GUAM. The long-running row between Lotte Duty Free and DFS Group over the speciality retail contract at Antonio B. (A.B.) Won Pat International Airport Authority (GIAA) has escalated following the indictment in a Korean court of former Lotte Duty Free executive Seung-Gyu Lee for allegedly sharing confidential company information with DFS.
In a statement supplied to The Moodie Davitt Report, DFS has flatly rejected any claims of wrongdoing, while Lotte Duty Free has also reacted today (see below).
The Moodie Davitt Report last month sighted the case number and details (Seoul Southern District Court Indictment/2018 3512) of the alleged impropriety. Due to the legal sensitivities, we sought further clarification before publishing.
However the matter was brought into the open last week when GIAA issued a statement saying, “GIAA is aware of recent news reports detailing the criminal indictment of a former Lotte Duty Free executive, Seung-Gyu Lee, who is accused by Korean authorities of revealing Lotte trade secrets to an executive of DFS Group, Andrew Ford, including a copy of the confidential proposal and presentation made to GIAA by Lotte in 2013. The criminal trial is scheduled to commence in October 2018 in the Seoul Southern District Court.
“DFS wishes to establish that no DFS employee met with any Lotte employee for any improper purpose, and at no time has DFS been in receipt of Lotte’s proprietary or confidential materials through any illegal means.” –DFS Group
“We are deeply concerned by these criminal charges against this former Lotte executive, which implicate DFS and certain of its high-ranking employees, and are looking into the circumstances surrounding the events described in the indictment,” continued GIAA.
“As a public agency, GIAA is committed to a rigorous and fair procurement process for all our contracts. We are fully supportive of the investigation into these matters by Korean criminal prosecutors and will cooperate fully with their efforts if called on to do so.”
However, DFS bit back at the allegations, noting in a statement provided to The Moodie Davitt Report.
“DFS Group (is disappointed by A.B. Won Pat International Airport Authority, Guam (GIAA)’s formal response to the indictment of a former Lotte executive in South Korea,” the company said. “The response ignores the findings of the Superior Court of Guam and an international arbitration panel, which have consistently ruled in DFS’ favor regarding GIAA’s and the Lotte Group’s (Lotte) collusion to wrongfully award the duty-free concession at the Airport to Lotte’s Guam subsidiary.”
The statement continued: “GIAA states that recent actions by South Korean authorities implicate DFS and certain of its high-ranking employees regarding the alleged exchange of Lotte’s confidential business information. The South Korean authorities have made no such allegations against DFS or its former employees.
“DFS wishes to establish that no DFS employee met with any Lotte employee for any improper purpose, and at no time has DFS been in receipt of Lotte’s proprietary or confidential materials through any illegal means.”
DFS said that the GIAA statement ignored the Guam Superior Court’s February voiding (since appealed by the Korean company) of Lotte’s contract.
“It is disturbing to all of us at GIAA that our airport, which is so key to the health and continued growth of the Guam economy, would be caught in the middle of what appears to be a worldwide battle between two of the leading players in the travel retail industry.” – Antonio B. (A.B.) Won Pat International Airport Authority (GIAA)
Ford, who has left his role as DFS Group Vice President Global Business Development in July 2016 (he now runs his own consulting and business development business called Paccaya Resources and is President of the Asia Pacific Travel Retail Association/APTRA), told The Moodie Davitt Report that he had no comment to make beyond the DFS statement.
In its statement, GIAA bemoaned the ongoing row. “It is disturbing to all of us at GIAA that our airport, which is so key to the health and continued growth of the Guam economy, would be caught in the middle of what appears to be a worldwide battle between two of the leading players in the travel retail industry,” it said.
“It is unfortunate that GIAA has been subjected to five years of litigation by former concessionaire, DFS, as a by-product of this fight. GIAA hopes that all of the questions surrounding the conduct of any of the bidders on the 2012-2013 procurement are resolved before the next solicitation so that the value of the concession is not adversely affected.
“GIAA stands behind the 2012-2013 procurement as a fair, open and competitive process that resulted in the best contract that the Airport has ever had. The Lotte contract, which has been in place for the last five years, has paid more than US$70 million in revenue to GIAA in contrast to the US$32 million paid by DFS during the last five years of its contract.
“The current contract has also resulted in over US$20 million in airport improvements and was the linchpin in the US$247 million bond issue that is funding the construction of the new Arrivals corridor.”
“It is very surprising that the criminal charges stated in the indictment were based on an indisputable fact that an employee handed over to DFS’s executive Lotte’s confidential internal documents, which outlined Lotte’s specific plan for developing new duty free businesses including that of Guam.” – Lotte Duty Free statement
DFS bites back
That position did not wash with DFS. The retailer’s statement concluded: “The Superior Court of Guam has found, based on an extensive record of evidence, that GIAA violated the Guam Procurement Law in wrongfully awarding the specialty duty free concession contract to Lotte Duty Free Guam, and that GIAA has attempted to conceal evidence of such misconduct and has wrongly seized millions of dollars in DFS’s funds in retaliation for DFS’ whistle-blowing. Lotte Duty Free Guam remains a defendant in a separate lawsuit whereby DFS alleges that Lotte Duty Free Guam committed illegal acts in connection with this wrongful award.
“It is now a matter of public record that South Korean prosecutors have found that Lotte had internally criticised its own handling of the airport bid procurement process. The South Korean indictment states that Lotte executive Seung-Gyu Lee (SK Lee) was ‘criticised by [Lotte’s] officers for his unreasonable way of seeking to participate in the tender [referring to the Guam procurement tender]’. SK Lee led Lotte’s bid for the GIAA duty free concession contract.
“The recent findings by the South Korean authorities are consistent with DFS’ allegations in its lawsuits against GIAA and Lotte Duty Free Guam. DFS submitted its communications and correspondence with SK Lee to the Court as evidence of its claims against GIAA and Lotte.
“DFS continues to be deeply concerned about GIAA’s unwillingness to take appropriate action in response to substantial and repeated evidence of Lotte’s wrongdoing. Despite the findings of the Guam legal system, Lotte continues to operate the duty free concession at the airport and has been awarded a significant discount in rent. DFS calls upon the GIAA to be mindful of its responsibility to serve the Guam public with integrity, and to act accordingly.”
Lotte Duty Free reacts
Lotte Duty Free also reacted, issuing a statement to The Moodie Davitt Report this morning. The retailer said:”It is truly regrettable that this absurd incident involving DFS took place when we were in the midst of using our utmost efforts in exploring overseas duty free business opportunities.
“Particularly, it is very surprising that the criminal charges stated in the indictment were based on an indisputable fact that an employee handed over to DFS’s executive Lotte’s confidential internal documents, which outlined Lotte’s specific plan for developing new duty free businesses including that of Guam.
“We will take necessary legal steps in light of the progress of the forthcoming trial, including potential legal actions against DFS.”
The company also made the claim that the employee “negotiated with the other party, as also stated in the indictment, to secure his employment with DFS by doing so.”
