The Lotte Group is suspected of giving business favors to a company controlled by its founder's third wife Seo Mi-kyung, who is on the list of those being investigated as part of the retail giant's slush fund allegations, industry watchers said Friday.

The 57-year-old Seo is the 1977 winner of the group's Miss Lotte beauty pageant and has a 33-year-old daughter with Lotte founder Shin Kyuk-ho, now 93. Under South Korea's monogamous marriage system, the two have been common-law married.  


Seo came into the limelight recently as prosecutors have widened their probe into South Korea's fifth-largest conglomerate on suspicion of embezzlement and creating slush funds through dubious deals with affiliates and companies with links to the owner family.

Among them is Yuki Co., a Seoul-based food franchise company that operates seven restaurants in Lotte Department stores.

Seo's relative is heading the company, but Seo and her daughter hold the majority ownership of the limited company, which is registered as a real estate rental, interior design, supermarket operation, securities investment, leisure, retail and food franchise business.

Out of 12.5 billion won ($10.5 million) in sales last year, most of the revenue came from its restaurants in Lotte Department Store's food courts.

How much commission Yuki pays to Lotte Department Store remains undisclosed, but market watchers expect the rate is below market average due to her relationship with the founder.

Prosecutors have raised suspicions that the founder may have created a slush fund in the process of giving orders to the company and other contracts with relation to Seo.

"The relations between some affiliates and Yuki have not been completely severed," a senior Lotte official said, asking for anonymity due to the sensitivity of the issue. "We expect it to gradually improve." (Yonhap)