Rio Tinto Is Said to Pay Legal Fees of Ex-CEO, CFO in Fraud Case

(Bloomberg) -- Rio Tinto Group will cover the legal costs of its former chief executive and chief financial officers after U.S. authorities charged them with fraud, according to people familiar with the situation.

Rio, also included in the fraud case, will pay the costs for former CEO Tom Albanese and ex-CFO Guy Elliott, according to the people, who asked not to be identified as the matter is private. It’s standard practice for executives to be covered by the company’s indemnification policy, one of the people said.

The U.S. Securities and Exchange Commission filed fraud charges against London-based Rio and the two executives last week claiming they inflated the value of Mozambique coal assets acquired in 2011. The unit was sold for $50 million in 2014 following impairments of about $2.9 billion in 2013 and $470 million a year later. The SEC is seeking the return of “ill-gotten gains,” civil penalties and to bar Albanese and Elliott from holding director positions.

Rio has said it will vigorously defend itself against the allegations, and Albanese and Elliott have refuted the SEC’s charges.

Separately, Rio has agreed to pay a 27.4 million pound ($36 million) fine for a breach of disclosure rules concerning the Mozambique assets after an investigation by the U.K. Financial Conduct Authority. The Australian Securities and Investments Commission is also reviewing the issue.

The charges come as Rio assists authorities in three countries over a separate case related to the $20 billion Simandou iron ore project in Guinea. Rio said in November it had alerted authorities including the U.S. Department of Justice and the U.K.’s Serious Fraud Office to a $10.5 million payment to an external consultant made in 2011.

To contact the reporter on this story: Thomas Biesheuvel in London at tbiesheuvel@bloomberg.net.

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Nicholas Larkin