Wednesday, August 12, 2009 0 comments ++[ CLICK TO COMMENT ]++

Rio Tinto employees formerly charged by China

According to MarketWatch, China finally charged the Rio Tinto employees accused of stealing state secrets:

Chinese prosecutors have charged four staff members of Anglo-Australian miner Rio Tinto Plc. with corporate espionage and bribery, according to an announcement late Tuesday in state media.

Preliminary investigations have showed that the four employees, Stern Hu, Liu Caikui, Ge Minqiang and Wang Yong, had obtained commercial secrets of China's steel and iron industry through improper means, the official Xinhua news agency reported, citing China's Supreme People's Procuratorate.

Hu is an Australian national who ran Rio Tinto's Shanghai office, while Liu, Ge and Wang are Chinese citizens.

Prosecutors also "found evidence to prove that they were involved in commercial bribery," the statement said.

The charges carry penalties ranging from a fine to seven years in prison, according to reports.

This is an interesting case to me for several reasons.

First of all, I haven't seen China target foreigners for commercial crimes such as bribery, espionage, and the like. Yes, there are stories here and there, but nothing that really caught my eye. (However, China does crack down hard on any political crimes regardless of who you are.)

Secondly, China is taking on one of the largest companies in the world. I haven't seen China start any battles with very large corporations in the past.

Thirdly, regardless of the merit behind the charges, if we assume that the charges have more to do with bribery rather than espionage*, China is tackling an endemic problem. It's a huge problem not just in China but in many other developing countries as well (for instance, I remember a story once saying how many Brazilians don't pay tax and illegally mask their income.)

Without knowing the details of this case, I don't have a very strong opinion on who is right. All that is certain is that totalitarian governments can almost do whatever they want to their citizens or anyone else caught in their territory.


* I doubt there is any chance of serious espionage having occurred. Rio Tinto is one of the largest companies and is literally part of an iron ore cartel consisting of a few other giants. The pricing power clearly lies with the iron ore suppliers. So, I would be surprised if Rio Tinto used illegal means to somehow gain an advantage on the buyers. There isn't much to gain from pursuing illegal actions. So, if there was indeed some illegal behaviour, it is probably more related to bribery.


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