China Indictment Could Be Good News for Rio Tinto 4

Posted by: Bruce Einhorn on February 11, 2010

The Australian government has confirmed that four employees of Melbourne-based resources giant Rio Tinto have been indicted in China after being detained for seven months on corruption charges. This might seem like bad news for the four Rio workers – Australian citizen Stern Hu and Chinese nationals Wang Yong, Ge Minqiang, and Liu Caikui - since the chances of them winning an acquittal in a Chinese courtroom are slim at best. The four were arrested last year shortly after the collapse of a high-profile bid by China’s state-owned Aluminum Corp. of China (Chinalco) to buy a $19.5 billion stake in Rio. The Anglo-Australian company ultimately rebuffed the offer - and a month after that deal fell apart, police detained the four Rio employees. Rio, not coincidentally, last year was also the lead negotiator among iron-ore producers in negotiations with the Chinese, talks that went nowhere after the Chinese side refused to accept the price that their counterparts in Japan and Korea had already reached.

So how can this be good news? As Richard Cassin, partner of Singapore-based law firm Cassin Law, tells Bloomberg, the indictment could be the first step toward freedom for the four. “In cases with a political element, clemency often plays a role after the trial is concluded,” Cassin said in an e-mail. “Clemency allows the political authorities to intervene and create goodwill, often in exchange for a political concession. That could happen in this case.”

I would go further and say that will probably happen in this case. By arresting the four Rio workers and charging them with corruption, China has made its point. Good relations with Australia are important to Beijing, which wants to reach a free-trade agreement with the Aussies and increase Chinese investments Down Under to gain more access to minerals and other raw materials needed by China’s factories. Keeping the Rio employees in jail for a long period of time could create a distraction Beijing doesn’t need. So I think chances are good the Chinese government will conduct a short trial and, after obtaining the guilty verdict Beijing wants, will let the Rio Tinto 4 go.

Reader Comments

Steven

February 11, 2010 1:28 AM

What a nonsense. Without laws, how do you do business. Stern Hu is a criminal in any country. He bribed, He got business info illegally and gained from them. Rio Tinto should keep distance from them or take over responsibility if the company really cares about its employees.

greg

February 11, 2010 9:56 AM

"So I think chances are good the Chinese government will conduct a short trial and, after obtaining the guilty verdict Beijing wants, will let the Rio Tinto 4 go. "

I hope not. The notion that the westerners are above the law and be treated differently from the Chinese citizens is absurd. If found guilty, these people should be tried to the maximum penalty possible by the law, just like the British drug smuggler executed recently.

Max

February 11, 2010 10:14 AM

The Rudd government in Australia has been provoking the Chinese in a number of ways as PM Rudd does his best to prove that he is not beholden to China, despite being a fluent Mandarin speaker.This could be Beijing's opportunity to push back at Rudd.

Chris

February 11, 2010 12:21 PM

Why am I not surprised that Chinese nationals are involved in scams, scandals and bribes? Don't waste your time with such articles. There is no law in China and "freedom" for these alleged individuals is beyond hope.

Ronald

February 11, 2010 1:28 PM

Zero knowledge about China.

DanTe

February 11, 2010 4:55 PM

Typical commie mouth piece - "Steven". 100% conviction prior to trial. And the funny thing is, these commies are too stupid to see the error of this.

fardream

February 11, 2010 7:54 PM

Such a high-profile case will never get clemency from Chinese Government...

liusg

February 12, 2010 7:24 AM

I'd like to say Mr.Einhorn understand the so-called Chinese characteristics better than most of the commmentators here.

mark318

February 12, 2010 9:35 AM

Rio Tinto has the goods the world wants. That's good news enough.

jc

February 12, 2010 9:56 AM

It can be a bit hard for the Chinese government to let them walking out completely free through political clemency because the case if too high-profile and the government has to watch the public reactions very carefully. Not only the government could be perceived too weak if they do that, but also China is in the process of trying to put law above everything else and political clemency could seriously undermine that effort.

It’s true that the Chinese wants to courts the Aussies, but China is not like North Korean that are completely isolated and out of options, and they are not only dealing with the Rudd government, but also many non-government businesses. I doubt a single political goodwill like this has much effect on businesses or general Australia public at all because after all China started this episode. On the other hand letting them go off too easily will probably send out the wrong signals. My guess is China has already made up their mind to throw them into jail when they detained them, all they are doing now is just to make sure they do get a fair trial, or at least “looks like” they get a fair trial. In any case if they do get a fair trial and are proven innocent then it should be regarded as the best outcome for everyone.

AJ

February 12, 2010 2:24 PM

Chinese behavior on a number of issues (land disputes with neighbors, sanctions on Iran, intransigence on global warming, etc.) has been that of a thug. One has to wonder what about its behavior strikes it as "harmonious." Clearly, it has not learned how a mature leader behaves.

Sloth

February 12, 2010 7:14 PM

Chinese elites are smart:

1) Arrest someone
2) use them as bargaining chip
3) Given clemency upon receiving concession.

Shaun

February 21, 2010 8:18 AM

The strategy backfired immediately after China jailed the Rio Tinto 4. Instead of getting a 30% discount from 2008 prices, same as Japan and Korea, suddenly China had to pay the full price on the spot market. Rio Tinto's been making huge profits by selling at full price to hungry Chinese steel companies. Rio Tinto's management has no incentive to compromise and get their guys out of jail. Shareholders will sue them for giving up profits.

Shawn

February 22, 2010 4:09 PM

Steven
February 11, 2010 01:28 AM

What a nonsense. Without laws, how do you do business. Stern Hu is a criminal in any country. He bribed, He got business info illegally and gained from them. Rio Tinto should keep distance from them or take over responsibility if the company really cares about its employees.

And you know this how?

Here is another question: In bribery and corruption, it takes two to tango. So, when are the Chinese going to arrest and put on trial those that took these alleged bribes?

Steven

February 25, 2010 11:48 AM

Shawn,

You are right. At least I know an official in Capital Steel who was in charge of supply was arrested in this case. Some in other companies were kicked out, many believe they were related to this case.

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