Vietnam shopping center linked to Lotte’s slush fund scandal

Luxembourg-incorporated Coralis SA, the company in question, developed Lotte Center Hanoi at a cost of around US$400 million. The 65-story shopping and leisure complex was opened in September 2014.

It recorded a net loss of 55.1 billion won ($47.31 million) last year, raising a suspicion that the conglomerate was exaggerating its losses to hide money, according to the report, citing sources from a Korean prosecutor’s office.

According to another theory, Lotte Engineering & Construction, the project’s contractor, may have overcharged the developer to hide funds, The Korea Herald said.

Coralis SA had been used for offshore tax evasion by Kim Seon-yong, the third son of former Daewoo Group chairman Kim Woo-jung, before being acquired by Lotte Asset Development in 2009 at 69.7 billion won ($59.86 million), according to The Korea Herald.

Lotte Asset Development later sold a stake of 45 percent in the company each to Lotte Shopping and Hotel Lotte, it said.

Lotte has denied the allegations, saying it bought Coralis SA to acquire the right to do business and lease land in Vietnam and that such practice is adopted by most companies when they invest overseas.

The report came as South Korea’s fifth-largest conglomerate was facing an ongoing investigation for alleged corruption, illegal intragroup deals and embezzlement, according to Korean media.

In Vietnam, Lotte has invested over $2 billion into more than 20 subsidiaries which operate in a wide range of sectors from retail to real estate.