By  on March 20, 2017
Lotte Group is under pressure on two fronts - a possible decline in Chinese tourism and South Korea's ongoing political scandal.

SEOUL — Lotte Group chairman Shin Dong-bin and family members on Monday attended their first hearing at Seoul’s Central District Court over their involvement with South Korea’s biggest political scandal to date.Along with his father and Lotte Group founder Shin Kyuk-ho, Shin Dong-bin appeared before prosecutors over charges ranging from embezzlement to breach of trust, in relation to impeached president Park Geun-hye’s corruption scandal.Group chairman Dong-bin is under investigation for his role in bribery in connection with Lotte Group handing over 4.5 billion won, or $4 million, to companies owned by Choi Soon-sil, Park Geun-hye’s friend and adviser. Prosecutors say Lotte bribed Park and Choi in exchange for being granted a highly coveted operating license for the firm’s duty-free shop.The firm’s 94-year-old founder and patriarch, Kyuk-ho, has been accused of tax evasion and breach of trust. Dong-bin's estranged brother, Dong-joo, also appeared at the hearing and faces one count of embezzlement.Outside the court, Lotte chairman Dong-bin told media he was sorry and that he would proceed with the prosecution, according to Yonhap. When contacted, a Lotte Group spokeswoman declined to offer further comments on the matter.Lotte’s legal woes are among a mounting series of issues the firm has faced over the past few months. The group's recent decision to hand over its Seongju county golf course to the South Korean government for Korea’s Terminal High Altitude Area Defense antiballistic missile deployment has been met with much criticism in China due to the nation's anti-THAAD policy.On Sunday, the group disclosed that over 80 percent, or 79 of its 99 Lotte Mart hypermarket outlets in China, have been shut down over recent weeks.While China accounts for over 50 percent of the firm’s overseas sales, Lotte Group’s overall reliance on China is less. The group's retail arm, Lotte Shopping, looks to China for 4.5 percent of it sales; while its food and beverage manufacturing arms, Lotte Chilsung Beverage and Lotte Confectionery, get 2.6 percent and 1.9 percent of their sales in China, respectively.And while the group's founding family is on trial for alleged embezzlement, experts say Lotte’s stock stands to be affected more by its relationship with China.“There is an effect, but not because of the trial. It is because of China,” said Kang Sungjin, an economist and lecturer at Korea University, “But in the long run, Lotte will be okay because these companies will become more transparent in terms of management and ceo activity. So performance is looking positive in the long run.”Lotte Group is among a handful of South Korea’s largest conglomerates, including Samsung and SK, currently under investigation for their roles in the former president’s corruption scandal.“Look at the stocks of Samsung and SK Group, after their ceos got into trouble [during the presidential scandal],” said Kang. “The stock prices actually increased. And that’s a reflection of the stockholders.”

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