[THE INVESTOR] Shin Young-ja, the chairwoman of Lotte Foundation and daughter of Lotte Group founder Shin Kyuk-ho, appeared at the Seoul Central Prosecutors’ Office in the morning July 1 as the bribery investigation involving the chairwoman deepens in South Korea.

Shin Young-ja is the elder sister of Lotte chairman Shin Dong-bin and SDJ Corp. chief Shin Dong-joo, who have been fighting over control of the group.

She is the first person from Lotte’s founding family to be summoned by the prosecution since the embezzlement probe into Lotte Group took off in early June.

“I will humbly cooperate with the prosecution and answer all questions with sincerity. I am sorry,” Shin Young-ja told local reporters on July 1.

The 74-year-old Lotte Foundation chief, is accused of accepting kickbacks from the now-disgraced former chief of cosmetics brand Nature Republic in exchange for securing spaces at Lotte’s duty-free outlets.

Allegations against Shin say that she received up to 1.5 billion won ($1.28 million) in bribes from former Nature Republic CEO Jung Woon-ho through BNP Trading, a retail consulting company owned by her son.

Prosecutors have reportedly seized additional evidence that Shin granted favors in exchange for bribes in granting a food company entry into Lotte Department Store and other cosmetics firms’ entry into Lotte Duty Free as well.

On June 28, prosecutors had raided the office of a high-ranking executive of the Lotte Foundation in Seoul, who is known to be a close advisor to Shin.

Shin’s own home, the offices of Hotel Lotte’s duty-free operations and the offices of her son’s company BNP Trading were also raided on June 2.

The ongoing bribery scandal is expected to hurt Lotte’s chances of winning a crucial government license to resume operating its landmark duty-free outlet in Jamsil, Seoul, industry insiders said.

The Jamsil store, which generated roughly 600 billion won in annual sales in 2015 as Lotte’s second-largest duty-free shop in Seoul, shut down on June 26 as its license had expired.

Resuming the store’s operation is crucial to the nation’s fifth largest conglomerate, which generates a majority of its retail sales from its duty-free business.

If Shin Young-ja is found guilty, Lotte Duty Free is unlikely to win the upcoming bid for four new licenses scheduled for the end of this year, according to the Korea Customs Service.

Cheon Hong-uk, the commissioner of the KCS, which issues the licenses, told local newspaper MoneyToday on Friday that Lotte Duty Free “will be (negatively) impacted” should the prosecution discover evidence that it engaged in unfair trade or bribery.

Deepening Lotte crisis

Shin Young-ja’s appearance on July 1 is fueling fresh speculations that Lotte Group chairman Shin Dong-bin may also soon be summoned as the prosecution zeroes in on the group’s top executives.

The Seoul Central Prosecutor’s Office on Thursday said it has directly pressed chairman Shin Dong-bin to submit transaction records between Lotte Chemical and a number of Lotte’s affiliates in Japan.

The group’s petrochemicals unit is suspected to have embezzled funds in the process of importing raw materials from overseas vendors and hiding the funds through Lotte’s unlisted Japanese units.

However, Lotte Chemical has reportedly refused to submit records of the transactions under question on the basis that shareholders of Japan-based Lotte Bussan Co. disapprove of the move, which is perceived by the authorities as “abnormal.”

“We believe that chairman Shin has can submit the given documents on his own will as he possesses voting rights in (Tokyo-based) Lotte Holdings,” the prosecution told the media.

The future direction of the ongoing investigation is expected to further fuel the ongoing power struggle between incumbent chairman Shin Dong-bin and his ousted elder brother Shin Dong-joo.

Shin Dong-joo, who returned from Japan after losing a shareholders’ vote for control over Tokyo-based Lotte Holdings for the third time last week, is expected to push for a compensation suit against his younger brother in the case that he is indicted, according to local news reports.

Meanwhile, Shin Dong-joo-controlled SDJ Corp. revealed on June 29 that the 92-year-old Lotte founder Shin Kyuk-ho has been treated for dementia since 2010, in a move which observers say may be a disguised attempt to attack Shin Dong-bin’s leadership.

If Shin Kyuk-ho is found to have been suffering from dementia, Korean prosecutors are likely to focus on Shin Dong-bin as being solely responsible for any wrongdoing found at the group, they said.

Lotte chairman Shin Dong-bin is scheduled to return to Korea this weekend, according to the group.

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