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China sentences 4 Rio Tinto workers to jail, signaling stance to foreign firms

Tom Connor, Australian consul general in Shanghai, briefs journalists after the Rio Tinto sentencing.
Tom Connor, Australian consul general in Shanghai, briefs journalists after the Rio Tinto sentencing. (Ng Han Guan/associated Press)
By Elaine Kurtenbach
Tuesday, March 30, 2010

SHANGHAI -- Unexpectedly severe jail sentences of seven to 14 years for four Rio Tinto employees charged with taking bribes and stealing commercial secrets could augur tougher times for foreign companies and errant executives in China's unruly business world.

Seeking to protect its business ties from what it termed the men's "deplorable behavior," the mining giant fired all four.

The court's rulings against Australian citizen Stern Hu, former manager of Rio Tinto's iron ore business in China, and three Chinese co-workers suggest authorities are taking a sterner stance toward foreign companies that violate the country's often selectively enforced corruption code.

The 10-year sentence for Hu was "very harsh," Australia's Foreign Minister Stephen Smith said after the verdict was read Monday by the lead judge at the Shanghai People's Intermediate Court. It was unclear whether Hu or his co-workers would appeal.

Rio Tinto, based in London and Melbourne, is a key industry negotiator in price talks with China's state-owned steel mills, and the arrests of its employees in August were thought to be linked to Beijing's anger over high prices it paid for iron ore -- a key commodity for China's booming economy. That belief was shaken last week after the four pleaded guilty to taking bribes from steel mills trying to get preferential access to ore supplies.

Australia said Hu's sentence would not affect ties with China, but some experts said the secrecy of parts of the trial underlined worries that companies have about doing business in a country in which legal proceedings are often opaque.

The verdict also comes as other fault lines appear between Beijing and global corporations eager to tap a fast-growing market of more than 1 billion people. A recent survey showed that a growing number of foreign businesses in China feel shut out under new government policies promoting homegrown technology. Internet search giant Google's high-profile decision to move its Chinese site to Hong Kong after a spat over censorship and hacking added to the unease.

China has chronic problems with corruption, so the Rio case "is not as simple as China sending a warning message to a particular country or company," said Jin Linbo, a senior research fellow with the China Institute of International Studies. "It's time China should deal with this problem, or more serious cases will emerge," Jin said.

Beijing is constantly staging anti-corruption crackdowns as the ruling Communists strive to clean up an image tainted by graft scandals. But big foreign companies are rarely targeted, making it difficult to know how widespread graft is among international businesses operating in China.

Rio Tinto, which is increasingly dependent on its business with China, issued a statement saying that an investigation it ordered found no wrongdoing by the company itself.

"I am determined that the unacceptable conduct of these four employees will not prevent Rio Tinto from continuing to build its important relationship with China," said chief executive Tom Albanese.

-- Associated Press

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