Anglo-Australian Miner Pays $15MM to Settle Guinea Graft Case

The Securities and Exchange Commission announced charges against and a settlement with global mining and metals company, Rio Tinto plc, for violations of the Foreign Corrupt Practices Act (FCPA) arising out of a bribery scheme involving a consultant in Guinea. The company has agreed to pay a $15 million civil penalty to settle the SEC’s charges.

The SEC’s order finds that, in July 2011, Rio Tinto hired a French investment banker and close friend of a former senior Guinean government official as a consultant to help the company retain its mining rights in the Simandou mountain region in Guinea. The consultant began working on behalf of Rio Tinto without a written agreement defining the scope of his services or deliverables.

Eventually the mining rights were retained, and the consultant was paid $10.5 million for his services, which Rio Tinto never verified. The SEC’s investigation uncovered that the consultant, acting as Rio Tinto’s agent, offered and attempted to make an improper payment of at least $822,000 to a Guinean government official in connection with the consultant’s efforts to help Rio Tinto retain its mining rights.

Furthermore, none of the payments to the consultant was accurately reflected in Rio Tinto’s books and records, and the company failed to have sufficient internal accounting controls in place to detect or prevent the misconduct. 

"Even well-designed controls need committed managers to be effective," said Charles E. Cain, Chief of the SEC Division of Enforcement’s FCPA Unit. "Here, deficient controls were no match for managers determined to hire a consultant whose only ostensible qualification was a personal relationship with a senior government official."

Rio Tinto began exploring Simandou in the 1990s. The project controversy began after the government of now-deceased dictator Lansana Conté in 2008 stripped Rio Tinto of two of the project’s four blocks, saying the miner had failed to develop the project in a timely manner.

The government awarded the rights to BSG Resources Ltd., the mining business of Israeli billionaire Beny Steinmetz, which later struck a deal with Brazil’s Vale SA to buy a 51% stake in the Simandou assets.

The Guinea government later stripped BSGR and Vale of those rights, alleging they were illegally obtained. BSGR has denied any wrongdoing. Rio Tinto won the pair of blocks back in 2011, when the bribery took place.

In 2016 Rio Tinto fired Energy and Minerals Chief Executive Alan Davies and Legal and Regulatory Affairs Group Executive Debra Valentine.  The same year Rio Tinto sold its stake in  Simandou to Aluminum Corp. of China for about $1.3 billion.