Rio Tinto PLC: The Bribe Warning Came Before the Payment

In the Rio Tinto plc FCPA case, the company agreed to a $15 million civil penalty over alleged accounting failures involving a consultant hired to protect mining rights in Guinea. The Securities and Exchange Commission alleged that the company approved a $10.5 million consultant fee despite an internal warning and poorly explained services. If you knew the consultant’s work or questioned the payment approval, this is a case about the gap you could see from inside the business.

The agency’s March 6, 2023 order resolved the foreign bribery action under the Foreign Corrupt Practices Act over inaccurate books and failed payment controls. The order named Rio Tinto plc, the British company whose American Depository Shares traded on the New York Stock Exchange. It described a mining-rights negotiation in Guinea, a consultant’s Swiss bank account and payments made through an Australian subsidiary.

Guinea Mining Rights Made the Consultant Valuable

The Securities and Exchange Commission described the consultant’s assignment as helping Rio Tinto retain its rights to part of the Simandou iron-ore deposit. According to the order, the Guinean government had already revoked the company’s rights to two of the four blocks after concluding that it had not taken adequate steps to develop the mine. A new administration’s decision to reexamine mining contracts put the remaining rights under scrutiny.

That made access to the government a commercial asset. The agency alleged that senior executives identified a French investment banker chiefly because he was a friend and former classmate of a senior Guinean official. He had no direct experience in mining generally or in Guinea specifically. The executive overseeing the negotiations became his principal contact inside Rio Tinto.

The order says Rio Tinto secured blocks three and four through an April 22, 2011 agreement that required a $700 million payment to the Guinean Public Treasury. The consultant’s fee was a separate payment, still being negotiated after the mining-rights agreement had been reached. For a project-development employee, the connection is concrete: who could keep the concession in place, who claimed access to that person and what the company authorized in return.

The Warning Was Already in the Emails

The third-party due diligence failure began before the payment, according to the Securities and Exchange Commission. A lower-level employee ran a cursory background check after the executive confirmed the consultant’s connection to the official. The agency alleged that the consultant began working without a written agreement defining his services, fees or deliverables.

His emails then raised a more basic question: whose interests was he serving? The order quoted an April 26, 2011 message in which he described the official’s objection to his joining Rio Tinto:

The agency treated the correspondence as a warning about whether the consultant was working for the company or the official, and whether part of his fee would reach the official. Apart from the emails and other feedback, the order said it was unclear what services he had provided during approximately four months. His claimed political access was much clearer than his work product.

An executive also questioned the appearance of the lump-sum fee the consultant wanted. The order quoted the warning in unusually plain language:

The agency alleged that executives approved the payments despite those concerns. We find the sequence more telling than any later compliance promise: someone inside the company had already put the problem into words, and the money still moved.

Millions Moved on Small-Payment Forms

According to the order, Rio Tinto signed the written agreement on July 7, 2011, one day before the first payment and months after the work supposedly began. The paperwork caught up just in time for the money.

The order describes $7.5 million sent to the consultant’s Swiss account and $3 million placed in escrow at the same bank. Release of the escrow balance depended on Rio Tinto retaining its rights to the two blocks after the end of 2015. The company authorized release in February 2016 at the consultant’s request. The fee’s structure connected his compensation directly to keeping the mining rights.

According to the Securities and Exchange Commission, the executive initiated both payments with manual forms generally limited to payments up to AUD $5,000. He bypassed the company’s prescribed process for larger amounts. That is the comparison an accounts-payable employee would recognize immediately: millions routed through a form intended for small payments.

The order identifies Hamersley Iron Pty Limited, an Australian subsidiary on the Rio Tinto Ltd side of the group, as the paying company. Rio Tinto plc and Rio Tinto Ltd operated as one economic enterprise and filed joint financial reports with the Securities and Exchange Commission, according to the order.

The agency said lower-level employees questioned why the payment was being accounted for there instead of through the Rio Tinto plc side. Another executive attributed the choice to the urgency and confidentiality surrounding the payment, and the order said the company lacked a system to flag those irregularities.

The payment trail runs well past the consultant agreement. The manual authorization, the entity supplying the money and the employees’ questions show different decisions inside the business. An insider who understands why those records do not fit together can explain something the signed contract alone would conceal.

The Bank Blocked an Attempted Official Payment

The Securities and Exchange Commission alleged that the consultant attempted to transfer $822,506 from his Swiss account to a Hong Kong company on July 15, 2011. The recipient belonged to a Guinean national with links to government officials. The bank questioned those ties and ultimately blocked the transaction.

When the bank asked about the payment, the consultant said he was acting on behalf of a junior Guinean official to pay the senior official, according to the order. He then told bank employees he would use an account at another bank. The attempted payment left a record of his explanation as well as the transfer instructions.

The agency also traced a subsequent $200,000 payment by the Hong Kong company to a Chinese supplier for reelection campaign T-shirts. The supplier eventually made shirts for the senior official’s campaign that matched the description on the invoice submitted to the Swiss bank. The agency cited that connection as evidence that the attempted transfer was intended to fund the campaign or, at minimum, pay the junior official. The bank’s blocked transfer and the later shirt purchase connect the consultant’s explanation, an invoice and a political benefit.

The Books and the Approval Process Both Failed

The Securities and Exchange Commission alleged that none of the payments to the consultant were accurately reflected in Rio Tinto’s books and records. Its accounting findings also addressed the controls over authorizing, recording and accounting for company assets.

The agency described executives debating the fee, employees questioning the paying entity and a contract eventually signed. In its account, those activities still left the consultant paid without adequate diligence or a clear account of the services. We see a business capable of discussing the warning in detail and still failing to stop the payment it described.

A Mining Permit Can Change While the Form Stays the Same

BHP Billiton provides a related mining example of paperwork missing a live government negotiation. In its Olympic hospitality order, the SEC alleged that employees failed to update or reconsider a minister’s invitation after negotiations began over a nickel exploration permit. The minister and his wife attended as company guests.

The same order described BHP’s country president for Guinea acknowledging forthcoming negotiations over a bauxite concession and a government review of mining concessions. That information did not reach the ethics reviewers, and the hospitality form was not updated. Staff mistook the absence of a response for approval.

The practical connection to Rio Tinto is the gap between a government relationship and the paperwork used to authorize a benefit. Project staff may know the negotiation has changed while finance or compliance sees an old form or a vague service description. Knowing both sides of that gap is valuable whistleblower knowledge.

What a Mining Insider Can Connect

In this case, the revealing records were ordinary business records: emails about hiring and fees, a late contract, manual payment forms, bank instructions and questions about the paying company. The agency’s account connects them to the decision to retain mining rights. A project, finance or compliance employee may understand the significance of one record because they know the decision behind it.

Whistleblower laws can deter accounting fraud, according to the 2019 working paper Do Corporate Whistleblower Laws Deter Accounting Fraud?, from the University of Chicago Booth School of Business and Baruch College. It studied companies exposed to state False Claims Acts through state pension-fund investment. It reported a 5% to 9% reduction in estimated accounting-fraud probability after exposure.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Rio Tinto’s action came through the Securities and Exchange Commission, whose separate program can pay eligible whistleblowers awards totaling 10% to 30% of the sanctions collected in qualifying actions. We build on what you know about the consultant, the approval and the government decision to pursue a foreign bribery whistleblower matter with you.

You Know Why the Payment Went Through

If you saw a mining-rights consultant paid for unexplained work, or an approval pushed through after someone questioned it, speak to one of our whistleblower experts about why that payment went through. We build the case with you and bring in foreign bribery whistleblower lawyers who understand consultant payments and multinational accounting. You have a partner from the first conversation through the pursuit of your whistleblower claim.