Rio Tinto plc paid the SEC $15 million Monday to settle FCPA offenses related to a consultant hired to retain mining rights in Guinea.
In an internal administrative order, the SEC charged Rio Tinto with violating the FCPA’s books and records and internal accounting controls provisions.
In 2011, Rio Tinto — a global mining and metals company — hired a French investment banker and close friend of a former senior Guinean government official as a consultant to help the company retain its mining rights in the Simandou mountain region in Guinea.
The consultant began working in March 2011, without Rio Tinto having conducted “adequate due diligence that was required for retaining third parties.” After a Rio Tinto executive contacted the consultant to confirm his relationship with the Guinean official, a lower level employee ran a “cursory” background check without any additional due diligence, the SEC said.
In total, the consultant was paid $10.5 million for his services, which Rio Tinto never verified. There was no written agreement of any sort in place for the majority of the consultant’s employment, and a written contract was only executed one day before the consultant was paid by Rio Tinto, according to the SEC.
The SEC said the consultant paid at least $822,000 to a Guinean government official to help Rio Tinto retain its mining rights.
Days after Rio Tinto made the initial payment to the consultant, the consultant attempted to transfer $822,506 from his Swiss bank account to a Hong Kong company owned by a Guinean national with links to government officials. The bank held up the transaction over concerns about the company’s ties to Guinean officials, the SEC said.
During an interview with the bank, the consultant told bank employees that he would use another account at a different bank to make the payment. Afterwards, the Hong Kong company paid $200,000 for re-election campaign t-shirts to a t-shirt company in China. That same t-shirt company eventually made shirts for the senior Guinean government official’s reelection campaign.
“Those shirts match the description on the invoice the Consultant submitted to the Swiss bank when attempting the $822,506 payment, further corroborating that the attempted payment from funds that Rio Tinto paid him was intended as a political contribution to the Senior Government Official’s reelection campaign or, at the very least, a payment to the Junior Government Official,” the SEC said Monday.
The payments to the consultant weren’t accurately reflected in Rio Tinto’s books and records, and the company failed to have sufficient internal accounting controls in place to detect or prevent the misconduct.
Rio Tinto consented to the SEC’s order without admitting or denying the SEC’s findings.
Ultimately, Rio Tinto never developed blocks three and four of the Simandou region or extracted anything of value from them, due, in part, to declining iron ore prices.
Rio Tinto plc is a UK company with shares listed on the London Stock Exchange and with American Depository Shares that trade on the NYSE. Rio Tinto plc and Rio Tinto Ltd — an Australian company with shares listed on the Australian Stock Exchange and debt listed on the NYSE — make up the Rio Tinto Group and jointly file periodic SEC reports.
Rio Tinto first disclosed the investigation in November 2016, according to data from FCPA Tracker. The initial disclosure said Rio Tinto learned in August 2016 about payments to the consultant, launched an investigation, and notified authorities in the UK, United States, and Australia.
“We are glad to have resolved this matter related to events that occurred over a decade ago on appropriate and reasonable terms. When Rio became aware of the issue, an internal investigation was immediately launched, and we proactively notified the appropriate authorities,” Rio Tinto chairman Dominic Barton said in a company statement Monday.
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