▲ A photo of Lotte Card Co.'s headquarters in central Seoul (Yonhap)

Lotte Card-breach of trust

Regulator says 2 Lotte Card employees engaged in breach of trust

SEOUL, Aug. 29 (Yonhap) -- South Korea's financial regulator said Tuesday two employees of Lotte Card Co. and the head of a subcontractor engaged in breach of trust, the latest in a series of moral hazard cases involving financial companies.

The Financial Supervisory Service (FSS) filed a complaint against the three with the prosecution on Aug. 14 over allegations that the two Lotte employees conspired with the head of the subcontractor to ensure the subcontractor wins a 10.5 billion-won (US$7.9 million) deal meant to promote Lotte Card products.

The two marketing employees of Lotte Card siphoned off 6.6 billion won from 10.5 billion won through a paper company and their family-owned companies, and invested in real estate, and bought cars and others, according to the FSS.

The prosecution will uncover the usage of the remaining 3.9 billion won the head of the subcontractor received, the FSS said, noting only a small portion of the money seems to have been used for promotional purposes of Lotte Card.

The FSS said Lotte Card's internal control system did not function properly.

Since last year, a number of financial companies have been involved in alleged embezzlement and other irregular activities.

An employee of Woori Bank was sentenced to 13 years in prison in September last year for embezzling 61.4 billion won by conspiring with his brother.

Earlier this month, the prosecution launched an investigation into allegations that an employee at BNK Kyongnam Bank embezzled and misappropriated up to 110 billion won.

The financial regulator is also looking into allegations that KB Kookmin bank employees raised unfair profit of 12.7 billion won by taking advantage of undisclosed information and that some employees of DGB Daegu Bank secretly opened about 1,000 securities accounts by using customers' documents without their knowledge.

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