Elder brother resuscitates Lotte family feudShin Dong-joo, chairman of SDJ Corporation, accused his younger brother Shin Dong-bin, Lotte Chairman, and Lotte Shopping CEO Lee Won-joon of accounting fraud on Lotte Shopping’s financial statements.
The elder Shin filed a complaint with prosecutors on Sept. 30, a day after a court rejected an arrest warrant for Lotte Group Chairman Shin, according to revelations by his aides.
The legal battle is a continuation of conflict between the Shin brothers over control of the Lotte Group.
Shin Dong-joo alleges that Lotte Shopping violated laws on regulatory filings by not fully reporting expected asset losses of 370 billion won ($329.56 million) in its financial statements released between May 2013 and November 2015.
The decrease in assets was attributed to goodwill paid to Chinese affiliates Times and LuckyPai when Lotte Shopping bought them in 2009 and 2010. Goodwill is a price the buying company pays in return for intangible assets such as brand value, industry know-how and human resources.
Assets are defined as impaired when their future value is expected to drop much lower than the current value. Under the law, companies are obliged to record such impaired assets as losses in their financial statement.
“Even before the complaint, we raised questions of whether Lotte Group was covering up large-scale deficits caused by the company’s failed businesses in China,” said a spokesman for SDJ Corporation.
In February, Lotte Shopping released a regulatory filing that said the company had revenue of 29.1 trillion won, operating profit of 857.8 billion won but a net loss of 346.1 billion won in 2015.
This was the first time Lotte Shopping recorded a net loss since it was listed in 2006. Not so long after the statement was released, the company told local media that the loss was a result of payment of goodwill of its Chinese affiliates. As the growth rate of the Chinese economy slowed, the acquired companies suffered losses after Lotte’s purchase, which obliged the company to record their impaired assets.
A Lotte Group spokesman said the company had not been contacted by prosecutors over SDJ’s complaint.
BY SONG KYOUNG-SON [firstname.lastname@example.org]