Ex-Lotte CEO summoned in ongoing fraud case

The former CEO of Lotte Corporation as well as Lotte Chemical, Kee June, was summoned by the Seoul prosecutor’s office on Tuesday for his alleged involvement in the chemical company’s accounting fraud and in Lotte Group’s creation of slush funds.

In 2006, Lotte Chemical, which was called KP Chemicals at the time, cooked its books and received some 27 billion won ($23 million) worth of tax rebates from the government, according to the prosecution.

The company claimed in its accounting book that it owned some 151 billion won worth of tangible assets such as production facilities, but the value of the assets fell, leading to a reduction in the company’s operating profits.

The company sued the National Tax Service and used the fraudulent accounting data to receive tax refunds, the prosecutors added.

Kee, who headed the company from 2004 to 2007, is accused of having ordered the execution of the accounting fraud scheme. The prosecution acquired testimony from then chief financial executive, a man surnamed Kim, that Kee was involved in the legal suit. Kim was indicted and detained by the prosecution on July 8. The prosecution is also planning to ask the court to issue a detention warrant for Kee.

Kee is additionally accused of having created Lotte Group’s slush funds in the form of transit fees paid to the Japanese branch of Lotte Corporation.

The prosecution suspects that in the process of Lotte Chemical’s importing of raw materials from Indonesian petrochemical companies, Kee included the affiliated company in Japan and created slush funds by increasing the fee amount to some 20 billion won.

Lotte Group, however, claimed that the money was paid legitimately to the company for mediating the financial transaction in the trade.

The court, meanwhile, declined on Tuesday to issue an arrest warrant for Kang Hyeon-gu, the CEO of Lotte Homeshopping. Kang was accused of having created slush funds totaling some 900 million won.

BY CHOI SUN-WOOK, SHIN SOO-YEON [shin.sooyeon@joongang.co.kr]