Rio Tinto Group, the world’s second-biggest miner, and two of its former top executives have been charged with fraud over the alleged inflation of the value of coal assets in Mozambique acquired for about $3.7 billion in 2011, the Securities and Exchange Commission said.

The London-based producer, ex-Chief Executive Officer Tom Albanese and former Chief Financial Officer Guy Elliott “failed to follow accounting standards and company policies to accurately value and record its assets,” the SEC said Wednesday in a statement.

“Rio Tinto intends to vigorously defend itself against these allegations,” the company said in an e-mailed statement. Albanese, Rio’s CEO between 2007 and 2013, said in a separate statement that “there is no truth in an of these charges.” Elliott, who retired in April 2013, also refuted the charges in a statement issued on his behalf.

Rio declined 1 percent to A$70.74 at 10:13 a.m. Wednesday in Sydney trading, as competitor BHP Billiton Ltd. fell 0.6 percent and the benchmark S&P/ASX 200 Index was little changed.

The U.K. Financial Conduct Authority said in a separate statement that Rio will pay a 27.4 million pound ($36 million) fine for a breach of disclosure rules by failing to carry out an impairment test and recognizing a loss on the value of the assets in Mozambique. Rio agreed to settle at an early stage and received a 30 percent reduction on its penalty, the FCA said.

‘Case Closed’

“The FCA made no findings of fraud, or of any systemic or widespread failure by Rio Tinto,” Rio said in a separate Wednesday filing. “The case is now closed.” The Australian Securities and Investments Commission is also reviewing the issue, Rio said.

According to an SEC complaint filed in federal court in New York, Rio raised $5.5 billion from U.S. investors, including $3 billion after May 2012, when executives had informed Albanese and Elliott that the Mozambique coal unit was likely worth negative $680 million.

“As alleged in our complaint, Rio Tinto’s top executives allegedly breached their disclosure obligations and corporate duties by hiding from their board, auditor, and investors the crucial fact that a multi-billion dollar transaction was a failure,” said Stephanie Avakian, Co-Director of the SEC’s enforcement division.

Rio acquired Riversdale Mining Ltd., the owner of the assets, in 2011 in an all-cash deal for A$3.9 billion, before writing the value of the assets down by $3 billion two years later. The charge, part of a wider $14 billion in asset writedowns, led to Albanese’s departure in 2013.

The SEC said in 2016 it was investigating the $3 billion impairment charge. Rio later sold the operations for $50 million in 2014.

Separately, Rio said in November it had alerted authorities including the U.S. Department of Justice and the U.K.’s Serious Fraud Office to a $10.5 million payment to an external consultant in 2011 in relation to the Simandou iron ore project in Guinea. Rio’s Chairman Jan du Plessis said in April the company remained in talks with authorities on the two separate inquiries.

Source:
courtesy of BLOOMBERG

by David Stringer

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