Rio Tinto executives admit to taking bribes in China

Australian Stern Hu admits accepting payments, but contests amounts
  • @AlistairDawber

Three of the four Rio Tinto employees facing bribery and espionage charges yesterday admitted to taking illicit payments on the opening day of their trial in Shanghai.

Stern Hu, an Australian, was until his arrest last July involved in negotiations with Chinese steel mills over setting the annual iron ore price. He admitted taking money from some of the mills yesterday, but challenged the amount alleged by prosecutors.

Australia's Consul-General in China, Tom Connor, said: "Mr Stern Hu was accused of receiving two amounts, two bribes. One amount of 1m [yuan] (£97,000) and another amount of $790,000 (£77,000). During the course of the trial, he did make some admission of those two bribery amounts. He did acknowledge receiving some of those two bribery amounts."

Mr Hu's Chinese colleagues Liu Caikui and Ge Minqiang admitted taking bribes, but also challenged the amounts. Wang Yong said that the $9m (£6m) he is accused of receiving was legitimate "profit from an iron ore deal", according to his lawyer, who added that Mr Wang was entitled to 70m yuan (£6.8m). "There are plenty of reasons to argue against the rest of the amount," the lawyer said.

The guilty pleas are hugely embarrassing for Rio Tinto. The Anglo-Australian miner has said previously that the charges are "without foundation", but has largely refused to comment on the cases, which started last year when the four were first detained on suspicion of stealing state secrets during fraught iron ore price talks. Rio has been at pains not to criticise China, its biggest customer, over the case.

Rio's chief executive, Tom Albanese, who was speaking at a conference in Beijing yesterday, said: "I can only say we respectfully await the outcome of the Chinese legal process. We remain committed to strengthening our relationship with China, not just because you are our biggest customer, but because we see long-term business advantages for both of us." Rio Tinto refused to say if the four would remain employees, or if they are still being paid.

Joe Lunn, an analyst at FinnCap, said that the guilty pleas were unlikely to damage permanently Rio's relationship with China: "I imagine that there has been some sort of plea bargain. There has been a lot of political manoeuvrings, but I do not see any lasting damage for the company. To a large extent, this could be China showing that it will not be beholden to the major iron ore producers."

Last week, Rio Tinto signed a preliminary deal with the Chinese aluminium producer and its biggest shareholder, Chinalco, to develop a huge iron ore project in Guinea. The four Rio Tinto employees were first detained a month after Rio spurned an $18.5bn investment from Chinalco, following objections from other investors.

The maximum sentence for bribery in China is about seven years, but that can be extended to up to 15 years if the bribes are deemed "huge" by a court.

Other charges, relating to stealing commercial secrets, will be heard in secret tomorrow and Wednesday.