judge Kim Sang-dong presiding over the 24th criminal division of Seoul Central District Court delivered sentences of 20 months in prison suspended for two years against Shin Dong-bin and four years in prison for general chairman Shin Kyuk-ho, 95, on charges of breach of fiduciary duty for losses caused to Lotte Shopping.

The losses stemmed from the sale of management rights for Lotte Cinema branches at below-market rates to companies where Shin Kyuk-ho’s common-law wife, Seo Mi-kyung, 58, a Yuki Co. board member, and daughter, Shin Young-ja, 72, a Lotte Scholarship Foundation chairperson, were majority shareholders.

Due to his advanced age, the court did not place the elder Shin under court custody. The court also issued sentences of two years in prison for Shin Young-ja on the same charge and two years in prison suspended for three years for Seo.

Shin Dong-bin and Shin Kyuk-ho were further convicted on embezzlement charges according to the Act on the Aggravated Punishment, etc. of Specific Economic Crimes for conspiracy to make a fraudulent payment of 10.1 billion won (US$9.4 million) to Seo’s daughter Shin Yu-mi.

“This is a case of embezzlement and breach of trust in which a chaebol family forced affiliates to pay massive amounts of illicit money to family members or delivered profits to private companies that were supposed to go to the affiliates, providing a clear illustration of the privatization of a company,” the court said.

But the court also acquitted Shin Kyuk-ho and Shin Dong-bin on a majority of charges against them. The two of them, along with former Japanese Lotte Group vice chairman Shin Dong-joo, 63, were found not guilty on charges related to 39.1 billion won (US$36.3 million) in fraudulent payments to Shin Dong-joo.

The court concluded that Shin Dong-bin and Shin Dong-joo had “assisted Shin Kyuk-ho from the position of successors and performed their duties as managers for the benefit of the entire group.” The court also acquitted Shin Kyuk-ho on charges of evading 85.8 billion won (US$79.6 million) in gift taxes by giving Seo and Shin Young-ja shares in the Japanese-based Lotte Holdings disguised as sales, on the grounds that the statute of limitations had expired and Seo is not a resident of South Korea.

The Lotte Group is now breathing a sigh of relief after avoiding a potentially disastrous leadership vacuum with Shin Dong-bin’s suspended sentence. In an official statement on Dec. 22, Lotte said it “respects the court’s decision” and would “work to contribute to economic development and fulfill its social responsibility.”

Prosecutors have requested sentences of four years in prison and 7 billion won (US$6.5 million) in penalties against Shin on charges of giving 7 billion won to the K-Sports Foundation in exchange for requests made to then-President Park Geun-hye in connection with Lotte’s duty-free stores. Sentencing for the trial is scheduled to take place on Jan. 26 of next year.

By Kim Min-kyung and Kim So-youn, staff reporters

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