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Rio Tinto, China Bribery Scandal: Executives Plead GUILTY To Receiving Huge Kickbacks

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SHANGHAI — Four employees of mining giant Rio Tinto pleaded guilty Monday to taking bribes, lawyers and an Australian diplomat said, in an embarrassing case seen as part of a harsh new attitude toward foreign business in China.

Rio Tinto is one of China's top providers of iron ore and a key industry negotiator in commodity price talks with the government. The accused include a Rio Tinto executive who was arrested along with three employees last year during fractious annual negotiations over iron ore prices.

The admissions of bribe taking – although no details of the allegations have been released – are a blow for Rio Tinto at a time when it is striving to restore good relations with China. The four also face charges of stealing commercial secrets, and final verdicts in the trial could take weeks.

"Only in the last year have we come upon some difficulties, which we are working hard to resolve," Rio Tinto's chief executive, Tom Albanese, told a conference in Beijing on Monday.

Stern Hu, an Australian national, was Rio Tinto's top executive in charge of iron ore for China when he was arrested. The lawyers said Hu and the three Chinese nationals – Liu Caikui, Ge Minqiang and Wang Yong – pleaded guilty but disputed the amounts they are alleged to have accepted.

"During the course of the trial, Mr. Hu made some admissions concerning those two bribery amounts. So he did acknowledge the truth of some of those bribery amounts," the Australian consul-general in Shanghai, Tom Connor, said after the first day of the trial finished.

Connor said Hu was accused of taking 1 million yuan ($146,000) and US$790,000. He did not provide further details.

Rio Tinto, based in Melbourne and London, at first rigorously denied the charges against its employees, but its recent statements have only urged that the court handle the case in a quick and transparent way.

The company recently named a new top executive for China, and last week announced an agreement with China's state-run aluminum giant Chinalco to develop an iron ore reserve in the West African country of Guinea.

"Today China is our largest customer," Albanese said. "Today, I want to look to the future."

In a question-and-answer session at the China Development Forum, a gathering of top officials and executives, Albanese refused to comment on the trial, though in his speech, he said it was of "great concern."

"I can only say we respectfully await the outcome of the Chinese legal process," he said.

The case comes at a time when many foreign businesses appear to be reassessing the environment in the world's fastest growing major market. The American Chamber of Commerce released a report Monday showing a growing number of foreign businesses in China – 38 percent of those surveyed – feel shut out under new government policies promoting homegrown technology.

The chamber's data, gathered earlier this year from 203 companies, portrays a steadily worsening environment for foreign companies in China over the past three years. Only 23 percent said they felt unwelcome in the chamber's 2008 survey.

The Chinese government meanwhile intensified its rhetoric against Google Inc. after the company said it was on the verge of making good on a threat to shutter its China site, Google.cn, because Beijing forces the Internet giant to censor search results.

"Business is business. But when it involves political tricks, business will come to an end soon," the newspaper China Daily wrote in one of several commentaries in state media Monday that accused Google of harboring a political agenda.

However, Premier Wen Jiabao praised multinational companies for helping China weather the global financial crisis.

"First I want to make it clear about the attitude of the Chinese government. The Chinese government welcomes the multinationals from around the world to China," Wen said at the China Development Forum.

The Australian government has protested the decision by the Shanghai No. 1 Intermediate People's Court to exclude consular officials from parts of the trial related to commercial secrets. China's legal system, like the rest of the government, is dominated by the Communist Party, an institution prone to secrecy.

The four Rio Tinto employees have not been allowed any public comment since their arrest. China has not disclosed who might be accused of offering the alleged bribes.

Tao Wuping, the lawyer for Liu, said all four pleaded guilty. Calls to Hu's lawyer, Duan Qihua, were not answered.

The trial was scheduled to last three days. Verdicts can come weeks or even months later. Almost all criminal cases that go to trial in China end in conviction. The maximum penalty for commercial espionage is seven years in prison. The maximum penalty for taking large bribes is five years.

Chinese reports have suggested that the Rio Tinto employees may have been caught up in an effort to control information exchanged during the iron ore pricing talks, where Rio Tinto was acting as lead negotiator for the miners.

The latest round of negotiations is dragging on, with China seeking once again to convince Rio Tinto and other suppliers to give its mills lower prices than those paid by Japan and South Korea. Miners reportedly want price hikes of 90 percent or more.

Foreign companies have played a critical role in China's industrial boom, providing massive financing and managerial know-how. But for many years they operated in a system of many gray areas, where bribes, shortcuts and other inducements were part of doing business.

They now are facing closer scrutiny, says Sang Baichuan, a foreign business expert at University of International Business and Economics in Beijing. He accused some companies of using bribes to try to beat the competition.

"The impact of foreign companies on China has gone from positive to negative," Sang said.

Around the Web

China Indicts Rio Tinto Staff on Bribery Charges - NYTimes.com

China Says Rio Tinto Bribed Most Big Steel Makers - NYTimes.com

Australia asks China for 'transparency' in Rio Tinto case - CNN.com

China accuses Rio Tinto of mass bribery - Telegraph