Monday, March 22, 2010

A Plea Deal in China for Three Rio Tinto Employees?

The New York Times reports that three employees of Rio Tinto (the British-Australian mining giant) agreed to plead guilty in China Monday to taking bribes while working for the company. This case has received much attention as the arrests of the employees came just after Rio Tinto rejected a $19.5 billion investment deal from Chinalco, one of the biggest state-owned Chinese mining groups. The timing lead many to claim the arrests were orchestrated to punish the company.

Three employees of Rio Tinto, the British-Australian mining giant, agreed to plead guilty Monday to taking bribes while working for the company in China, making stunning confessions on the opening day of their three-day trial here.

The employees, including Stern Hu, a senior executive and Australian citizen, admitted to having received several million dollars in bribes, according to their lawyers. A fourth employee is also expected to plead guilty.

The proceedings were largely closed to the public, but the Australian consul general in Shanghai said that Mr. Hu — the focus of the case — had admitted in court Monday to receiving some of the $1 million in bribes prosecutors accused him of having taken while at Rio Tinto.

Mr. Hu and the three Chinese employees were detained last July in a high-profile corruption case that at the time rocked the global steel industry and strained diplomatic relations between China and Australia.

After nine months in detention, Mr. Hu and his three colleagues are on trial this week at the Shanghai No. 1 Intermediate Court, accused of having accepted about $12 million in bribes and also of having stolen commercial secrets from Chinese state-owned companies.

Each of the defendants could face up to 10 years in jail if they plead guilty to accepting bribes, one of their lawyers said.

In a statement after the opening day of the trial Monday, the Australian consul general in Shanghai, Tom Connor, said Mr. Hu had made “some admissions” and had acknowledged taking some of the money.

Zhang Peihong, a lawyer for another Rio Tinto employee standing trial, Wang Yong, said his client had agreed to plead guilty to accepting about $1 million in bribes — much less than the $10 million he is accused of taking...

The four employees were initially accused of espionage, which would have fallen under a tough Chinese state secrets law, and of causing China “enormous economic losses.” But in August, the four employees were formally charged with lesser offenses: bribery and stealing commercial secrets.

The trial focused only on the bribery issue Monday. On Tuesday or Wednesday, the court is expected to shift its focus to the commercial secrets charges.

Many Western executives doing business in China have said that they worried that the Rio Tinto employees — Mr. Hu, Mr. Wang, Ge Minqiang and Liu Caikui — might have been unfairly detained because of business disputes with government-owned companies and that other foreign executives could be targeted.

The timing of the case seemed ominous. Shortly before the July detentions, the Chinese steel industry association had complained about the skyrocketing price of iron ore and had criticized Rio Tinto and other foreign suppliers for a breakdown in contract talks on iron ore prices.

The detentions also came after Rio Tinto had scrapped plans to accept a $19.5 billion investment from Chinalco, one of the biggest state-owned Chinese mining groups.

Beijing has said that this was a criminal case and has pressed Australian officials and others to avoid “politicizing” the case. Yet because Australia is one of the leading suppliers of iron ore to China — iron ore worth billions of dollars and intended for the Chinese booming steel industry — the case has become a concern for the top leaders of both countries.

Legal experts said the July detentions and initial allegations that the four Rio Tinto employees were stealing state secrets had also suggested the government might have been using the case to punish Rio Tinto.

Western executives said they were alarmed because in the days after the detentions were announced last July, a spokesman for the Chinese Foreign Ministry had described the accused as spies, and the Chinese state-owned media published articles saying it was the Rio Tinto employees who were bribing government officials to get access to sensitive documents.

Yet in the nine months since the four were detained, the Chinese authorities have announced no other arrests of steel industry officials for bribing Rio Tinto employees or trading in government secrets.

Prosecutors reduced the charges to bribery and stealing commercial trade secrets after Australian and even American officials said they were concerned about the case and what it would mean for foreign executives working here.

Jerome Cohen, a professor at New York University and an expert on China’s legal system, says he is troubled by the closed nature of the proceedings Monday, and the government’s attempt to turn this into a bribery case.

“The first thing they did to quell foreign protests was to reduce it to trade secrets,” Mr. Cohen said in a telephone interview. “The second was to discredit the defendants in the eyes of their employers. It was a brilliant move. But there are a lot of unanswered questions. A bribe for what? What did they do for it? Was it with Rio Tinto’s knowledge?”...

No comments: