The US securities and exchange commission (SEC) on Tuesday charged the mining company Rio Tinto and two of its former top executives with fraud, saying they inflated the value of coal assets in Mozambique and concealed critical information while tapping the market for billions of dollars.
The UK's financial conduct authority (FCA) also said on Tuesday it had reached a settlement with Rio Tinto under which the company would pay a fine of £27 million (Dh130m) to settle claims that it breached accounting rules in connection with the Mozambique assets.
The Mozambican coal business, which relied on barging the product down the Zambezi River to port, was acquired for US$3.7 billion in 2011 from Riversdale Mining and sold a few years later for $50m.
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In a lawsuit filed in US federal court in Manhattan, the SEC said Rio Tinto, the former chief executive Thomas Albanese, and former chief financial officer Guy Elliott failed to follow accounting standards and company policies to accurately value and record the assets.
The SEC said that soon after the deal was completed, Rio Tinto learned that the acquisition would yield less coal, and of a lower quantity, than expected. The global miner could only transport and sell a fraction of the coal it had originally assumed, the SEC said.
By making misleading public statements, RioTinto and the executives were able to raise $5.5bn from US investors, the SEC said. They continued to solicit the investments even after executives of the Mozambique subsidiary told Mr Albanese and Mr Elliott that the unit was likely worth negative $680m, according to the SEC.
"There is no truth in any of these charges," Mr Albanese said.
Christina Mills, a spokeswoman for Mr Elliott, said he would vigorously contest the charges.
Rio Tinto said it would defend itself vigorously against the SEC's allegations. The company said the UK FCA had "made no findings of fraud, or of any systemic or widespread failure by Rio Tinto".
The SEC allegations are contained in court documents that also request a jury trial. The SEC said the rapid and dramatic decline in value of the coal business was concealed, in part because Rio Tinto had already disclosed huge losses in connection with its 2007 acquisition of Alcan.
"The Mozambique acquisition was expected to restore the market’s confidence in Mr Albanese’s deal-making acumen, but on-the-ground realities in Mozambique quickly undermined that narrative," the SEC said.
The SEC said the company knew its barging assumptions were unrealistic and railway capacity severely limited by the end of 2011, just months after securing the Riversdale assets.
"Defendants concealed the nature and extent of these adverse developments from Rio Tinto’s board of directors, audit committee, independent auditors, and the market," the SEC said.
The SEC said that if it had been disclosed, the developments would have triggered an impairment analysis. An impairment analysis would measure the difference in the expected cash flow from an asset and the value the company has booked the asset at.
By May 2012, Mr Albanese and Mr Elliott were informed of the negative $680m valuation, although the company carried the assets on its books at more than $3bn while also promoting its prospects to the market.
The SEC said the fraud continued until January 2013, when another executive discovered accounting irregularities. Mr Albanese subsequently resigned and the value of the Mozambique assets were lowered by more than $3bn.
The SEC is seeking to have Mr Albanese and Mr Elliott barred from acting as officers or directors of any public company.
The SEC also disclosed that the Australian Securities and Investments Commission was looking into Rio's accounting of the Mozambique assets.
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Itcan profile
Founders: Mansour Althani and Abdullah Althani
Based: Business Bay, with offices in Saudi Arabia, Egypt and India
Sector: Technology, digital marketing and e-commerce
Size: 70 employees
Revenue: On track to make Dh100 million in revenue this year since its 2015 launch
Funding: Self-funded to date
Results
4pm: Al Bastakiya – Listed (TB) $150,000 (Dirt) 1,900m; Winner: Panadol, Mickael Barzalona (jockey), Salem bin Ghadayer (trainer)
4.35pm: Dubai City Of Gold – Group 2 (TB) $228,000 (Turf) 2,410m; Winner: Walton Street, William Buick, Charlie Appleby
5.10pm: Mahab Al Shimaal – Group 3 (TB) $228,000 (D) 1,200m; Winner: Canvassed, Pat Dobbs, Doug Watson
5.45pm: Burj Nahaar – Group 3 (TB) $228,000 (D) 1,600m; Winner: Midnight Sands, Pat Dobbs, Doug Watson
6.20pm: Jebel Hatta – Group 1 (TB) $260,000 (T) 1,800m; Winner: Lord Glitters, Daniel Tudhope, David O’Meara
6.55pm: Al Maktoum Challenge Round-1 – Group 1 (TB) $390,000 (D) 2,000m; Winner: Salute The Soldier, Adrie de Vries, Fawzi Nass
7.30pm: Nad Al Sheba – Group 3 (TB) $228,000 (T) 1,200m; Winner: Final Song, Frankie Dettori, Saeed bin Suroor
Company%20profile
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The specs
Engine: 2.0-litre four-cylinder turbo
Power: 268hp at 5,600rpm
Torque: 380Nm at 4,800rpm
Transmission: CVT auto
Fuel consumption: 9.5L/100km
On sale: now
Price: from Dh195,000
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The Perfect Couple
Starring: Nicole Kidman, Liev Schreiber, Jack Reynor
Creator: Jenna Lamia
Rating: 3/5
The Melbourne Mercer Global Pension Index
The Melbourne Mercer Global Pension Index
Mazen Abukhater, principal and actuary at global consultancy Mercer, Middle East, says the company’s Melbourne Mercer Global Pension Index - which benchmarks 34 pension schemes across the globe to assess their adequacy, sustainability and integrity - included Saudi Arabia for the first time this year to offer a glimpse into the region.
The index highlighted fundamental issues for all 34 countries, such as a rapid ageing population and a low growth / low interest environment putting pressure on expected returns. It also highlighted the increasing popularity around the world of defined contribution schemes.
“Average life expectancy has been increasing by about three years every 10 years. Someone born in 1947 is expected to live until 85 whereas someone born in 2007 is expected to live to 103,” Mr Abukhater told the Mena Pensions Conference.
“Are our systems equipped to handle these kind of life expectancies in the future? If so many people retire at 60, they are going to be in retirement for 43 years – so we need to adapt our retirement age to our changing life expectancy.”
Saudi Arabia came in the middle of Mercer’s ranking with a score of 58.9. The report said the country's index could be raised by improving the minimum level of support for the poorest aged individuals and increasing the labour force participation rate at older ages as life expectancies rise.
Mr Abukhater said the challenges of an ageing population, increased life expectancy and some individuals relying solely on their government for financial support in their retirement years will put the system under strain.
“To relieve that pressure, governments need to consider whether it is time to switch to a defined contribution scheme so that individuals can supplement their own future with the help of government support,” he said.
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Company%20Profile
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Company%20Profile
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BEETLEJUICE BEETLEJUICE
Starring: Winona Ryder, Michael Keaton, Jenny Ortega
Director: Tim Burton
Rating: 3/5
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Killing of Qassem Suleimani
SPECS
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