Rio Tinto (ASE:RIO) Australian Executive Confesses to Accepting Bribes in China

Monday, March 22nd, 2010

With much at stake, a Rio Tinto executive confessed he had taken bribes, and now Stern Hu faces up to 20 years in prison as a result. Hu was the lead negotiator for iron ore for Rio Tinto with China.

It's hard to tell if the sentencing will take into account international relations or not, as many in Australia are watching closely to see how stiff that will be.

There has been a cloud hanging over the case because of the timing of the arrests, which had come right after the Australian government rejected a bid of $19.5 billion from Chinalco for a stake in Rio Tinto. Chinalco is a Chinese state-owned metals company.

Although some seem to have believed it was retaliation from China, it's impossible to tell, and improbable that it is true. The confession by Hu seems to indicate the evidence in the case must have been strong in order for him to admit to his guilt, although there is a part of Chinese culture which would do that for a variety of reason. Even though Hu is an Australian national, he is Chinese, which could lend to that happening. There is of course the long period of time he has been held, where he could have been convinced it was the only way to ge.

Either way, now that tensions seemed to be simmering down some, the trial seems to have lost its international edge, which probably isn't good for Hu.

For Rio Tinto, this has been a difficult time with China, as they've been working to heal the rift between the two countries, which widened over the last 6 months or so.

The concern for China is they could be viewed as hard core in this and a difficult and potentially dangerous place to do business. They can't afford that, as Russia has earned that dubious distinction, and it has had a huge impact on whether companies want to do business with them or not.

It has also caused more attention on Chinese monetary policy, which China would rather keep quieter and work behind the scenes to manage.

Article by Gary B

The views expressed are the subjective opinion of the article's author and not of

Tags: australia business , china , rio tinto

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