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[Newsmaker] Lotte Shopping chief faces kickbacks claims

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Published : 2014-04-03 20:38
Updated : 2014-04-03 20:38

It is a widely known fact that the retail sector is one of the least transparent segments in Korea.

Kickbacks are ― or at least were ― rampant, mostly because there are simply too many vendors vying to get their products on the shelves.

Lotte appears to have been no exception, as seen in the recent case involving Shin Heon, CEO of Lotte Shopping, who will soon be summoned for questioning over allegations he received cash kickbacks from a local subcontactor. 
Shin Heon (Lee Sang-sub/The Korea Herald)

The Seoul Central District Prosecutors’ Office said on Thursday that it has placed a travel ban on Shin that went into effect as of Wednesday.

The prosecution discovered Shin’s involvement as they were investigating executives from Lotte Homeshopping ― a sister company of Lotte Shopping ― on allegations they had received cash bribes several times from a subcontactor between 2008 and 2012.

They admitted that they offered business favors to the sub-contractor. But they did not go down alone.

The pair confessed that they shared the bribes with Shin, who had served Lotte Homeshopping’s CEO between 2008 and 2011.

The amount of money that Shin had hidden away in his private coffers has yet to be revealed.

The 60-year-old businessman was not available for comment, but for now the company is saying that he denies the charges.

Shin is considered one of the few inner circle members of Lotte Group chairman Shin Dong-bin, so the idea of him behind bars is rocking the nation’s fifth-largest conglomerate.

Shin joined Lotte Group in 1979, and has served as CEO for key retail affiliates of Lotte Shopping, including Lotte Homeshopping and Lotte Department Store.

The bigger concern now is, assuming Shin is in fact guilty as charged just how big the scope of his crimes will be, and the repercussions it could have on Lotte Group. The prosecution rarely goes after someone unless they believe they have a case.

Sources believe that given Shin’s status within the group, the prosecution may try to link his crimes with attempts to create slush funds.

Now, other fellow retailers, such as CJ and Shinsegae, are also jittery, again, because bribes from vendors are far from out of the norm in the local retail industry.

“Securing sales and distribution channels is the biggest key for business success in the retail sector,” said an official from a subcontractor of Emart, the supermarket chain of Shinsegae Group.

This means that unless the suppliers try to gain favors any way they can, they have no hope of getting their goods in the stores.

These practices also run counter to the Park Geun-hye administration’s initiative to create greater fairness for smaller companies.

By Seo Jee-yeon (jyseo@heraldcorp.com )

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