Rio Tinto faces US class actions over Guinea bribery scandal
By Paul Garvey
Rio Tinto is facing a quartet of class action lawsuits out of the US as litigation specialists look to leverage the mining giant’s Guinean corruption crisis.
At least four US law firms have filed class actions aimed at drawing in aggrieved investors and pursuing damages over the bribery allegations surrounding Rio Tinto’s iron ore efforts in the West African nation.
But the firms face a struggle in getting the actions off the ground, given the relative strength in Rio Tinto’s share price since the scandal emerged last month.
Shares in Rio are up 7.95 per cent in the weeks since the company announced it had reported its concerns to authorities in the US, Britain and Australia about its conduct over the huge Simandou iron ore project in Guinea.
That compares with the 7.4 per cent gain in the shares of rival mining giant BHP Billiton over the same period.
A spokesman for Rio said the company would seek to have the actions dismissed.
US-based firms Goldberg Law, Khang & Khang, Bronstein, Gewitz & Grossman and the Jeffery P. Weiner Supplemental Trust have each filed class-action suits in recent days as a key step in recruiting potential shareholders into the actions.
The filing by Goldberg names Rio Tinto, former chief executives Sam Walsh and Tom Albanese, former chief financial officer Guy Elliott and current CFO Chris Lynch as defendants. Mr Lynch joined Rio in 2013, two years after the email correspondence now subject to the Simandou investigations took place.
Goldberg alleges that Rio made “materially false and misleading statements” that “deceived” the investing public and artificially inflated the price of Rio securities.
“(Rio Tinto and the executives) engaged in a plan, scheme, conspiracy and course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions, practices and courses of business which operated as a fraud and deceit … made various untrue statements of material facts … and employed devices, schemes and artifices to defraud in connection with the purchase and sale of securities,” the law suit says. The scandal stems from a $US10.5 million payment Rio made to a consultant to settle a dispute over the project. The consultant, Francois de Combret, was an adviser to the Guinea government.
Simandou is described as the world’s biggest untapped iron ore deposit, but its development has been stifled by its remote location and the logistic and regulatory difficulties of operating in one of the world’s poorest nations.
Rio in October announced a deal to sell its stake in Simandou to China’s Chinalco in exchange for a royalty on future production.