Mining Executives Face Fraud Charges
CFO and CEO of London-based Rio Tinto are charged with falsely inflating asset valuations; SEC seeks civil penalties and to bar the men from serving on corporate boards.
Rio Tinto Plc must face a U.S. Securities and Exchange Commission (SEC) lawsuit over the company’s valuation of coal assets in Mozambique, a federal judge ruled.
U.S. authorities in October 2017 filed fraud charges against London-based Rio Tinto, former CEO Tom Albanese, and former CFO Guy Elliott, claiming they had inflated the value of assets Rio Tinto acquired in 2011 for $3.7 billion.
U.S. District Judge Analisa Torres on Monday denied Rio Tinto’s request to dismiss the case, saying the SEC had adequately claimed that statements about the unit’s valuation—which it said were made after Albanese and Elliott learned of “severe adverse developments”—didn’t square with the information the company had at the time.
“The SEC has plausibly alleged that Rio Tinto was not just facing risks and challenges, but that it was apparent, at least to the individual defendants, that Rio Tinto had no realistic options to transport large amounts of coal,” a problem that would render the business worthless, Torres said.
Rio Tinto didn’t immediately respond to inquiries seeking comment on the ruling. Albanese has said “there is no truth in any of these charges.” Elliott has also denied the allegations.
The coal assets were sold for $50 million in 2014 following impairments of about $2.9 billion and $470 million. The SEC is seeking the return of “ill-gotten gains” as well as civil penalties, and to bar Albanese and Elliott from holding director positions.
The case is SEC v. Rio Tinto Plc, 1:17-cv-7994, U.S. District Court, Southern District of New York (Manhattan).
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