Rio Tinto China trial verdict due Monday

By Lucy Hornby

SHANGHAI (BestGrowthStock) – A Chinese court will deliver a verdict on Monday against four Rio Tinto employees accused of accepting bribes and stealing commercial secrets in a case closely watched by foreign investors and the huge domestic steel industry.

The court will also rule on a second case, that of Tan Yixin, an executive at Shougang Corp, China’s eighth-largest steel mill, who was detained around the same time as Rio’s Stern Hu, a Chinese-born Australian citizen, and his Chinese colleagues at Rio Tinto.

Court documents showed the verdict in the case of Tan and unnamed others for violating commercial secrets would be issued on Monday afternoon, immediately after the Rio verdicts at around 2 p.m., and by the same judge.

Chinese officials did not say when their trial took place.

The case has 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.

Leaked testimony of money handed over in cardboard boxes and plastic bags also cast the spotlight on business practices by Chinese steel mills desperate to secure relatively low-cost and stable iron ore supplies from Rio Tinto, the world’s second-largest miner.

All four Rio employees pleaded guilty to receiving kickbacks but contested the amounts, which prosecutors said reached 6.46 million yuan ($946,300) for Stern Hu, and 75 million yuan, including $9 million from steel tycoon Du Shuanghua, in the case of Wang Yong, head of a separate iron ore sales team.

Only one of the four, Liu Caikui, pleaded guilty to infringing commercial secrets in a portion of the trial closed to Australian diplomats. Liu was accused of taking 3.78 million yuan, the lowest amount of kickbacks of the four Rio employees.

Prosecutors had asked for more than five years in jail for the charges of receiving bribes alone, lawyers said last week.

A guilty verdict could raise questions about Rio’s business practices, although the company says an audit cleared it of wrongdoing.

U.S. authorities fined automaker Daimler AG (DAIGn.DE: ) $185 million last week for bribing officials in a number of countries, including China.

SECRETS

While some details have trickled out about the kickbacks portion of the case, much less is known about the commercial secrets portion, and lawyers are unwilling to comment.

Foreign reporters were barred from the trial, held last week at the No. 1 Intermediate People’s Court in Shanghai.

Much of the foreign interest in the case stems from the secrets charges, which adds a layer of uncertainty and risk to operating in China.

Some of the information, including detailed mine production and operation rates, is considered by companies as vital market intelligence in China, where official statistics are unreliable.

Australian diplomats were barred from the commercial secrets portion of the trial, a ban that legal scholars say contravenes China’s own laws as well as consular agreements.

Tan Yixin, who was at one point considered a candidate to head Shougang, was detained in July along with Wang Hongjiu, shipping manager for Laiwu Iron and Steel Group.

They were questioned for “revealing China’s negotiating strategy” during tense term iron ore price talks in 2009, when the China Iron and Steel Association was trying to bring domestic mills to heel to present a united front against miners Rio, BHP Billiton (BHP.AX: )(BLT.L: ) and Vale

“The case has been reported by media so much. A verdict or a conclusion on this case has to come sooner or later. There is nothing new about it at all,” said a media officer with Shougang Corp in Beijing, when asked about Tan’s trial.

The involvement of Du Shuanghua, founder of private Rizhao Steel in Shandong Province, and the manager from state-owned Laiwu, also in Shandong, reveals the desperate competition for iron ore by China’s rapidly growing mid-sized steel mills.

Both Laiwu and Rizhao Steel relied on term iron ore supplies and ship chartering to ensure stable inflows of raw materials and avoid the high and volatile spot iron ore markets.

Both mills were fighting to stay independent and fend off a top-down merger orchestrated by Shandong Province and central planners in Beijing, who believe that China’s steel industry must be consolidated into globally competitive state-owned behemoths.

Both lost, and are now part of state-owned Shandong Steel.

Stock Today

(Additional reporting by Chen Aizhu in Beijing; Editing by Ken Wills)

Rio Tinto China trial verdict due Monday