Lotte Group said Friday that it has hired South Korea’s mega law firms to represent and defend its position as Seoul prosecutors widen their probe into the country’s fifth-largest conglomerate over alleged embezzlement and slush fund creation.

Korea’s top law firms including Kim & Chang, Bae, Kim & Lee (Taepyeongyang), Lee & Ko (Gwangjang) and Shin & Kim (Sejong) are set to represent Lotte Group’s headquarters and its major affiliates which are currently under heavy investigation, according to local reports.

A spokesperson for Lotte Group confirmed to The Korea Herald that “Kim & Chang will represent the stance of the group’s main policy coordination bureau,” but declined to comment further.

A team of lawyers from Kim & Chang, led by former chief of the Seoul Central District Prosecutors‘ Office Chun Sung-gwan and former vice chief of the Supreme Prosecutors’ Office Cha Dong-min, will represent Lotte Group’s policy coordination bureau, the Chosun Ilbo reported Friday.

At the same time, “dozens of lawyers” from the remaining three law firms Kim & Lee, Lee & Ko and Shin & Kim are slated to each represent Lotte’s core affiliates that are under legal scrutiny, including Lotte Chemical, Lotte Shopping and Lotte Homeshopping, it said.

“We are not in a position to confirm case-by-case which law firms will be representing which of our affiliates (as they each make decisions on their own),” the group spokesperson said. “The selections are also set to change according to circumstance,” he said.

Since last week, local prosecutors have raided the residence of Lotte chairman Shin Dong-bin and founder Shin Kyuk-ho, the group’s headquarters in Seoul and its core affiliates including Hotel Lotte, the de facto holding company of the group’s operations in Korea.

The investigation pushed Hotel Lotte, which runs the group’s lucrative hotel and duty-free business, to indefinitely postpone plans to pursue an initial public offering valued at up to $4.5 billion, which had been expected to be the world’s biggest IPO of the year.

With the investigation continuing, the prosecution said that it has seized evidence suggesting Lotte created a slush fund through dubious forms of intercompany asset trading and questionable money transfers involving a unit of Lotte Japan at Lotte Chemical.

Lotte Chemical, the group’s petrochemicals arm, is suspected of embezzling funds in the process of importing raw materials from overseas vendors using paper companies in Hong Kong and Lotte’s Japanese units.

The chemicals firm on Wednesday released a statement denying the allegations, saying the company for the most part directly purchased its raw materials from overseas and managed the transactions. It also denied allegations that it created a slush fund by siphoning cash to a subsidiary of Lotte Japan, with which it terminated ties in 2013.

The prosecution has asked Lotte Chemical to submit sufficient records detailing its transactions with the unlisted Japanese company, stating plans to seek a joint probe with investigators in Japan if necessary.

Among other cases, local prosecutors are further zeroing in on bribery allegations involving Lotte Corp., which was granted approval during the former Lee Myung-bak administration in 2009 to build Lotte’s landmark skyscraper in Jamsil, southeastern Seoul, despite safety concerns over flight paths at the neighboring Seoul Air Base.

By Sohn Ji-young (jys@heraldcorp.com)