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Lotte Duty Free may pull out of Guam amid bribery scandal

Lotte Duty Free in Guam

Publication Date : 23-01-2014

 

Lotte Duty Free is on the verge of losing its business in Guam because of a legal battle over an escalating bribery scandal that is alleged to have taken place during the selection process.

Should Lotte lose the influence-paddling case against DFS, it will have to pull out of Guam, where the company has been running a duty free outlet at Antonio B. Won Pat International Airport since July last year.

“Once Lotte loses, it should immediately empty the business,” said Maurice Suh, attorney for DFS.

According to DFS, the world’s largest duty free store operator, Lotte had “suspicious” relations with the Guam International Airport Authority, which on April 12 selected the Korean duty free retailer to run the 2,250 square-metre store up until 2022.

Lotte at the time agreed to pay GIAA an annual rent of US$15.4 million, while also investing $23 million for airport improvement with aim to bring in up to 1 trillion won ($938.1 million) in sales from its Guam branch.

Until Lotte took over, DFS had been operating an outlet in the airport.

A DFS spokesmen claimed that two of the Guam airport authorities were pampered with free gifts from the Lotte Department Store management in 2012. The monetary value of the gifts surpassed well over $25, which DFS points out exceeds the legally permitted amount the airport authorities may receive.

Lotte claims the visits had nothing to do with the duty free shop selection, however they did occur just a few days before the decision was made.

The members who received the gifts abstained in the voting for the duty free shop, and later on returned their gifts. But the DFS filed a lawsuit on the grounds of influence-paddling

After a local court ruled for a lack of evidence, the DFS appealed. On January 17, it filed with the local Supreme Court to expedite the case. On January 22, the Guam Supreme Court ordered a response to DFS‘ motion to expedite on the requested shortened time frame.

The case drew further attention as it was revealed that Lotte had agreed to pay for GIAA’s legal fees as part of their contract.

Senator Benjamin J.F. Cruz, vice speaker for the Guam Legislature, told the local media that it is not appropriate that “a private business should pay the legal fees of a government entity", adding that this was especially so for ongoing litigations.

The Guam airport sees around 1.4 million travellers a year and according to Lotte, 60 per cent of them are Korean, Chinese or Japanese.

For Lotte, the branch is strategically significant as Guam is considered the gateway for the company’s advancement into the US market. Lotte has previously applied for several US airport branches including L.A. but failed.

Lotte flatly denied the allegations.

“DFS is just trying to make fuss out of an old story. We are now in the process of renovating our store and will have a grand opening in April,” said Lee Seok-won, a spokesman for Lotte. “If they want to appeal, it’s up to them. But we will request DFS to compensate for our legal fees should we win.”

 

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