Accused Rio Tinto executive Stern Hu 'pleads guilty'

Stern Hu, the Australian executive for Rio Tinto arrested in China, has allegedly pleaded guilty to bribery charges and could face 15 years in jail.

BEIJING // Stern Hu, the Australian iron ore executive for Rio Tinto in China, has pleaded guilty in a Shanghai court to bribery charges, says the lawyer for one of Mr Hu's colleagues who is facing the same charge. The case has had a high international profile, particularly as the four were arrested soon after Rio Tinto rejected a US$19.5 billion (Dh71.61bn) investment by the Aluminium Corporation of China (Chinalco), a state-owned company based in Beijing.

Mr Hu was accused of receiving about 6 million yuan (Dh3.2m) of bribes, the lawyer said yesterday. The Australian executive and three Chinese citizens have been held in custody since July last year and could face prison sentences of between five and 15 years on the bribery charges alone. Tao Wuping represented Mr Hu's colleague, Liu Caikui, at yesterday's hearing at the Shanghai court, where media coverage was restricted. Mr Liu, who faces bribery charges involving about 3.7m yuan, "doesn't plan to plead innocence", Mr Tao said.

Another defendant, Wang Yong, is facing charges for amounts totalling 70m yuan, while the fourth, Ge Mingqiang, is accused of taking bribes of 6.9m yuan, said Mr Tao, who added that prosecutors were asking for jail terms of more than five years for the bribery charges. The court's website says the four also infringed commercial secrets. Last month, prosecutors issued indictments that said the men had on several occasions sought or accepted illegal bribes from Chinese steel firms and had "exploited their positions to seek gain for others".

The charges are thought to relate to talks held last year over iron ore prices, with Chinese steel makers having rejected Rio Tinto's offer of a 33 per cent price cut. This year's negotiations have also run into difficulties, with the China Iron and Steel Association having said this month that Chinese steel makers were unhappy with proposals from Rio Tinto, Vale and BHP Billiton, the largest suppliers, to increase prices by 90 per cent.

The fraud case has had a high profile in Australia and the country's prime minister, Kevin Rudd, said close attention would be paid to the trial. "China has a different legal system to Australia," Mr Rudd said. "China has a different legal system to the rest of the world. The world will be watching very closely how the trial is handled." Other Australian politicians have said the trial should be held in public. Foreign reporters were barred from yesterday's proceedings, while Chinese journalists and Tom Connor, the Australian consul general, were allowed entry, although diplomats are likely to be excluded from parts of the proceedings relating to the breaching of commercial confidentiality.

The Chinese authorities have insisted they will "fully guarantee" the rights of the four defendants. Tom Albanese, the chief executive of Rio Tinto, said yesterday in Beijing his company, the third-largest mining firm in the world, needed a "positive relationship" with China. "I can only say we respectfully await the outcome of the Chinese legal process," Mr Albanese said. "This issue is obviously of great concern to us, as it would be for any company operating in China."

Chinalco last week agreed to pay $1.35bn for a 44.65 per cent stake in a Rio Tinto iron ore project in Guinea. Chinalco is also the largest shareholder in Rio Tinto, which has its headquarters in Melbourne and London. Last year, Rio Tinto's sales to China reached almost a quarter of its total revenue, up from less than a fifth the year before, and overtaking sales to North America and Europe. Since 2004, the proportion of Rio Tinto sales to China has doubled.

Vivienne Bath, an associate professor at the Sydney Law School at the University of New South Wales, said the Chinese authorities were keen for the trial to send a message that fraud was unacceptable in China. "What they are interested in is a clean business environment generally, and that puts you on notice that giving or taking bribes is not an acceptable way of doing business in China," Ms Bath said.

* with Bloomberg