SEC Charges Miner Rio Tinto, Former Execs With Fraud

The Securities and Exchange Commission charged mining company Rio Tinto and two former top executives with fraud for inflating the value of coal assets acquired for $3.7 billion and sold a few years later for $50 million.

The SEC’s complaint, filed in federal court in Manhattan, alleges that 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. 

Instead, as the project began to suffer one setback after another resulting in 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.

“As alleged in our complaint, Rio Tinto’s top executives allegedly breached their disclosure obligations and corporate duties by hiding from their board, auditor and investors the crucial fact that a multibillion-dollar transaction was a failure,” said Stephanie Avakian, co-director of the SEC’s Enforcement Division, in a statement.

Steven Peikin, co-director of the SEC’s Enforcement Division, said that 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.”

Based on the complaint’s allegations, Rio Tinto plc, Rio Tinto Ltd., 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.