China court jails 4 Rio Tinto employees

The court in Shanghai found Australian executive Stern Hu and three Chinese co-workers guilty of bribery and passing commercial secrets and sentenced Hu to 7 years in jail and five years on stealing trade secret charges.

But, Hu will serve a reduce sentence of up to 10 years in the case which was seen as a barometer of China's handling of foreign companies. Chinese employee Wang Yong also received a tough sentence of 14 years for receiving USD 9 million in bribe.

Two other employees Ge Minqiang and Liu Caikui were sentenced to 8 to 7 years respectively, in the first-ever case involving foreign firms.The judge told the court that the case had caused severe losses to China's steel making industry.Media reports from Melbourne quoted Australian Foreign Minister Stephen Smith as saying that the sentence on Hu was tough and there remained many "unanswered questions".

Though Smith talked tough on the court sentence, the Anglo-Australian company Rio Tinto sacked all the four employees who were jailed for corruption and said the case would not affect its operations or trade ties with China.

"In accordance with our company policy, we will terminate the employment of all the four employees," said Sam Walsh, a top executive of the company in a statement in which he described their behaviour as "deplorable".

Australian Prime Minister Kevin Rudd had come down hard on the trial being in camera and had said the world would be watching the proceedings with sharp eyes.
"China has missed a substantial opportunity. This was an opportunity for China to bring some clarity to the notion or the question of commercial secrets," his Foreign Minister Smith said.

He said openness and transparency would have helped Australia and the international business community in understanding and dealing with the matter."Regrettably, China and the Shanghai court chose to go down a different road," he said."That leaves serious, unanswered questions and a significant lost opportunity so far as China is concerned."
The case comes after three decades of the China opened up to the world. US and European companies who had made a beeline to the world's largest market are now complaining of increasingly onerous rules, preferential treatment for local firms and growing nationalism.

Hu was Rio Tinto's lead negotiator in talks with Chinese steel mills to try to settle a price for China to buy iron ore from Australian mining companies. During the trial, the defendants admitted taking bribes, but disputed the amounts of money involved, according to their lawyers.

Hu was apparently charged with accepting bribes of (USD 900,000). He was given a seven-year sentence for bribery and five years for commercial secrets theft, reduced to 10 years in total. His assets worth 500,000 yuan (USD 73,000; 49,000 pound) confiscated and was fined the same amount.

Australia's Consul-General Tom Connor who was designated by the Australian government to attend the court told reporters that all the sentences would be backdated to 5 July 2009 when the four were first arrested. They have been detained ever since.
A month before the arrests, Rio Tinto scrapped a proposed investment of USD 19.5 bn from China's state-owned Chinalco in favour of tie-up with BHP Billiton, signed a deal with Chinalco to develop a massive iron ore mine in Guinea.

The Journalists who were not allowed to attend the trial were allowed to watch on a video link as the verdicts in this highly-anticipated trial were delivered. Media had a glimpse of the four Rio Tinto executives as they filed in and sat down in silence. The Judge said four had seriously damaged the competitive interests of Chinese steel enterprises, which led China to suspend major price negotiations last year.
The Rio trial coupled with the exit of Google and nervousness expressed by majority of the American firms in a recent survey has cast a shadow on foreign businesses the driving force behind China's economic progress during the past two decades