Rio Tinto class actions have quickly been flagged in Australia and the US in response to this week’s explosive fraud charges levelled at the big miner, and its former chief executive Tom Albanese, over alleged inflation of the value of Mozambique coal assets.
Yesterday, Australian firm Bannister Law, which has launched class actions against Quintis and Dick Smith, jumped in to declare it was investigating a class action against Rio Tinto, alleging the company may have breached continuous disclosure obligations.
“Bannister Law claims that Rio may have contravened various provisions of the Corporations Act in deciding not to make any disclosures to the ASX about the implications of the Mozambique investment,” Bannister said in a statement calling for shareholders to register for the class action.
“Shares were negatively affected because of these overdue disclosures, and shareholders may have suffered loss and damage as a result.”
Maurice Blackburn head of class actions, Andrew Watson, said the firm was looking at similar issues.
“There are certainly serious misconduct allegations that deserve further scrutiny, but like all potential matters we consider, we will undertake our own analysis and investigations before determining if it is something we will ultimately pursue,” Mr Watson said.
In the US, San Francisco law firm Hagens Berman Sobol Shapiro called for US bondholders and shareholders to register for a potential claim.
“We’re focused on the matters identified by the SEC, defendants’ apparent knowledge of fraudulent accounting for Rio Tinto Coal Mozambique, and investors’, including bond investors’, damages,” Hagens Berman partner Reed Kathrein said.
“We hope it’s not too late to salvage some of the investor claims.”
On Wednesday, the US Securities and Exchange Commission charged Rio, Mr Albanese and former finance director Guy Elliott with fraud over Rio’s disastrous $4 billion takeover of Mozambique coking coal play Riversdale Mining in 2011.
The SEC alleges the company and the executives “sought to hide or delay disclosure” of problems with the Riversdale assets, while also raising $US3bn of US debt soon after the executives learned of the concerns.
Rio copped a record-breaking £27.4 million ($46m) fine from Britain’s Financial Conduct Authority over its delays in disclosing the problems with Mozambique.
Rio, Mr Albanese and Mr Elliott all said they would vigorously defend the SEC charges and denied wrongdoing.
Despite the SEC charges and Rio’s agreement to pay the FCA fine, lawyers at Slater & Gordon were less enthusiastic about the prospects of a successful class action in Australia.
Senior associate Andrew Paull said the firm had been looking closely at the case but at this stage was not convinced it was worth pursuing.
“There is some serious concern that this has the scent of being questionable disclosure conduct,” Mr Paull said.
“But for a class action to be viable in Australia, you need to show investors have suffered a loss because of the conduct.”
He noted shares rose immediately after the writedown was announced, which made it hard to prove the conduct caused a loss, even if the near-term gain was due to Mr Walsh being made CEO.