Lotte Group sons' battle turns nasty

Lotte Group sons' battle turns nasty
PHOTO: Korea Herald/ANN

The spat between the two sons of Lotte Group founder and general chairman Shin Kyuk-ho is taking a nasty turn ahead of the coming shareholders meeting to decide his successor.

Shin Dong-joo, the first son, stepped up his offensive against his rival and younger brother Shin Dong-bin on Sunday, expressing confidence in winning the vote.

Dong-joo is a former vice chairman of Lotte Holdings, the de facto control tower of the Lotte empire in Korea and Japan, while Dong-bin is currently chairman of Seoul-based Lotte Group and chief executive of the holding company.

Speaking in an interview with SBS-TV, the first son tried to stress that his father supports him in the succession battle. "Dong-bin angered our father and was hit by him in early July." The reason behind the father-son dispute is as of yet unknown.

"I suggested to Dong-bin on July 6 that we meet in Korea to clear up any misunderstanding and work together better," Dong-joo said. "But he declined the offer, and was in firm belief that he should have complete control of Lotte both in Korea and Japan."

In a related move, the founder Sunday called his second son and Lotte Group chairman Dong-bin "unforgivable," referring to his moves to oust the founder and older brother Dong-joo.

"I've never appointed my second son Dong-bin to Lotte Group chairman and Lotte Holdings head," he said in a televised message aired on KBS-TV, adding that he "feels sorry for those who have blinded Dong-bin's eyes (to delude him to think he has control over the mass)."

"His decision to remove me, the founder who has grown this company, is unforgivable and can't be understood. I sincerely apologise to the people for making such a fuss," the founder said.

While the planned shareholders meeting remains to be crucial for the result of the family feud, Lotte Holdings did not say when the meeting would take place. It is being speculated that it may take place this Friday, or early next week at the latest.

Lotte Group, which is currently under Dong-bin's supervision, said he will fly into Seoul on Monday to visit the father and meet financial and government authorities for support.

As to the general chairman's video message, the group said they believe the first son's party pulled strings behind the scene.

"It isn't difficult to understand with common sense that Shin Dong-joo's side used the aged founder to distort the truth, which has zero legal force," the group said in a statement.

The bitter power succession fight intensified last week when the eldest son brought his 93-year-old father to Japan to oust Dong-bin from the holding company.

In a tit-for-tat move, Dong-bin sacked his father from the holding company with consensus from the board of directors.

Lotte Group claims the upcoming shareholders meeting will focus on approving the founder as an honorary chairman, while the older son argues that he will replace all board of directors who are siding with his younger brother at the meeting.

"It's difficult to predict the result, because this is an unlisted company we're talking about. The equity and ownership structure is publicly unknown and, plus, other family members (who all have a chunk of stake in Lotte affiliates) are split, siding with whoever will best represent their interest," a market watcher said, declining to be identified due to the sensitivity of the issue.

Whether Dong-bin will be able to maintain his control over the sprawling conglomerate still remains uncertain, as his half-sister, Lotte Shopping president Young-ja, and other key family members reportedly joined the "pro-Dong-joo" force.

In January, Dong-joo was fired by his father for not reporting a new business investment, leading the younger son to be named the holding company's CEO.

The older son has stepped up his bid to win back his father's trust and gain more control of Lotte's Japan business as well as operations in Korea ever since.

While earning their father's allegiance seems to be one of the crucial steps to maintain a grip on the conglomerate, reports that back up allegations by the eldest son were released Sunday.

Data showed that Lotte Group lost more than 1 trillion won (S$1.18 billion) from its operations in China and Hong Kong over the past four years, going in line with the eldest son's claim that Dong-bin showed poor performance in China and did not clearly report the losses to his father.

The China and Hong Kong-based subsidiaries of Lotte's major listed units, including Lotte Shopping and Lotte Confectionery, posted billions in losses from 2011-2014, starting with a 92.7 billion won shortfall in 2011 alone. The figure grew every year to 250.8 billion won in 2012 and 580.8 billion won in 2014, according to CEO Score's data.

"Dong-bin did not report the losses from the China investment to the founder. My father was enraged when he belatedly got the information," the eldest son said in an interview with Japanese media.

Lotte Group denied the accusations, saying the founder was fully aware of the case.

"The general chairman knew about the losses from the beginning. It will be difficult for such a detailed person like him to not know about a prolonged loss that has happened for more than four years," Lotte Shopping CEO Lee Won-joon said.

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