ASIC has expanded its legal proceedings recently filed in the Federal Court in Sydney against Rio Tinto Limited (RTL) and its former Chief Executive Officer, Mr Thomas Albanese, and its former Chief Financial Officer, Mr Guy Elliott. The new allegations relate to RTL’s failure to recognise an impairment of a wholly owned subsidiary, Rio Tinto Coal Mozambique (RTCM) in its 2012 Interim Financial Statements in accordance with the relevant accounting standards, RTL’s failure to disclose the substantial impairment and other related breaches of the Corporations Act.
In December 2010, RTL announced a takeover offer for Riversdale Mining Limited (ASX:RIV) (Riversdale) which was completed in August 2011 at a total cost of over US$4 billion. Following the acquisition RTL delisted Riversdale and renamed it RTCM.
ASIC alleges that RTL was required to test for and recognise an impairment of RTCM in its 2012 Interim Financial Statements in accordance with the relevant accounting standards. By not doing so when it published its 2012 Interim Financial Statements, ASIC alleges RTL also engaged in misleading or deceptive conduct. ASIC further alleges that RTL should have disclosed the substantial impairment in relation to RTCM to the ASX in those Financial Statements.
ASIC alleges that Mr Albanese and Mr Elliott failed to take all reasonable steps to comply with or to secure compliance by RTL with the relevant accounting standards in relation to the 2012 Interim Financial Statements, and in addition, by allowing RTL to engage in such conduct, Mr Albanese and Mr Elliott failed to exercise their powers and discharge their duties with the care and diligence required by law as directors and officers of RTL. ASIC also alleges that Mr Albanese and Mr Elliott failed to disclose to the audit committee and the auditors information of which they were aware that was relevant to the impairment.
In addition to the declarations, pecuniary penalties and disqualifications sought in the original proceedings ASIC is seeking further declarations that:
- RTL contravened sections 304, 305 and 1041H of the Corporations Act 2001 (Cth) (the Act) with respect to its 2012 Interim Financial Statements;
- RTL contravened s674(2) of the Act in failing to comply with its continuous disclosure obligations by failing to disclose a substantial impairment in the carrying value of the operating assets of RTCM in its 2012 Interim Financial Statements. ASIC has sought from the Court a pecuniary penalty against RTL;
- Mr Albanese and Mr Elliott contravened s180 of the Act in relation to the above contraventions by RTL and their provision of information to the audit committee and auditors of RTL, and further that Mr Albanese and Mr Elliott contravened s344 of the Act; and
- ASIC has sought from the Court pecuniary penalties against Mr Albanese and Mr Elliott and that they be disqualified from managing corporations for such periods as the Court thinks fit.
ASIC announced that it will be making no further comment at this time.
The complete announcement can be sen here.