Rio Tinto and a former CEO are in court accused of ‘misleading and deceptive’ conduct

Former Rio Tinto CEO Tom Albanese. Photo: Leon Neal/ AFP/ Getty Images.

Rio Tinto, its former CEO Tom Albanese and CFO Guy Elliott now find themselves in an Australian court facing accusations of misleading or deceptive conduct over a coal company acquisition and valuation.

The Federal Court proceedings launched by ASIC (Australian Securities and Investments Commission) relate to statements in the Rio annual report for 2011 which was signed on March 5, 2012, and published on March 16 of that year.

US authorities in October last year charged Rio Tinto and the two former senior executives with fraud.

The Securities and Exchange Commission alleges the executives inflated the value of coal assets that were acquired for $US3.7 billion and sold a few years later for $US50 million.

Rio Tinto, the world’s second largest mining company behind BHP, faces permanent injunctions, return of allegedly “ill-gotten gains” plus interest, and civil penalties.

In December 2010, Rio announced a takeover offer for Riversdale Mining Limited which was completed in August 2011 at a total cost of $US4 billion. Following the acquisition Rio delisted Riversdale from the ASX and renamed it Rio Tinto Coal Mozambique.

In January 2013 Rio announced it expected to recognise a non-cash impairment charge of $US3 billion relating to Rio Tinto Coal Mozambique. It was also announced that Albanese had stepped down as CEO.

In October 2017, the UK Financial Conduct Authority announced it had fined Rio Tinto plc £27.38 million for breaching Transparency and Disclosure Rules by failing to carry out an impairment test and to recognise an impairment loss in the Rio Tinto 2012 half year report.

Now the Australian regulator alleges that Rio engaged in misleading or deceptive conduct by publishing statements in the annual report, signed by Albanese and Elliott, misrepresenting the reserves and resources of Rio Tinto Coal Mozambique.

ASIC alleges Albanese and Elliott failed to exercise their powers and discharge their duties with the care and diligence required by law as directors and officers.

Investigations are continuing in relation to the circumstances surrounding the impairment.