Lotte Group’s shopping subsidiary is being investigated for allegedly creating a slush fund, prosecutors said

http://www.koreatimes.co.kr/www/news/nation/2015/03/116_175521.html

Updated : 2015-03-19 17:46

Lotte under anti-corruption probe

By Kim Rahn
Lotte Group’s shopping subsidiary is being investigated for allegedly creating a slush fund, prosecutors said Thursday.The Seoul Central District Prosecutors’ Office said it is tracing suspicious money flows involving Lotte Shopping after tips from the Korea Financial Intelligence Unit.
Lotte Shopping is among several companies being examined in the prosecution’s widening corruption investigation. Prosecutors earlier said they are looking into suspicious deals involving POSCO, the Korea National Oil Corp. (KNOC) and Keangnam Enterprises.
According to the prosecution, billions of won was sent from the Lotte Shopping’s head office to affiliated businesses ― Lotte Department Store, Lotte Mart, Lotte Super and Lotte Cinema ― between 2011 and 2012, and why the money was transferred was unclear. The money was later withdrawn in cash.
They have looked into bank accounts of several workers of the company since the end of last year. They also called in five of them earlier this year for questioning over why the money was transferred and what it was spent on.
Officials from Lotte Shopping denied the slush fund allegation.
“The money was spent for due purposes, such as expenses for workers’ transportation fees and dinners,” a company official said. “But there may be misunderstanding because the money was sent from the corporate bank account to individual workers’ accounts. The summoned employees told this to prosecutors during questioning.”
He said the company’s four business units ― department stores, markets, cinemas and supermarkets ― are all run separately, and money transactions between them is impossible.
However, the prosecution is not ruling out the possibility of a slush fund, because some distribution companies have been caught previously creating funds using workers’ personal bank accounts.
The company has already been caught for tax evasion in 2013, when the Seoul Regional Tax Office imposed a 60 billion won fine after an audit.
Since the Park Geun-hye administration’s launch, speculation has continued that Lotte would be the target of an investigation, as the group obtained business favors under the previous Lee Myung-bak administration, including the controversial construction of the Lotte World Tower skyscraper.
Prosecutors are now investigating various corruption allegations that took place under the Lee government.
POSCO’s construction arm is under probe for an alleged slush fund creation in its construction of expressways in Vietnam.
The head offices of the KNOC and Keangnam Enterprises were raided as part of an investigation into the failed “energy diplomacy.”
Keangnam obtained more than 35 billion won in special loans from the government for overseas development projects, and the prosecution found about 10 billion won of the money was instead sent to bank accounts of Keangnam Chairman Sung Woan-jong’s family members.
Sung, a former ruling Saenuri Party lawmaker, is a close confidant of former President Lee.
The KNOC also obtained 224 billion won in a special government loan, and prosecutors are investigating whether it exaggerated expected profits from overseas projects in getting the loan or used part of the money to bribe related domestic and foreign officials.

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