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SEC Sues Rio Tinto, Two Former Executives

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10/17/2017 | 10:30pm CET
By Dave Michaels 

U.S. regulators on Tuesday sued Rio Tinto PLC and two former top executives over claims they misled investors about the value of Mozambique coal assets obtained in a disastrous acquisition that caused huge losses for the global mining giant.

Rio Tinto continued to value the mining assets in Mozambique at more than $3 billion despite an internal assessment that they were worth negative $680 million, according to a lawsuit filed in Manhattan federal court. The SEC's lawsuit alleges that former Chief Executive Thomas Albanese and former Chief Financial Officer Guy Elliott knew about the project's rapidly declining value but didn't disclose it to investors and misled their board of directors about the scope of the problems, the SEC said.

The SEC's investigation began in 2013, Rio Tinto disclosed in December.

Attorneys for Rio Tinto, Mr. Albanese and Mr. Elliott didn't immediately return calls and emails seeking comment.

Mr. Albanese stepped down in 2013 as Rio Tinto said it would write off roughly $14 billion in the value of various assets, including the Mozambique coal operations it acquired in 2011 through its $3.7 billion takeover of Riversdale Mining Ltd. The $14 billion figure included a huge impairment recognized on the value of Alcan Inc., which Rio Tinto acquired in 2007.

The SEC alleged that Messrs. Albanese and Elliott didn't disclose the problems with the Mozambique assets because they had already written down the value of Alcan and feared the market's reaction to another unsuccessful deal.

"Rio Tinto and its top executives allegedly failed to come clean about an unsuccessful deal that was made under their watch," said Steven Peikin, co-director of the SEC's enforcement division. "They tried to save their own careers at the expense of investors by hiding the truth."

Write to Dave Michaels at [email protected]

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