U.S. SEC says Rio Tinto, ex-CEO, ex-CFO must face fraud case
By Jonathan Stempel
NEW YORK, Jan 23 (Reuters) - The top U.S. securities
regulator on Tuesday rejected arguments by Rio Tinto Plc
and two former top executives that its civil lawsuit
claiming they concealed the plunging value of coal assets owned
by the big Anglo-Australian mining company should be dismissed.
In letters filed with the U.S. District Court in Manhattan,
the Securities and Exchange Commission said its complaint
adequately alleged that fraud occurred, and that Rio Tinto,
former Chief Executive Thomas Albanese and former Chief
Financial Officer Guy Elliott intended to deceive investors.
Rio Tinto responded by referring to its statement in October
that it believed the lawsuit was unwarranted and that a court or
jury would reject the SEC's claims.
Lawyers for the defendants did not immediately respond to
requests for comment or had no immediate comment.
The SEC accused Rio Tinto of ignoring the need to write down
most of the value of Mozambique coal assets it had bought for
$3.7 billion in April 2011, while it was raising roughly $5.5
billion from U.S. investors.
Rio Tinto wrote off most of the value in January 2013, and
sold the assets in late 2014 for just $50 million.
"This is not simply a case about Rio Tinto's valuation of
Rio Tinto Coal Mozambique," the SEC said in one of Tuesday's
"Rio Tinto, Albanese, and Elliott faced enormous pressure to
structure a successful deal in light of the fact that they were
responsible for an earlier disastrous multibillion dollar
acquisition," the SEC said.
The SEC also rejected Rio Tinto's contention that any
alleged misstatements and omissions might be immaterial because
the writedown was for only 3 percent of company assets.
It said that had Rio Tinto properly written down the assets,
its net earnings for the first half of 2012 would have been
reduced by more than 50 percent.
"Accordingly, the question of materiality must be decided by
a jury," the SEC said.
In letters on Jan. 16 explaining why the lawsuit should be
dismissed, Albanese said he acted at all times as a "reasonable"
CEO would, and Elliott said he relied on a "well-tested and
rigorous process" to ensure that Rio Tinto reported its
The SEC case is being overseen by U.S. District Judge
Analisa Torres. It is unclear when she will rule on defense
motions to dismiss it.
(Reporting by Jonathan Stempel in New York; Additional
reporting by Sonali Paul in Melbourne; Editing by Richard Chang)
© 2018 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.