Go to Contents Go to Navigation

Crisis-hit Lotte chairman likely to face off against elder brother again

All News 14:40 June 12, 2016

SEOUL, June 12 (Yonhap) -- Lotte founder Shin Kyuk-ho's two sons are likely to face off again later this month over the control of Lotte Group, as the fifth-largest South Korean conglomerate is plunging deeper into crisis due to prosecutors' widening probe into suspicions of a slush fund and other illegal acts.

Officials at Lotte said Sunday that Lotte Holdings, a de facto holding company for the conglomerate's far-flung operations in South Korea and Japan, will hold its regular shareholders' meeting in Tokyo in late June, where industry watchers forecast Shin's disgraced eldest son Dong-joo will seek to oust his brother and incumbent group chairman Dong-bin from management posts.

The looming clash comes after prosecution investigators raided Lotte's headquarters offices and six of its affiliates, as well as the chairman's office and residence, on Friday, expanding investigations into allegations of embezzlement and malpractice. Prosecutors then summoned a number of top group executives, starting Saturday, to question them about suspicions that the group created slush funds mainly while making transactions between its affiliates.

Lotte Group Chairman Shin Dong-bin has tightened his grip on the retail giant as he won shareholder support at Lotte Holdings' previous shareholders' meeting in March following a fierce succession feud with Dong-joo, the former vice chairman of the Tokyo-based holding company.

Dong-joo has claimed he is his father's hand-picked successor and is currently taking care of his 93-year-old father, who has been hospitalized, in what could be a move to project an image that he is an heir. Meanwhile, Dong-bin argued that his father is unable to make reasonable judgments due to mental health problems.

Dong-joo has reportedly demanded that Lotte Holdings shareholders vote on his proposal calling for the dismissal of Dong-bin and Lotte Holdings President Takayuki Tsukuda from the post of company director at the shareholders' meeting. Lotte Holdings is expected to adopt the proposal as a formal agenda item for a vote, according to the officials.

Dong-bin prevailed in two previous shareholders' meeting, including the one in March, a move that cemented his footing in Lotte in a power struggle with his elder brother.

Still, Dong-joo has asked Lotte Holdings to set up an emergency consultative meeting ahead of the shareholders' meeting, citing the crisis over the prosecutors' investigation.

His call is widely seen as an attempt to mount a challenge against Dong-bin in a fight for managerial control of the group.

Still, Lotte Group remains confident that the prosecutors' investigation is unlikely to affect Dong-bin's management control, saying there is no sign of unrest among the major shareholders in Lotte Holdings.

Adding to the group-wide crisis, local prosecutors are also widening the probe into the Lotte founder's eldest daughter and the incumbent chairman's sister Shin Young-ja, who is 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 have flatly denied the allegations.

Hotel Lotte Co., which recently postponed its initial public offering to next month due to the investigation into Shin Young-ja, could be forced to put off the IPO schedule again depending on the result of the prosecutors' ongoing probe into allegations of a slush fund.

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


Send Feedback
How can we improve?
Thanks for your feedback!