Monday 19 February 2018

Rio Tinto and former bosses hit with US fraud charges

America’s Securities and Exchange Commission accused Rio, its former chief executive and ex-chief financial officer of ignoring proper accounting standards and misleading investors.

Rio Tinto
Rio Tinto

By Holly Williams, Press Association Deputy City Editor

Mining giant Rio Tinto and two of its former top bosses have been charged with fraud in the US and the firm has been hit with a record UK fine for allegedly hiding losses by inflating the value of African coal assets.

America’s Securities and Exchange Commission (SEC) accused Rio, its former chief executive Tom Albanese and ex-chief financial officer Guy Elliott of ignoring proper accounting standards and misleading investors in how they valued coal deposits bought for $3.7 billion (£2.8 billion) in 2011 and later sold for just $50 million (£38 million).

Rio said it would “vigorously defend itself against these allegations”.

The UK’s Financial Conduct Authority (FCA) also fined Rio Tinto £27.4 million for breaching disclosure rules – the largest such fine – over the Mozambique coal purchase.

Stephanie Avakian, the SEC’s enforcement division co-director, said in a statement: “Rio Tinto’s top executives allegedly breached their disclosure obligations and corporate duties by hiding from their board, auditor, and investors the crucial fact that a multi-billion dollar transaction was a failure.”

The SEC alleges that Rio discovered soon after it bought the coal assets that they would produce less coal than expected, but hid this and was able to raise $5.5 billion (£4.2 billion) from investors.

Rio pledged to fight the charges, saying it “believes that the SEC case is unwarranted and that, when all the facts are considered by the court, or if necessary by a jury, the SEC’s claims will be rejected”.

As a result of the charges, Mr Elliott stood down from his role as a non-executive director at oil group Royal Dutch Shell.

Shell said: “We sincerely hope he satisfactorily resolves those proceedings and, that in that event, he  would like to be considered for rejoining the board.”

Rio – an Anglo-Australian firm – is listed on London’s FTSE 100 Index and employs 50,000 people worldwide.

Press Association

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