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« Event: When Good People Make Bad Decisions (NYU Law School -- November 30) | Main | Whistleblower awarded $5 million for medical device maker's false claims »
Friday
Nov112016

Rio Tinto discloses $10 million West Africa payment, suspends senior exec

Global mining giant Rio Tinto said it suspended the chief executive of its energy and minerals division while it investigates more than $10.5 million paid to a consultant for the Simandou iron ore project in Guinea.

Alan Davies was in charge of Simandou in 2011 when the payments for "advisory services" were allegedly made, according to a U.S. securities filing.

London-based Rio Tinto said it learned about the payments in August this year from email correspondence.

Legal & Regulatory Affairs group executive Debra Valentine stepped down, Rio Tinto said. She previously notified the company of her intention to retire on May 1, 2017.

On Tuesday, Rio Tinto notified authorities in the UK and the United States. It said it “is in the process of contacting the Australian authorities.”

“Rio Tinto intends to co-operate fully with any subsequent inquiries from all of the relevant authorities,” the company said. “Further comment at this time is therefore not appropriate.”

Davies took over Rio Tinto’s energy and mineral group in July.

Rio Tinto canceled the $20 billion Simandou project because of low iron ore prices.

Last month Rio Tinto sold its 46.6 percent interest in Simandou for about $1.3 billion to Chinalco, a Chinese company listed in Hong Kong.

The Wall Street Journal reported Thursday that internal Rio Tinto emails it saw showed that high-level executives, including then CEO Tom Albanese, approved the payments in 2011 to a consultant.

The WSJ said the consultant was François de Combret, a former Lazard Frères managing director with ties to senior government officials in Guinea.

The government of Guinea stripped Rio Tinto of half the Simandou project in 2008 for alleged non-performance.

The rights then went to BSG Resources Ltd., owned by Israeli billionaire Beny Steinmetz. BSG teamed up with Brazil’s Vale SA to acquire control of Simandou.

But Rio won the rights back in 2011 after the Guinea government stripped them from BSG and Vale, alleging the companies had acquired them illegally.

BSG and Vale have denied any wrongdoing.

This week Steinmetz said the Rio Tinto disclosure revealed a long-running scheme against BSG.

“It’s a big conspiracy against us, huge,” Steinmetz told Bloomberg. “They tried to paint themselves as nice and clean but they never wanted to develop one ton of iron ore. We are the good guys.”

*     *     *

Here's the disclosure from Rio Tinto's Form 6-K (Report of Foreign Private Issuer) filed November 8, 2016 with the SEC:

On 29 August 2016, Rio Tinto became aware of email correspondence from 2011 relating to contractual payments totalling US$10.5 million made to a consultant providing advisory services on the Simandou project in Guinea.
 
The company launched an investigation into the matter led by external counsel. Based on the investigation to date, Rio Tinto has today notified the relevant authorities in the United Kingdom and United States and is in the process of contacting the Australian authorities.
 
Energy & Minerals chief executive Alan Davies, who had accountability for the Simandou project in 2011, has been suspended with immediate effect.
 
Legal & Regulatory Affairs group executive Debra Valentine, having previously notified the company of her intention to retire on 1 May 2017, has stepped down from her role.
 
Rio Tinto intends to co-operate fully with any subsequent inquiries from all of the relevant authorities. Further comment at this time is therefore not appropriate.

____

Richard L. Cassin is the publisher and editor of the FCPA Blog.

Reader Comments (1)

Great example of the 'business case' for anti-corruption. You never know if the other guy's bribe is bigger and more attractive.
November 11, 2016 | Unregistered CommenterAlison Taylor
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