U.S. SEC charges Rio Tinto, former top executives with fraud
(Adds comments from Albanese and Elliott, further comments from
Rio Tinto, paragraphs 8-11)
By Brendan Pierson
NEW YORK, Oct 17 (Reuters) - The U.S. Securities and
Exchange Commission on Tuesday charged mining company Rio Tinto
Plc and two of its former top executives with
fraud, saying they inflated the value of coal assets in
Mozambique acquired for $3.7 billion and sold a few years later
for $50 million.
The U.K.'s Financial Conduct Authority also said Tuesday it
had reached a settlement with Rio Tinto under which the company
would pay a fine of £27 million ($35.6 million) to settle claims
that it breached accounting rules in connection with the
In a lawsuit filed in U.S. federal court in Manhattan, the
SEC said Rio Tinto, former Chief Executive Officer Thomas
Albanese, and former Chief Financial Officer Guy Elliott failed
to follow accounting standards and company policies to
accurately value and record the assets.
The lawsuit centers on Rio Tinto's 2011 acquisition of
Mozambique coal explorer Riversdale Mining for $3.7 billion. The
SEC said that soon after the deal was completed, Rio Tinto
learned that the acquisition would yield less coal, and of a
lower quantity, than expected.
The securities regulator said Rio Tinto concealed the
problems with the deal, in part because Rio Tinto had already
disclosed huge losses in connection with its 2007 acquisition of
Alcan. Making public a second failure "would call into question
Albanese’s and Elliott’s ability to pursue the core of Rio
Tinto’s business model," the SEC said in its complaint.
By making misleading public statements, Rio Tinto and the
executives were able to raise $5.5 billion from U.S. investors,
the SEC said. They continued to solicit the investments even
after executives of the Mozambique subsidiary told Albanese and
Elliott that the unit was likely worth negative $680 million,
according to the SEC.
The SEC said the fraud continued until January 2013, when
another executive discovered accounting irregularities. Albanese
subsequently resigned, and the Mozambique subsidiary was sold
for just $50 million, the SEC said.
"There is no truth in any of these charges," Albanese said
in a statement.
Christina Mills, a spokeswoman for Elliott, said Elliott
would vigorously contest the charges.
Rio Tinto said it would defend itself vigorously against the
SEC's allegations. The company said the U.K. FCA had "made no
findings of fraud, or of any systemic or widespread failure by
It also disclosed that the Australian Securities and
Investments Commission was looking into its accounting of the
(£1 = $1.3185)
(Additional reporting by Jane Wardell in Sydney and Eric Walsh
in Washington; Editing by Mohammad Zargham and David Gregorio)
First Published: 2017-10-18 00:21:35
Updated 2017-10-18 02:04:13
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