[THE INVESTOR] South Korean prosecutors on Aug. 24 said it secured evidence that Lotte Engineering and Construction has accumulated over 30 billion won (US$26.8 million) in slush funds over 10 years.

Seoul Central District Prosecutor’s Office -- which launched an all-out probe into the nation’s fifth-largest conglomerate in June -- raided the Lotte E&C office early this month and confiscated computer hard disks and documents related to the allegations. 

Based on the findings, authorities believe Lotte’s construction arm created slush funds by inflating payments to its 19 subcontractors and later receiving them back from 2002 to 2011.

Authorities believe the fund was siphoned off to the policy coordination unit of Lotte Group, which is regarded as the control tower of the conglomerate.

Meanwhile, prosecutors will summon Lotte Group President Hwang Gak-kyu, head of policy coordination and a close aide of Lotte Group Chairman Shin Dong-bin, on Aug. 25 as a suspect to be questioned over the retail giant’s numerous charges, which include embezzlement and slush fund creation.

The prosecutors will then bring in Shin’s other key men, including President Lee In-won, head of external relations, and President So Jin-se, head of external relations, to grill them over their involvement in the company’s irregularities. 

By Ahn Sung-mi (sahn@heraldcorp.com)