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18-119MR ASIC takes further action against Rio Tinto Limited and its former CEO and CFO
ASIC has today expanded its legal proceedings recently filed in the Federal Court in Sydney against Rio Tinto Limited (RTL) and its former Chief Executive Officer, Mr Thomas Albanese, and its former Chief Financial Officer, Mr Guy Elliott. The new allegations relate to RTL's failure to recognise an impairment of a wholly owned subsidiary, Rio Tinto Coal Mozambique (RTCM) in its 2012 Interim Financial Statements in accordance with the relevant accounting standards, RTL's failure to disclose the substantial impairment and other related breaches of the Corporations Act.
In December 2010, RTL announced a takeover offer for Riversdale Mining Limited (ASX:RIV) (Riversdale) which was completed in August 2011 at a total cost of over US$4 billion. Following the acquisition RTL delisted Riversdale and renamed it RTCM.
ASIC alleges that RTL was required to test for and recognise an impairment of RTCM in its 2012 Interim Financial Statements in accordance with the relevant accounting standards. By not doing so when it published its 2012 Interim Financial Statements, ASIC alleges RTL also engaged in misleading or deceptive conduct. ASIC further alleges that RTL should have disclosed the substantial impairment in relation to RTCM to the ASX in those Financial Statements.
ASIC alleges that Mr Albanese and Mr Elliott failed to take all reasonable steps to comply with or to secure compliance by RTL with the relevant accounting standards in relation to the 2012 Interim Financial Statements, and in addition, by allowing RTL to engage in such conduct, Mr Albanese and Mr Elliott failed to exercise their powers and discharge their duties with the care and diligence required by law as directors and officers of RTL. ASIC also alleges that Mr Albanese and Mr Elliott failed to disclose to the audit committee and the auditors information of which they were aware that was relevant to the impairment.
In addition to the declarations, pecuniary penalties and disqualifications sought in the original proceedings ASIC is seeking further declarations that:
- RTL contravened sections 304, 305 and 1041H of the Corporations Act 2001 (Cth) (the Act) with respect to its 2012 Interim Financial Statements;
- RTL contravened s674(2) of the Act in failing to comply with its continuous disclosure obligations by failing to disclose a substantial impairment in the carrying value of the operating assets of RTCM in its 2012 Interim Financial Statements. ASIC has sought from the Court a pecuniary penalty against RTL;
- Mr Albanese and Mr Elliott contravened s180 of the Act in relation to the above contraventions by RTL and their provision of information to the audit committee and auditors of RTL, and further that Mr Albanese and Mr Elliott contravened s344 of the Act; and
- ASIC has sought from the Court pecuniary penalties against Mr Albanese and Mr Elliott and that they be disqualified from managing corporations for such periods as the Court thinks fit.
ASIC will be making no further comment at this time.
Rio Tinto Limited is an Australian publicly listed company. Rio Tinto plc is a UK publicly listed company. RTL and Rio Tinto plc together operate a dual listed structure and the directors of both companies are the same. Both companies together form the Rio Tinto Group (Rio Tinto) and one set of financial statements are prepared.
In December 2010 Rio Tinto announced a takeover offer for Riversdale Mining Limited (ASX:RIV) (Riversdale) which was completed in August 2011 at a total cost of over US$4 billion. Following the acquisition RTL delisted Riversdale and renamed it Rio Tinto Coal Mozambique.
On 17 January 2013 Rio Tinto announced it expected to recognise a non-cash impairment charge of approximately US$14 billion (post tax) in its 2012 full year results which included approximately US$3 billion relating to RTCM. It was also announced that Mr Albanese had stepped down from his role as CEO.
In October 2017, the UK Financial Conduct Authority announced it had fined Rio Tinto plc £27,385,400 for breaching Transparency and Disclosure Rules by failing to carry out an impairment test and to recognise an impairment loss on the value of RTCM in the Rio Tinto 2012 half year report.
On the same date the US Securities and Exchange Commission commenced civil proceedings in the United States Federal Court in Manhattan against Rio Tinto, Mr Albanese and Mr Elliott for inflating the value of RTCM.
On 2 March 2018 ASIC filed proceedings in the Federal Court that related to statements which ASIC alleges were misleading or deceptive contained in the RTL annual report for 2011 which was signed on 5 March 2012 and published on 16 March 2012 (refer: 18-061MR ASIC takes action against Rio Tinto and its former CEO and CFO for misleading and deceptive conduct).
The matter has been listed for a further hearing on 24 July 2018 at 9.30am.
ASIC would like to thank the US SEC for their assistance and collaboration in relation to this ongoing matter.
Refer to 18-061MR for updates on these proceedings.