Rio facing class action in the U.S. over Mozambique coal mine
Seattle-based law firm Hagens Berman Sobol Shapiro LLP released a statement saying it filed a suit on behalf of purchasers of Rio Tinto American Depositary Receipts between Oct. 23, 2012 and Feb. 15, 2013 in the U.S. District Court for the Southern District of New York.
The action has been filed against Rio Tinto (ASX, LON:RIO) and its former CEO Tom Albanese and CFO Guy Elliott over the value destroying acquisition of Mozambique coking coal assets in 2011.
The filing cited Anton Colbert of Cook County, Illinois, as lead plaintiff. The document states that Colbert acquired Rio Tinto ADRs between Feb. 28, 2011 and Sept. 16, 2013. His legal action acts in the name of “hundreds or thousands of members in the proposed class.”
Instead of timely performing the impairment analysis, these executives "thwarted it and continued to tout RTCM’s value to investors,” Hagens Berman writes in its complaint.
The law firm pointed to the eventual January 13, 2013 $US3.7bn writedown of the assets (which were later sold for $US50m) to $US611.
“Throughout the class period, the market price of Rio Tinto securities was inflated by the material omissions and false and misleading statements made by the company, Albanese and Elliott, which were widely disseminated to securities markets, investment analysts and the investing public,” the complaint reads.
The document also adds: “When the partial truth about Rio Tinto’s asset values was revealed to the market, the price of its ADRs declined in response, as the artificial inflation caused by defendants’ misrepresentations and omissions was partially removed from the price … thereby causing substantial damages.”
Rio is already facing fraud charges announced last week by the U.S. Securities and Exchange Commission. The SEC alleges that the company inflated the value of Mozambique coal assets and concealed critical information while tapping the market for billions of dollars
The assets were acquired for $3.7 billion in 2011 from ASX-listed Riversdale Mining, but sold a few years later for $50 million.
Rio, Albanese and Elliott have denied the accusations and say they will defend themselves.