The first class action shark has started snuffing around the Rio Tinto Mozambique coal scandal.
In a legal action started in a New York court, a Seattle based law firm has filed a class action suit against Rio over the near $US4 billion takeover of Riversdale Coal and its claimed Mozambique metallurgical and thermal coal deposits.
The law firm, Hagens Berman revealed the action on Monday (http://www.businesswire.com/news/home/20171023006535/en/Hagens-Berman-Sobol-Shapiro-LLP-Files-Securities) as a way of starting the round up of sufficient Rio shareholders in US Depository Receipts to give its prospective legal action standing in the courts.
Of more danger to Rio will be a class action or actions filed in Australia where the cohort of Rio shareholders possibly impacted by the Riversdale debacle would be much larger.
Hagens Berman, which describes itself as “ national investor-rights law firm”, claims it has taken the action on behalf of purchasers of Rio Tinto plc American Depositary Receipts between October 23, 2012 and February 15, 2013.
The action was filed in the US District Court for the Southern District of New York, and emerged just a few days after the American regulator, the Securities and Exchange Commission, revealed it had charged Rio Tinto and two of its former top executives (Albanese and Elliott) with fraud.
The Hagens Berman class action complaint alleges that Rio Tinto, its former chief executive Tom Albanese and former chief financial officer Guy Elliott, "made false and misleading statements and/or failed to disclose adverse information regarding RTCM’s (Rio Tinto Coal Mozambique’s) true value," during the period October 23, 2012 and February 15, 2013.
"The complaint alleges that during the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding RTCM’s true value.
“More specifically, the complaint alleges: (a) within months of the purchase, now-former senior executives knew of material problems adversely affecting RTCM’s multi-billion dollar publicly reported valuation; (b) as time passed, the same senior executives knew of additional problems and events that, under applicable accounting rules, required an impairment analysis of RTCM and reductions in its reported valuation; (c) instead of timely performing the impairment analysis, these executives thwarted it and continued to tout RTCM’s value to investors; (d) when a concerned employee outside the normal financial control function discovered or suspected the senior executives concealed RTCM’s negative valuation from Rio Tinto’s Board of Directors, he bypassed them and directly alerted the Chairman, who ordered an investigation into RTCM’s true value; (e) on January 15, 2013, less than a year and a half after the purchase, the Board determined RTCM was severely impaired and should be written down by billions of dollars to $611 million; and (f) the impact of this writedown was reported to investors in Rio Tinto’s financial report on Form 6-K filed with the SEC on February 15, 2013."
In response to last week’s announcement from the SEC, Rio Tinto and the two former executives vowed to fight the charges.
In a statement Rio Tinto said it believed the SEC’s case was “unwarranted and that, when all the facts are considered by the court, or if necessary by a jury, the SEC’s claims will be rejected” Albanese and Elliott have also strongly rejected the SEC claims.
