hankyoreh

Clouds gather over the Lotte Building and Lotte Department Store in Seoul’s Songpa district after a prosecutors’ search and seizure operation was carried out

South Korean prosecutors’ current investigation into the Lotte Group is notable in several respects. They made the unusual move of sending in two investigative teams from Seoul Central District Prosecutors’ Office to do a simultaneous search and seizure on the group’s policy headquarters - the “brains” of the group, as it were - as well as major affiliates and the owning family’s residence and offices. It could mean that they plan to investigate corrupt practices throughout the group, and that even the owners may be punished. The Lotte Group’s approach to management remains insular and pre-modern, with the most cross-shareholding of any of South Korea’s chaebol. Hopefully, this investigation will have it turning over a new leaf.

The investigation could be an opportunity to root out persistent back-scratching between government and business. The vice of illegal lobbying - secret company slush funds being passed on as bribes to politicians and the government - is widespread, and Lotte has been fingered as a prime example of exploiting its relationships with politicians to build its business.

Allegations are rife. Lotte World 2, which had been scratched several times since 1998, suddenly got its building permit as soon as the Lee Myung-bak administration came to office in 2008. This raises a number of questions. Why did the military have a sudden change of heart after over a decade of opposition? If there was administration support, what cost did it come at? The military also made an abrupt about-face on its opposition to the building of a second privately funded highway between Seoul and Incheon, which began construction in 2012. Claims of preferential treatment for Lotte have also been made about the repurposing of the Lotte World site in Busan, the group’s expansion into beer brewing, and the growth of its duty-free store - none of which would have been possible without support from deep within the administration. It should also be noted that Lotte more than doubled its assets over the five years of the Lee presidency, with seventeen large-scale mergers and acquisitions in South Korea alone. It’s enough to raise some serious questions about illicit transactions. The prosecutors are going to need to get all the way to the bottom here, not just on the slush fund and corporate corruption allegations but on these questions too. Collusion between business and politicians is a threat to the market economy, and there’s no reason to delay putting a stop to it.

One thing we should be on guard against is the possibility of political calculations influencing the investigation. Already, some are suggesting the current investigation is really an attempt to “take care of” former administration figures to help the governing Saenuri Party out after its bad general elections loss in April. Rumors are rife that Lotte is being made an example of and reined in amid predictions of economic crisis. The mere fact that such claims are being made undercuts the investigation’s effectiveness. We’ve already witnessed the failures of investigations that were ordered from on-high into improprieties at POSCO and KT. There’s an even bigger disaster in store if prosecutors try to the use the investigation to draw attention away from the scandals unfolding around former and current chief prosecutors Hong Man-pyo and Jin Kyung-joon. They should forgo any political considerations and keep a steady focus on the root of the corruption.

Please direct questions or comments to [english@hani.co.kr]