The long-running legal wrangle involving DFS Group, Guam International Airport Authority (GIAA) and Lotte Duty Free over the awarding of a speciality contract at Won Pat Airport shows no sign of concluding. This is after DFS Group expressed its ‘disappointment’ at GIAA’s response to the recent indictment of former Lotte Duty Free Executive Seung-Gyu Lee.
According to DFS, the airport authority’s formal response ignores the findings of the Guam Superior Court and an international arbitration panel, which have ‘consistently ruled’ in DFS’ favour regarding GIAA and Lotte Group’s decision to ‘wrongfully award’ the speciality airport duty free concession to Lotte.
Meanwhile, Lee is accused by Korean authorities of revealing Lotte trade secrets to Andrew Ford, a former DFS Executive, 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 at the Seoul District Court.
A GIAA statement seen by TRBusiness said it was deeply concerned by the criminal charges which, ‘implicate DFS and certain high-ranking employees’ regarding the alleged exchange of Lotte’s confidential business information.
The statement added: “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.
“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’s 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.”
The GIAA statement concludes with the airport hailing the 2012-2013 tender as a fair, open and competitive process that resulted in the best contract it has ever had. “The Lotte contract, which has been in place for the last five years, has paid more than $70m in revenue to GIAA in contrast to the $32 million paid by DFS during the last five years of its contract.
“The current contract has also resulted in over $20m in airport improvements and was the linchpin in the $247 million bond issue that is funding the construction of the new arrivals corridor.”
Emphasising the fact South Korean authorities have made no allegations against DFS or its former employees, a statement from the company received by TRBusiness read: “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.
“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 speciality 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.”
A statement supplied by Lotte to TRBusiness 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.
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