Lotte Group chief Shin Dong-bin heaved a sigh of relief Friday as he was given a suspended sentence by a local court on charges of embezzlement and breach of trust, keeping in place his leadership over the nation’s largest retail giant. 

The court, however, sentenced his father and group founder Shin Kyuk-ho to four years in prison. He was not taken into custody because of his failing health.

The chairman’s elder brother, Shin Dong-joo, was also found not guilty, while his half sister Shin Young-ja was sentenced to two years in prison. His father’s mistress, Seo Mi-kyung, received a suspended sentence of two years. 

After the ruling the Lotte chief said he was “sorry to the Korean public,” but remained silent on plans to appeal.

But the conglomerate later said in a statement that it respects the court’s decision, and vowed to push for structural reform aimed at improving transparency in governance and expanding overseas operations. 

“We respect the court’s decision. Lotte’s employees will continue to work to contribute to economic development and fulfill our social responsibility,” the company said.

The ruling comes at a crucial time for Lotte. 

This year, the company began its transition to a holding company structure to increase transparency and strengthen its management under the chairman, the younger son of the founder who took control of the conglomerate after an ugly fraternal fight with his elder brother, Shin Dong-joo. 

If Shin Dong-bin had been taken into custody, it would have thrown a wrench into the process of completing the transition, according to market insiders.

Lotte Group has been tasked to reduce chains of its complex cross-holdings between affiliates by April to comply with fair trade regulations and bring in additional affiliates under the holding company Lotte Corp. The group is also seeking to pursue an initial public offering for Hotel Lotte, which functions as a middle holding company. 

Listing the company publicly is an important step for Lotte’s Korean operations to distance itself from Japanese stakeholders’ influence in Korea. Hotel Lotte’s IPO has been pushed back since 2015 amid continued battles for leadership between Chairman Shin Dong-bin and his brother Shin Dong-joo, as well as investigations by prosecutors into corruption at the firm.

A second point of concern was Shin Dong-bin’s leadership across Korea and Japan. Following a messy and public feud in 2015 with his brother Shin Dong-joo over control of Lotte’s operations, Shin Dong-bin had successfully pushed his brother and father out of top decision-making positions to solidify his position as chairman.

Industry watchers had speculated that if Shin Dong-bin had been taken into custody, he would have lost the trust he had built among Japanese stakeholders, possibly handing back influence to his brother and breaking up the unity of the Lotte empire once again.

However, Shin Dong-bin still has another court decision that could shake up the current situation. Prosecutors sought a four-year term for the chairman with regards to Lotte’s involvement in a bribery scandal involving Choi Soon-sil, the confidante of former President Park Geun-hye. Shin Dong-bin has been charged with providing funds to a foundation run by Choi in exchange for special favors from the government in evaluations for awarding duty-free licenses. 

Some members of the Shin family were indicted last year over a string of charges including embezzlement and breach of trust. Prosecutors accused them of the payment of 50 billion won of wages to family members who never worked for the company. 

Prosecutors charged them for inflicting 130 billion won in losses on Lotte’s affiliates.

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