Lotte Group Chairman Shin Dong-bin was sentenced to a two-and-a-half year jail term for bribery charges on Tuesday, a surprising result that could put a stop to key business decisions of the country’s fifth largest conglomerate, including the planned initial public offering of its hotel unit.
The Seoul Central District Court sentenced Shin to 30 months in prison and a fine of 7 billion won ($6.47 million) after finding him guilty of bribery charges in connection to an influence-peddling scandal that ousted former President Park Geun-hye early last year. Following the verdict, Shin was immediately put behind bars.
Shares of Lotte Corp., the holding company of Lotte Group, fell more than 7 percent to a near eight-week low in early trading on Wednesday.
The court also sentenced Park’s secret confidante Choi Soon-sil to 20 years in prison and a fine of 18 billion won. In December, the prosecutors sought a four-year jail term for Shin and 25 years for Choi.
The court said it sentenced Shin a jail term without probation because it found he had offered 7 billion won in bribes to Choi`s K-Sports Foundation in exchange for a government favor to renew a license for its duty-free shop in Seoul.
It said Lotte Group competed unfairly against other rivals that had gone all out to win the license. “Condoning bribery on grounds that the president had ordered it would only prompt more companies to resort to bribery,” it added.
The latest ruling is a big blow to Lotte as it had hoped the charges would be dismissed after the company received back the 7 billion won from K-Sports Foundation. Shin, who denied the charges during trials, had avoided a jail term late last year when the court found him guilty of breach of trust and embezzlement but sentenced him to 20 months in prison with a two-year probation.
Following the latest verdict, the country’s fifth largest conglomerate will face a leadership vacuum for the first time in its 51-year history.
This would hinder its group-wide reorganization efforts to transform into a holding company structure, an initiative started last year to streamline complex cross-shareholding ties and consolidate Shin’s control. IPO plans for Hotel Lotte, which has served as the group’s de facto holding entity, would also be delayed.
It may also have to close one of its duty-free stores in Seoul less than a year after it reopened. Upon growing demand from the political circle to postpone the third round of bidding to give duty-free store operating licenses, the Korea Customs Service in 2016 announced it would cancel Lotte Group’s license if Shin was convicted of bribery charges.
On the day of the verdict, Lotte Duty Free coincidentally announced it will partially pull its business out of Incheon International Airport due to a sharp fall in sales after the number of Chinese visitors to Korea nearly halved last year. Beijing had banned all group tours to Korea since March 2017 in protest against Seoul’s deployment of a controversial U.S. missile shield, which Beijing fears could be used to spy on its military.
Shin’s verdict stands in contrast to another court decision involving Samsung Group heir apparent Jay Y. Lee, who was indicted on similar bribery charges in the same corruption scandal. Earlier this month, the Seoul High Court reduced Lee’s five-year jail term sentenced in the lower court to two and a half years with a four-year probation, immediately setting him free. Lee had been detained since Feb. 17 last year.
Lee was cleared of most of the charges except for having suspicious motives for sponsoring equestrian training for Choi’s daughter. The appeals court said it could not see his donations to Choi’s foundations as bribery in return for the president’s influence over government authorities to facilitate the merger of two Samsung Group entities to cement his succession of the conglomerate. The court added that out of customs, the conglomerate could not have turned down the president’s demand for funding.
By Chae Jong-won and Kim Hyo-jin
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