Seoul court denies arrest warrant for Lotte Group chairman; corruption probe continues

September 28, 2016 10:44 PM EDT

Lotte Group chairman Shin Dong-bin arrives at a court in Seoul, South Korea, September 28, 2016. REUTERS/Kim Hong-Ji


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By Joyce Lee

SEOUL (Reuters) - A South Korean court rejected a request by prosecutors for a warrant to arrest Lotte Group Chairman Shin Dong-bin in the latest twist in a wide-ranging corruption probe that has convulsed the country's fifth-largest family-run conglomerate.

But an investigation that has constricted management since flaring into public in June, derailing plans for billion-dollar deals, will continue. Prosecutors may re-submit their request, a prosecution source said, and warrant or not, Shin could yet face trial - a process that with appeals could last many months.

A Seoul Central District Court judge said early on Thursday the arrest warrant request had been turned down after a hearing at which Shin, 61, appeared on Wednesday. The court said it didn't view Shin's arrest as necessary.

The probe into the retail to chemicals group had uncovered embezzlement or breach of trust involving about 170 billion won ($155 million), the prosecution source said, without specifying a time frame.

Shin's father, the 93-year-old Lotte Group founder Shin Kyuk-ho, was pushed aside last year in a bitter succession feud between his two sons and was questioned by prosecutors previously in the probe.

A Lotte Group spokesman said many of the suspicions raised by prosecutors against Shin Dong-bin concerned dealings that had been conducted at his father's behest, an explanation the current chairman set out at the Wednesday hearing.

Prosecutors rejected that argument and were critical of the court's move to dismiss the request for an arrest warrant.

"We very much regret that it was denied due to chairman Shin Dong-bin's unreasonable claim that it was his father exercising management control" over dealings under investigation, the prosecution source said.

A spokesman for Lotte's founder declined to comment.

Lotte, which was forced by the investigation to shelve a planned $4.5 billion initial public offering of its Hotel Lotte unit in June, said after the court ruling it aimed to return to business as usual as quickly as possible. Shares in listed units Lotte Shopping <023530.KS> and Lotte Chemical <011170.KS> rose as investors looked forward to that prospect.

"We have a strong intention to do the IPO. After we see what happens with the investigation, we will begin considering it," the Lotte spokesman told Reuters. "When prosecutors' investigation concludes, we plan to announce reform measures and social contribution plans, and begin reviewing investment plans again such as M&A."

The Hotel Lotte IPO had been intended in part to bring more transparency and improve corporate governance at the conglomerate, which was widely criticized in South Korea after a bitter public feud last year between Shin and his older brother over who would succeed their father at the head of the group.

In addition to derailing the IPO, the investigation also prompted Lotte Chemical to drop out of bidding for U.S. chemical firm Axiall Corp (NYSE: AXLL) in June.

It was also the backdrop for the apparent suicide last month of one of the group's top executives, hours before he was due to be questioned by prosecutors.

($1 = 1,095.7000 won)

(Reporting by Joyce Lee; Editing by Tony Munroe and Kenneth Maxwell)



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