Rio Tinto Group's disastrous $3.7 billion coal deal in Mozambique continues to keep the world's second-biggest miner in the spotlight for all the wrong reasons even as it struggles with another African misadventure.
US authorities filed fraud charges against London-based Rio, its former chief executive officer Tom Albanese and ex-chief financial officer Guy Elliott, claiming they inflated the value of the coal assets acquired in 2011. The unit was sold for $50 million in 2014 after $2.9 billion impairments in 2013 and $470 million a year later.
Rio raised $5.5 billion from US debt investors, of which $3 billion came after May 2012, when executives had told Albanese and Elliott that the Mozambique unit was likely worth negative $680 million, according to a Securities and Exchange Commission complaint filed in federal court in New York.
''Rio Tinto intends to vigorously defend itself against these allegations,'' the company said in an e-mailed statement on the SEC charges. Albanese, Rio's CEO between 2007 and 2013, said in a separate statement that ''there is no truth in any of these charges.'' The allegations were also refuted by Elliott, who retired in 2013 in a statement issued on his behalf.
According to the SEC's complaint, filed in federal court in Manhattan, Rio Tinto, its former CEO Thomas Albanese, and its former CFO Guy Elliott failed to follow accounting standards and company policies to accurately value and record its assets.
Also, as the project began to suffer one setback after another which led to the rapid decline of the value of the coal assets, they sought to hide or delay disclosure of the nature and extent of the adverse developments from Rio Tinto's board of directors, audit committee, independent auditors, and investors.
''Rio Tinto and its top executives allegedly failed to come clean about an unsuccessful deal that was made under their watch. They tried to save their own careers at the expense of investors by hiding the truth,'' said Steven Peikin, co-director of the SEC's Enforcement Division.
Based on the complaint's allegations, Rio Tinto plc, Rio Tinto Limited, Albanese, and Elliott are charged with violating the antifraud, reporting, books and records and internal controls provisions of the federal securities laws. The SEC seeks permanent injunctions, return of allegedly ill-gotten gains plus interest, and civil penalties from all the defendants, and seeks to bar Albanese and Elliott from serving as public company officers or directors.
Tom Albanese is the chief executive officer of Vedanta Resources. He was asked to resign from Rio Tinto on 17 January 2013 and was replaced by Sam Walsh.