 |
Lotte Jamsil Tower exterior view. (Photo = Lotte Engineering & Construction) |
[Alpha Biz= Kim Jisun] Lotte Engineering & Construction (Lotte E&C) has belatedly paid over KRW 14 billion in subcontract fees and delayed interest after the Fair Trade Commission (FTC) launched an investigation into alleged violations of the Subcontracting Act.
According to industry sources on the 20th, Lotte E&C recently settled a total of KRW 14.08 billion — comprising KRW 13.52 billion in unpaid subcontracting fees and KRW 560 million in delayed interest — with 58 subcontractors involved in the "Gueui Station East Pole Redevelopment Project" (Jayang District 1 of the Gueui-Jayang New Town).
Some subcontractors had reportedly waited more than two years to receive payment. Under Korea’s Subcontracting Act, contractors must settle payments within 60 days of project completion. However, Lotte E&C delayed payments from a minimum of 40 days to as long as 735 days.
A breakdown of the delay periods shows:
34 subcontractors were paid within three months of delay,
15 within 3–6 months,
7 within 6–12 months,
and 2 after more than one year.
Lotte E&C, a major conglomerate, withheld an average of KRW 230 million from each subcontractor. The statutory interest rate for delayed payments is 15.5% annually, leading to KRW 560 million in accrued interest.
The FTC began a field investigation into Lotte E&C on June 16 following a whistleblower tip — the first such investigation related to subcontract transactions under President Lee Jae-myung’s administration.
Lotte E&C reportedly delayed payments until the 30-day grace period following the FTC’s probe had nearly expired. On July 10, it paid two subcontractors, and on July 15 — the last day before penalties would apply — it completed payments to the remaining 56 companies.
According to the Enforcement Decree of the Subcontracting Act, companies that self-correct by paying overdue amounts within 30 days of an FTC probe can avoid penalty points and face only a warning. Accumulated penalty points can restrict companies from participating in public bids or even result in business suspensions.
In a statement, Lotte E&C explained:
"While progress payments were completed, disputes over final settlement payments arose due to disagreements on project scope and what we deemed excessive claims for loss compensation by some partners. To foster mutual growth, we decided to pay the disputed amounts along with statutory interest to prevent any further harm."
The company added, "We are committed to fair and cooperative relationships and will work to ensure such issues do not recur."
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
