Rio Tinto and two former top execs must face fraud charges — SEC

The United States’ top securities regulator has rejected arguments by Rio Tinto (LON:RIO) and two former top executives that its civil lawsuit claiming they tried to cover up multi-billion losses on a coal investment in Africa should be dismissed.

Last week, the company, its former chief executive Tom Albanese, and its ex finance director Guy Elliott moved to have the case dismissed, arguing that they did not attempted to conceal the plunging value of the company's coal assets in Mozambique while Rio Tinto raised billions of dollars in the US bond market.

The SEC said its complaint adequately alleged that fraud occurred, and that Rio Tinto, former CEO Tom Albanese and ex-CFO Guy Elliott did intend to deceive investors.

In a court filing quoted by Reuters, the Securities and Exchange Commission (SEC) said its complaint adequately alleged that fraud occurred, and that Rio Tinto, and the former executives intended to deceive investors.

"This is not simply a case about Rio Tinto's valuation of Rio Tinto Coal Mozambique," the SEC said in one of the filings.

The charges originally laid by the SEC in October last year relate to allegations of an attempt to cover up multi-billion losses on a coal investment in Mozambique.

Those assets were acquired for $3.7 billion in 2011 from ASX-listed Riversdale Mining, but sold a few years later for $50 million. Rio ultimately took a $3-billion write down on Riversdale — later renamed RTCM — in January 2013, when it also fired Albanese.

The SEC also rejected Rio’s argument that the alleged misstatements and omissions might be immaterial because the impairment charge “was only 3%” of the company’s assets. It said Rio’s earnings would have been reduced by more than 50% at the half-year in 2012 if it had properly impaired the assets. “No readers could sensibly conclude that the halving of Rio Tinto’s earnings was ‘obviously unimportant to a reasonable investor’,” the SEC said.

The case is being heard by US District Judge Analisa Torres.