Shin Dong-joo eyes return to power

The bitter family feud that broke out between two brothers of one of Korea’s largest conglomerates is reigniting as a probe into the group’s finances threatens to shake the company’s stability.

Shin Dong-joo, the head of SDJ Corporation, was ousted by shareholders from his controlling position in Lotte’s Japanese operations under the leadership of his younger brother Shin Dong-bin earlier this year.

By removing Lotte founder Shin Kyuk-ho and Shin Dong-joo from power, Shin Dong-bin effectively made himself the sole leader of Lotte Group both in Japan and Korea.

Now just a few months later, as Lotte Group faces allegations of embezzlement and the creation of a slush fund, the elder Shin brother has seized upon an opening to reclaim his power.

On June 10, when prosecutors raided the offices of Lotte’s affiliates, Shin Dong-joo promptly released a statement in Japan claiming the probe “revealed the problems in management headed up by Lotte Group chairman Shin Dong-bin.” He also said that “Lotte Group’s social credibility and corporate value was hurt” by unfolding events.

Shin Dong-joo also requested a vote on removing Shin Dong-bin and Lotte Holdings CEO Takayuki Tsukuda from Lotte Holdings’ board at the company’s shareholders meeting at the end of this month.

Lotte Holdings is at the center of the complex structure of Lotte Group. The brother that receives the support of Lotte Holdings’ shareholders essentially wins control over the entire group.

Although Shin Dong-joo has a controlling stake over Lotte Holding’s largest shareholder Koiyunsya, or Kwang Yoon Sa, he must win over another large shareholder in order to push his agenda through and unseat Shin Dong-bin. It was also revealed that the prosecutors’ case against Shin Dong-bin rested largely on data provided by Shin Dong-joo last December. Shin Dong-joo had filed suit against Shin Dong-bin for obstruction of business, and had given prosecutors data on Lotte’s corporate structure and the losses of Lotte’s Korean arm regarding investments in China.

The data helped prosecutors determine how Lotte’s profits from Korea were flowing into Japan through the shareholder structure, and also provided clues about possible embezzlement and the existence of a slush fund.

Industry watchers say that Shin Dong-joo’s public attacks on Shin Dong-bin‘s trustworthiness and management capacity are appeals to the employee shareholders’ association, which holds 27.8 percent of Lotte Holdings. Koiyunsya holds 28.1 percent of the company.

Shin Dong-joo has indicated that he has another weapon to use against Shin Dong-bin. On Monday, his lawyer Kim Soo-chang told Yonhap News Agency that there was a “problematic portion” in the analysis of Hotel Lotte’s books that would be revealed “at the right time in the right way.”

By Won Ho-jung (hjwon@heraldcorp.com)