China formally arrests Rio Tinto employees

BEIJING - Chinese prosecutors have formally arrested four employees of Anglo-Australian mining giant Rio Tinto on suspicion of obtaining commercial secrets and bribery, the official Xinhua news agency reported on Wednesday.

By (Reuters)

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Published: Wed 12 Aug 2009, 10:56 AM

Last updated: Thu 2 Apr 2015, 3:45 AM

Australian Stern Hu and three Chinese staff of the world’s second-biggest iron ore producer are suspected of “using improper means to obtain commercial secrets about our country’s steel businesses”, Xinhua cited prosecutors in Shanghai as saying.

The commercial secrets charge can bring jail terms of up to 3 years, or 7 years in “especially serious” cases. The procuratorate, or prosecutors, also approved their arrest on suspicion of “commercial bribery”, said the Xinhua report.

Xinhua did not mention accusations of stealing state secrets, a sweeping charge raised in earlier reports, which can attract tougher sentences.

“The procuratoratial organ conducted investigations and believes that it has evidence for suspecting the four, including Stern Hu, of the above crimes,” said the Xinhua report.

Hu and the three other members of Rio Tinto’s Shanghai-based iron ore marketing team — Liu Caikui, Ge Minqiang and Wang Yong — were detained on July 5. Hu, a Chinese-born Australian citizen and head of the team, was accused of obtaining the Chinese steel industry’s negotiating stance in iron ore price talks, sources have said. Iron ore is used to make steel.

The Rio case has cast a shadow over Australia-China trade, worth $53 billion in two-way terms in 2008. But China’s sidelining, for now, of the graver state secrets accusations may indicate an effort to cool political contention over the matter.

“That lowers the temperature,” said Jerome Cohen, an expert on Chinese law at New York University, speaking of the absence of the state secrets accusations.

“That puts this as a white collar crime, a commercial crime, and not espionage involving state secrets.”

Chinese Vice Minister of Commerce, Fu Ziying, told a news conference in Beijing the case would receive a “fair verdict” — a term suggesting a trial is certain — and said it showed his government wanted to create a fair and open marketplace.

“I believe this case will not, and should not, affect the healthy and stable development of Chinese-Australian bilateral trade and economic relations,” he said.

The arrests do not amount to a decision to go to trial but allow authorities to continue investigating, said Mo Shaoping, a prominent criminal lawyer in Beijing.

“The arrest means the suspects remain in detention and the police can continue investigations, usually for up to two more months,” Mo told Reuters.

Cohen said that without the state secrets accusations, which authorities can use to justify keeping suspects entirely isolated, the Rio suspects stand a stronger chance of being allowed to see lawyers.

Rio Tinto’s shares have fallen about 5 percent from their close at the end of last week of A$60.57, before a weekend report from China that said the company had been spying for six years.

The shares were at A$57.35 by 0400 GMT on Wednesday.

Rival BHP Billiton has fallen about 1.3 percent to A$37.50 over the same period and the benchmark Australian S&P/ASX 200 index has risen about 0.6 percent.

No comment from Rio

Rio Tinto declined to comment when contacted by Reuters about the arrests. Rio has previously said the four did nothing wrong.

Australia’s Foreign Ministry said Australian diplomats in Shanghai were informed of the arrests late on Tuesday but a spokeswoman refused to comment on whether China had softened its position by using the commercial secrets charge.

“We are not prepared to speculate, though the range of possible penalties under these articles is less severe than for state secrets,” the spokeswoman said.

Prime Minister Kevin Rudd has warned China it had significant economic interests at stake in detaining Hu and that the world was watching how it handled a case that has highlighted the risks of doing business in the world’s third-largest economy.

Australia exported $15 billion worth of iron ore to China in 2008, accounting for 41 percent of China’s iron ore imports in that period.

The Xinhua report also said that in recent days Chinese steel executives had been formally arrested on suspicion of “providing commercial secrets” to Hu.

An online article published in a magazine run by China’s state secrets agency at the weekend said Rio spied on Chinese mills for six years, resulting in the mills overpaying $102 billion for iron ore, Rio Tinto’s biggest earner.

The Australian government on Tuesday dismissed the Chinese report, which had rattled investors.

“I think they (China) wanted to get the bad PR behind them as much as they could but at the same time get a message out to corporations operating in China,” Scott Harrison of Pacific Strategies and Assessments, an Asia-focused risk consultancy company, told Reuters of the formal arrests.

“Although it may reduce international pressure, at the grassroots level I don’t think its going to reduce the concerns of companies operating here,” he said.

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