The trial of the Rio 4 is over. No verdict or sentence has been handed down yet by the Shanghai court. That could take weeks. Three of the four Rio employees pleaded guilty to taking bribes; it is not known how the four pleaded to the industrial espionage charges. Those were heard in secret, though Australian diplomats were allowed to attend the part of the trial dealing with the bribery charges. Justice is blind, or at least blinded.
Tag Archives: Rio Tinto
Stern Hu, head of Rio Tinto’s Shanghai office, who stands accused of taking bribes and engaging in industrial espionage, has admitted taking bribes, though he contests the size of them. We know that via one of the attorney’s representing one of Hu’s three colleagues who are also on trial. Proceedings, which are expected to last three days, are closed, even to Australian consular officials for most of the time. The part dealing with infringing trade secrets charges is expected to start sometime on Tuesday. As Lu Zhian, an associate professor at Fudan University’s Law School, told Xinhua, if we want to find out what went on, we “can refer to the court’s hearing records after the trial and appeal”.
While gathering our thoughts for a preview of Monday’s start of the Rio 4 industrial espionage trial, we received word of Rio Tinto’s $1.35 billion iron ore joint venture with Chinalco in Guinea. Having slept on it for more than 24 hours, this Bystander still can’t make anything out of it that isn’t surreal. Perhaps it is just another example of China’s remarkable ability to operate in parallel universes.
We had assumed that the trial of Australian Stern Hu and his three Chinese colleagues at Rio would proceed to its predetermined conclusion, with a routine sentence to follow. The main point the court proceedings are meant to be making is that China follows the administration of its law–not the same thing as following the rule of law, of course–and that nobody is above the process. With a host of domestic corruption cases in train, no foreigner, especially an ethnic Chinese one like Hu, can expect much by way of favors. Foreigners routinely underestimate how signals they assume are directed at them are really more for domestic consumption.
The case has strained though not severed relations between Beijing and Canberra. Those were further frayed last June when Rio Tinto pulled the plug at the eleventh hour on a $19.5 billion cash injection from Chinaclo that would have increased the state-owned aluminum giant’s 9% stake in the Anglo-Australian miner. A revisionist view of the causes of Rio’s change of heart more favorable to the company has taken hold in Beijing. Last year Rio’s sales to China accounted for a quarter of the company’s revenue.
The new joint venture between the two in Guinea gives Chinalco a 47% stake in Rio’s Simandou project which involves infrastructure work Chinese firms are well practiced at in Africa, building a mine, a port and a railway to connect the two. Last October, China signed a $7 billion mining and energy deal with Guinea’s military rulers, so it makes a well-connected partner for Rio in a project that has run into local political problems. The joint venture also gives China a voice on the sellers’ side of the table at the iron ore price negotiations where it is already sits on the other side as the buyer. More parallel worlds.
The industrial espionage case involving four employers of the Anglo-Australian mining company Rio Tinto has entered its next phase. The four, who include an Australian citizen Stern Hu, have been indicted on on charges of bribery and stealing business secrets, Xinhua reports. They will stand trial in Shanghai in what promises to be another test of relations with Australia, and of the nerves of foreign investors which have been rattled by what seem to be a number of strikes at foreign companies in recent months. If found guilty, the Rio 4 could face up to seven years in jail on the commercial secrets charge, and up to 20 years on the bribery charge. Last week, Rio appointed Ian Bauert to run its operations in China. An old China hand, Bauert set up the company’s first China office more than 25 years ago.
Kevin Rudd, Australia’s prime minister, seems to have to no change out of his Chinese counterpart Wen Jiabao when the two discussed the case of Stern Hu and three of his Rio Tinto colleagues who were detained by Chinese authorities in July on suspicion of stealing state secrets. Speaking on the sidelines of the ASEAN meeting in Thailand, Rudd said only that the case, which has strained relations between Canberra and Beijing, continued to be the subject of “intense and continuing discussion” between the two countries’ foreign ministries. Deciphering the diplomatic body language, those discussions aren’t making much progress. The four were formally arrested in August on charges of stealing commercial secrets, but not on the more serious one of stealing state secrets.
more than 50 people have been prosecuted in the U.S. since 2006 for allegedly transporting restricted technology, stealing trade secrets or conducting business espionage for China, according to the U.S. Justice Department.
Noting the relatively rarity of prosecutions being brought in China in connection with these sorts of cases, Bloomberg also says that, unlike the Rio Tinto case, many of the U.S. prosecutions involved military data. Both Chinese and U.S. citizens have been brought before the courts.
The Rio Four have finally been formally arrested on charges of infringing trade secrets and bribery, Xinhua reports. A statement from the Supreme People’s Procurate said prosecutors approved the arrest of the four Rio Tinto employees, that investigations had showed they obtained China’s commercial secrets through improper means and that there was evidence of bribery involved.
The four, Stern Hu, who is an Australian citizen, Liu Caikui, Ge Minqiang and Wang Yong, were detained in Shanghai in early July. Rio has said its employees did nothing “unethical” and did not bribe Chinese steel mills for information.
Given the prominence of the arrests, formal charges hardly come as a surprise, though this Bystander notes in passing that the four were not charged with the more serious crime of stealing state secrets, which carries a potential life sentence on conviction. Stealing commercial secrets, our learned friends advise us, carries a sentence of up to three years imprisonment and/or a fine.
What to watch for next is which executives of which Chinese steel companies get fingered.
The Economic Observer says the investigation into the leaking of China’s negotiating position at the iron-ore price negotiations earlier this year that has resulted in the detention without charge of four Rio Tinto employers has widened to include Baosteel, the largest steel company. (China Daily has reported that all 16 of the leading steel mills are implicated, though this remains unconfirmed.)
The Economic Observer also lays out the way the government stepped in to take control of this year’s annual price negotiations, dissatisfied that the individual companies were consistently getting the worse of each year’s deal, with the consequent impact on the economy of higher steel prices. By having the China Iron and Steel Association handle a collective negotiation, the government thought it could hold a tougher line on prices and stop the negotiating tactics leaking out by cutting the steel companies out of the picture. But what the Economic Observer suggests is that it was not price but quota size that mattered most to the larger steel mills. So secret side deals that have always taken place between the mills and the miners continued, and with them the mutually back-scratching relationships necessary to facilitate them. So in what has become a political power battle between government and the state-owned steel mills, officials are cracking down in the only way they know how, hard.
Dan Harris over at China Law Blog has a horrifying tale from the rep. office in China of what we assume is a U.S. company. The company was declaring bankruptcy and sent an executive to China to inform suppliers that they wouldn’t be getting paid. The suppliers didn’t just take umbrage; they took hostages, forcibly holding the U.S.-passport holding citizens in the rep. office against their will for some days. (The situation, as of the post, remains unresolved.) From Dan’s recounting of the tale and the comments to his post, this is not a unique event, all of which puts the espionage accusations against the four Rio Tinto executives being held without charge by the authorities into a new perspective.
Conspiracy theorists start here: Xinhua has a report on the growing dispute with Australia over the detention without charge of four Rio Tinto executives, one an Australian citizen, on allegations of stealing state secrets. It is titled, China Striving To Create Fair Trading Environment, so you get its drift. But it concludes with the following tantalizing final paragraph:
But the spying case has cost the mining giant 100 billion yuan ($16 billion), with its market share dwindling by as much as 30 percent, according to a report by the China Times.
That is only $3 billion shy of the $19 billion that Chinalco was going to invest in Rio, before the mining company pulled the plug on the deal at the last minute, much to the chagrin of Chinalco and Beijing.
Could it be there is a measure there for how much longer the Rio Four will be held without charge?