Home > Corporate Social Responsibility > Rio Tinto executives lose appeal in Chinese court

Rio Tinto executives lose appeal in Chinese court

May 18, 2010

A Shanghai court has rejected the appeals of three former Rio Tinto employees against their sentences for corruption.

The report, from the Xinhua news agency, said the Higher People’s Court of Shanghai threw out the pleas by Wang Yong, Ge Minqiang and Liu Caikui.

They, and an Australian citizen, Stern Hu, were convicted in March for commercial espionage and taking bribes.

Source: BBC News, May 17 2010

Observations:

  • Rio Tinto did support the executives for a long time, until it was clear in public that they had really committed fraud. Initially many people in industry expected China was merely trying to frustrate Rio Tinto. Once the wrongdoing of the traders became clear Rio Tinto decided to dismiss them.
  • The executives were taking bribes from small steel companies that were trying to evade following the yeraly benchmark pricing agreements for iron ore.

Implications:

  • The executives made use of the very intransparent yearly pricing system in their illegal activities. It will be harder in the new quarterly system to use illegal shortcuts.
  • Although corporate reputation has certainly taken a hit, Rio Tinto has not announced far-stretching measures to improve the internal controls system in order to prevent similar practices in the future.
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  1. June 2, 2010 at 1:36 am

    I wonder if you would care to make some observations on and spell out the implications of two recent actions in the Court of Justice of the European Union. The link is:

    http://bit.ly/d7wpam

  2. June 2, 2010 at 8:49 am

    Observations:
    – The EU has decided to classify a number of nickel substances as “dangerous”, thus making it significantly more expensive for the nickel industry to handle the substances.
    – Some parties in the nickel industry disagree with the classification, as they find the scientific support for it unconvincing.

    Implications:
    – The nickel industry will need to prove that the nickel substances are really not dangerous in “normal use”. Appealing to procedural mistakes by the EU is certainly not convincing and might turn public opinion against the industry.
    – Regulation on tracking and handling chemical substances has changed recently after the REACH implementation. The metals industry will face increasing pressure to account also for other potentially dangerous substances in their operations. It will need to be proactive rather than reactive in finding the safest way of handling the chemical threats.

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