[News] China sends Rio executives to 7-14 years jail
(Reuters) - A Chinese court sent four Rio Tinto employees to jail on Monday for 7 to 14 years for taking bribes and stealing commercial secrets, a verdict that Australia called harsh, but not surprising given the evidence.
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Canberra said the trial would not affect ties with Beijing.
In China, the verdict could strengthen the hand of China's largest, state-owned steel mills and sharply curtail Chinese iron ore purchases from volatile spot markets.
The Shanghai Intermediate People's Court said China-born Australian citizen Stern Hu, who headed Rio Tinto's iron ore operations in China, will serve 10 years, with parts of a 7 year bribery term and a 5 year secrets sentence running concurrently.
"On any measure this is a very tough sentence. It is a tough sentence by Australian standards. As far as Chinese sentencing practice is concerned, it is within the ambit or within the range," Australia's Foreign Minister Stephen Smith said, while acknowledging evidence that they had received bribes.
"I don't believe the decision that has been made or has occurred will have any substantial or indeed any adverse implications for Australia's bilateral relationship with China."
Three other executives, all Chinese nationals, were sentenced to between 7 and 14 years on bribery and secrets charges. All four were fired by Rio on Monday.
The four men, dressed casually in sports jackets, stood for the verdicts, which come nine months after they were first detained at the height of fraught iron ore negotiations.
The court said the defendants helped obtain information from confidential strategy meetings of the China Iron and Steel Association (CISA), which was representing the Chinese steel industry in negotiations with the world's three top iron ore suppliers, Rio, BHP Billiton and Vale.
Rio shares were barely affected by the sentencing.
"There's no implication that Rio Tinto was involved directly in what transpired," said Tim Schroeders, portfolio manager at Pengana Capital.
"This will probably allow one lingering doubt to be resolved and people to focus on the fundamentals of the company."
Rio said it had no comment on the verdict but would sack all four employees.
"We have been informed of the clear evidence presented in court that showed beyond doubt that the four convicted employees had accepted bribes," Sam Walsh, the chief executive of Rio Tinto Iron Ore, said in a statement.
"By doing this they engaged in deplorable behavior that is totally at odds with our strong ethical culture. Rio Tinto has concluded that the illegal activities were conducted wholly outside our systems."
SECRETS
The case had raised foreign investor concern over China's legal system, particularly the paucity of official information surrounding the secrets charges. It has shed light on business practices in the Chinese steel industry, the world's largest, as well as in the global iron ore trade.
"China has missed a substantial opportunity. This was an opportunity for China to bring some clarity to the notion or question of commercial secrets. That of course required transparency," Foreign Minister Smith said, referring to China's decision to close the portion of the trial dealing with commercial secrets to Australian diplomats.
"Openness and transparency would assist not just Australia but the international business community in understanding and dealing with this matter. As China emerges into the global economy, the international business community needs to understand with certainty what the rules are in China."
Leaked testimony of money handed over in cardboard boxes and plastic bags also spotlighted business practices of Chinese steel mills desperate to secure relatively low-cost and stable iron ore supplies from Rio Tinto, the world's second-largest miner.
The court said the infringement of commercial secrets caused a great loss to Chinese mills, putting them in a disadvantageous position in iron ore pricing talks.
According to the court, last year 20-plus Chinese steelmakers paid extra advances of 1.02 billion yuan for their iron ore imports because of the crimes committed by the four.
It named Tan Yixin, once tipped as future head of Shougang Steel in Beijing, and Wang Hongjiu, shipping manager for Laiwu Steel in Shandong, as the source of some of the leaks.
The verdict may raise questions about Rio's business practices, although the company says an audit cleared it of wrongdoing. U.S. authorities fined automaker Daimler AG $185 million last week for bribing officials in a number of countries.
The court also sentenced those two executives on Monday, although their sentences were not immediately announced. Both were detained shortly after the Rio executives, in July.
Chinese officials did not say when their trial took place.
Foreign reporters were barred from the Rio Tinto executives' trial, held last week at the No. 1 Intermediate People's Court in Shanghai, but allowed in for the verdict.
($1=6.826 yuan)
(Additional reporting by Chen Aizhu in Beijing and Fang Yan in Shanghai; Editing by Ken Wills and Raju Gopalakrishnan)
Source - http://www.reuters.com/article/idUSTRE62S0R020100329
