Harsh Jail Terms for Rio Tinto Four

March 29, 2010
Executive received 10 years while his colleagues received terms of 14, 8, 7 years.

China jailed an Australian executive with mining giant Rio Tinto for 10 years and handed stiff terms to three of his colleagues on March 29 for stealing trade secrets and pocketing millions in bribes.

The climax to the trial in Shanghai -- which stoked foreign investors' anxiety about the rule of law in China -- provoked protests from Australia, which said the prison term for Stern Hu was "very tough" and "harsh."

But the Anglo-Australian mining firm, a prime supplier of the raw materials that China needs to sustain its economic boom, announced it was firing the convicted quartet and said it wanted to maintain good relations with Beijing.

Hu and the three Chinese staff were convicted of taking more than $13 million in kickbacks from Chinese steel firms during tense 2009 iron ore talks, which the court said they had helped ruin, and of stealing trade secrets.

Hu, head of Rio Tinto's Shanghai office, was sentenced to seven years for bribery and five more on the industrial espionage charge -- but the court reduced the combined sentence to 10 years.

His colleagues Wang Yong, Ge Minqiang and Liu Caikui were given jail terms of 14, eight and seven years respectively.

The actions of the defendants "severely damaged the competitiveness of China's steel companies" and "isolated" China during last year's iron ore price talks, leading to their collapse, presiding judge Liu Xin told the court. "They took advantage of their favorable position in the iron ore trade and teased out information by dangling the promise of profits," the judge said.

"The four have confessed criminal information that prosecutors did not know," he said, flanked by two other judges.

At last week's three-day trial, the court reportedly heard evidence that millions of yuan in bribes from small Chinese steel mills were stuffed into bags and boxes for the accused.

The presiding judge said the bribes took other forms too -- Ge took a watch worth more than $19,000. He said assets worth a combined 6.3 million yuan (US$920,000) were confiscated from the men.

But foreign critics said the four were made to pay the price as China grows increasingly assertive in defending its economic interests and ensuring access to materials it needs to fuel its dramatic economic growth.

Australian Foreign Minister Stephen Smith protested over Hu's bribery sentence and said there were "serious unanswered questions" about the trial's industrial spying portion, from which Australian diplomats were shut out.

While insisting the ruling would not affect Australia's ties with China, its top trading partner, Smith said: "On any measure this was a very tough sentence. "I feel very much for Stern Hu and his family. Whilst we do not condone bribery in any way I think the sentence, on any measure, is harsh."

Judge Liu described the sentences as "light".

The Rio employees were arrested last July during the contentious iron ore contract talks between top mining companies and the steel industry in China, the world's largest consumer of the raw material.

Before the global financial crisis, small private steel companies in China were locked out of buying iron ore from Rio because the mining giant prioritized large state-run steel companies.

When the crisis hit in September 2008, demand for iron ore plummeted and the smaller players paid bribes "to squeeze into the club and join the buyers", Hu's lawyer Jin Chunqing said.

The judges ruled the four had stolen trade secrets including the minutes of a China Iron and Steel Association meeting and information on output cuts by Chinese steel giant Shougang. The court named Sinochem International, Shougang and wealthy steel tycoon Du Shuanghua as among those who had paid bribes.

Rio moved quickly to fire the four upon their conviction, with iron ore chief executive Sam Walsh describing their behavior as "deplorable."

Rio chief executive Tom Albanese said he was "determined" not to allow the case to "prevent Rio Tinto from continuing to build its important relationship with China."

Lawyers for Liu and Wang said their clients were likely to appeal. The defence team for Hu -- who was fined 500,000 yuan by the court -- said they needed to discuss the verdict with their client.

Copyright Agence France-Presse, 2010

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