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(2nd LD) Lotte Group raided over alleged embezzlement, malpractice

All News 16:15 June 10, 2016

(ATTN: CORRECTS number of affiliates raided in lead following prosecution's correction; ADDS prosecutor's comment in para 7; Minor edits)

SEOUL, June 10 (Yonhap) -- Prosecutors raided the headquarters of South Korea's retail giant Lotte Group, as well as its six affiliates, on Friday over allegations of embezzlement and malpractice.

The Seoul Central District Prosecutors' Office said it sent some 200 investigators to 17 places, including the group's headquarters in central Seoul, its major affiliates and the homes of some executives.

Hotel Lotte Co., TV channel Lotte Homeshopping and its key retail unit Lotte Shopping Co. were all raided.

Prosecutors said they confiscated computer hard drives, accounting books and other documents in their asset transactions.

Travel bans have been put out for some of the company's senior officials, according to prosecutors. Some of the executives are accused of making secret funds by exaggerating unit prices in contracts with their subcontractors.

Prosecutors also suspect the group created slush funds while making transactions between its affiliates.

"We could no longer postpone the raid as there have been tips that evidence was being destroyed," a senior prosecutor said.

The conglomerate, which has sprawling businesses in both South Korea and Japan, has been riddled with a series of scandals from last year, including a high-profile fight between brothers for managerial control and the recent prosecutors' probe into the group's duty-free business unit.

Hotel Lotte Co., which has been preparing to list its shares later this month, postponed the proposed initial public offering (IPO) to next month as its senior officials have come under investigation over alleged bribery.

Prosecutors raided the hotel unit and the house of Shin Young-ja, the head of Lotte Foundation and daughter of group founder Shin Kyuk-ho, over the allegations last week.

The 74-year-old Shin and other company officials are suspected of receiving kickbacks from Jung Woon-ho, chief of the scandal-ridden cosmetics brand Nature Republic, in return for favorable space in Lotte's duty-free shops. Both Shin and Hotel Lotte flatly denied the allegations.

The listing of Hotel Lotte is one of the reform pledges that Lotte Group Chairman Shin Dong-bin has made as part of his efforts to improve its corporate image overall.

The prolonged family feud has virtually come to an end as the founder's second son and incumbent chief won shareholder support in March to tighten his grip on the nation's fifth-largest conglomerate.


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