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Rio Tinto pays UK fine, faces SEC charges for accounting fraud

The U.S. Securities and Exchange Commission Tuesday charged Rio Tinto Plc and two former executives with fraud for allegedly inflating the value of coal assets in Mozambique.

Also Tuesday, the UK Financial Conduct Authority fined the mining giant £27 million ($35 million) for breaching disclosure and transparency rules.

Rio Tinto bought the mining assets in Mozambique for $3.7 billon in August 2011. It sold the same assets a few years later for $50 million.

The FCA said Rio Tinto failed to “carry out an impairment test and to recognize an impairment loss . . .when publishing its 2012 interim results.”

Rio Tinto “demonstrated a serious lack of judgment,” the FCA said.

In the SEC’s lawsuit filed in federal court in Manhattan, the agency charged the company, former Chief Executive Officer Thomas Albanese, and former Chief Financial Officer Guy Elliott.

The SEC said they failed to follow accounting standards and company policies to accurately value and record the Mozambique assets.

In London Tuesday, the FCA said it received “considerable assistance [and] collaboration” from the SEC and the Australian Securities & Investments Commission.

Rio Tinto settled the matter “at an early stage” and therefore received a 30 percent reduction in its penalty, the FCA said.

In July this year, the UK Serious Fraud Office confirmed that it had opened a corruption investigation into Rio Tinto.

The SFO said its investigation targeted “suspected corruption in the conduct of business in the Republic of Guinea by the Rio Tinto group, its employees and others associated with it.”

In November 2016, Rio Tinto suspended the chief executive of its energy and minerals division pending an investigation of a $10.5 million payment to a consultant for the Simandou iron ore project in Guinea.

The executive, Alan Davies, was in charge of Simandou in 2011 when the payments for “advisory services” were allegedly made, the company said in an SEC filing.

Rio Tinto said it learned about the payments in August last year from email correspondence.

The SEC disclosure also said Legal & Regulatory Affairs group executive Debra Valentine stepped down.

Rio Tinto said in the filing that it notified authorities in the UK and the United States. The company also said it was “in the process of contacting the Australian authorities.”


Richard L. Cassin is the publisher and editor of the FCPA Blog.

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