China to put detained Rio Tinto employees on trial on commercial espionage, bribery charges

China to put Rio Tinto employees on trial

SHANGHAI — Australian mining giant Rio Tinto expressed concern Thursday over charges of stealing commercial secrets and bribe-taking against four of its employees in China, a case highlighting Beijing’s efforts to control the country’s strategically important steel industry.

The Australian government confirmed it was notified that a Shanghai court will try the four Rio employees including an Australian national. They were detained July 5 in Shanghai while Rio Tinto Ltd. was acting as lead negotiator for global iron ore suppliers. No trial date has been disclosed.

“We are very concerned about the nature of these charges,” Sam Walsh, chief executive of Rio Tinto’s iron ore business, said in a statement. He said he could not comment further.

The arrests have strained ties between China and Australia, which repeated its call that the case be handled “transparently and expeditiously.”

“As with all legal processes, it is not appropriate to speculate on the outcome or penalties at this time,” the Australian Department of Foreign Affairs and Trade said in a statement.

The trial comes as Beijing tries to tighten control over China’s dozens of steel producers and consolidate the industry through mergers. As with other important industries, the state owns many of the biggest steel mills and views their profitability as a strategic priority.

Communist authorities treat a wide range of commercial information as state secrets. Chinese reports that the Rio employees were originally suspected of obtaining state secrets suggest they may have been caught up in an effort to control information exchanged during iron ore negotiations.

The Shanghai No. 1 Intermediate Court accepted the case against Australian Stern Hu, manager of Rio’s iron ore business in China, and three Chinese nationals, the Xinhua News Agency reported Wednesday.

A court statement accused the four of allegedly “taking advantage of their position to seek profit for others, and asking for, or illegally accepting, huge amounts of money from Chinese steel enterprises,” according to the state-run China Daily newspaper.

An earlier report by the Chinese newspaper National Business Daily said investigators found confidential information on sales and production from dozens of Chinese mills on a computer seized from Rio’s Shanghai office.

In an unexpected twist, Xinhua said the Rio employees were charged with stealing commercial secrets and taking bribes. Earlier reports said the Rio employees were accused of paying bribes to obtain information on China’s stance in iron ore negotiations.

It did not say who was accused of giving the bribes.

But those familiar with the industry say steel mills often seek to buy iron ore shipments on the side at favorable prices from miners who hold stockpiles for that purpose.

“Many domestic steel mills who have good relations with their suppliers can always buy some shipments at a relatively lower price,” said Xu Xiangchun, a supervisor at the industry Web site mysteel.com.

One defendant is alleged to have taken bribes worth 70 million yuan ($10.3 million), said Zhai Jian, the lawyer representing Ge Minqiang, one of the three Chinese indicted in the case.

“The loss for some Chinese steel millers is apparently huge,” Zhai said, describing the case as “interesting, very interesting.”

Nearly all criminal cases that go to trial in China end in conviction. The maximum penalty for commercial espionage is seven years in prison if the case is found to have caused extreme damage. The maximum penalty for taking large bribes is five years.

Lawyers for the defendants said they expected the trial to begin soon, maybe later this month. Court officials contacted by phone did not confirm or deny that.

“I do not expect a public hearing since this is related to commercial secrets,” said Zhang Peihong, the lawyer for Wang Yong, another Chinese named in the case. The third is Liu Caikui.

Asked about the trial, Chinese Foreign Ministry spokesman Ma Zhaoxu said he could not say when it would start or if it would be open to the public.

“What I can tell you is that China will handle this case according to China-Australia consular agreements and relevant international conventions and the rights of the defendants will be fully guaranteed,” Ma said.

China is the world’s biggest steel producer and consumer of iron ore and is pressing Rio and other suppliers to give its mills lower prices than those paid by Japanese, South Korean and other competitors.

Rio balked last year and talks ended without agreement, forcing Chinese mills to pay the same price as other customer, and drawing vehement protests from China. Analysts are forecasting iron ore price hikes of 40 percent or more this year because of strong demand.

Rio has denied its employees paid bribes, but has not commented on the charge that they received them. The company recently named Ian Bauert, a fluent Chinese speaker, to head its operations in China, apparently hoping to repair relations with its biggest customer.

Australian officials have warned Beijing that delaying the case could erode Australian public support for close commercial ties with China. Prime Minister Kevin Rudd warned Beijing shortly after the arrests the world was watching its handling of the case and said China should consider its economic ties.

Chinese officials have rejected Australian comments as interference in this country’s judicial system.

On the Net:

Rio Tinto Ltd.: www.riotinto.com

Associated Press researcher Ji Chen in Shanghai contributed to this report.