US law firm Hagens Berman has launched a class action lawsuit against mining major Rio Tinto over the miner’s 2011 investment in the Mozambique coal assets.
The lawsuit claims that Rio and former executives violated the Securities Exchange Act, and made false and misleading statements regarding the true value of the Mozambique coal assets.
Rio and former Chief Executive Officer Tom Albanese and Chief Financial Officer Guy Elliott were also facing charges of fraud from the US Securities and Exchange Commission (SEC), which claims inflated the value of Mozambique coal assets, which were initially acquired for $3.7-billion in 2011, and then divested for A$50-million in 2014.
The SEC’s complaint, which was filed in federal court in Manhattan, alleges that Rio, Albanese and Elliott failed to follow accounting standards and company policies to accurately value and record its assets.
Instead, the SEC said that as the project began to suffer one setback after another resulting in the rapid decline of the value of the coal assets, they sought to hide or delay disclosure of the nature and extent of the adverse developments from Rio’s board of directors, audit committee, independent auditors and investors.
Hagens Berman in their lawsuit also claims that while the company’s senior executives were aware of “material problems adversely affecting” the coal assets, they failed to report impairment to the assets, and instead continued to tout the value of the coal assets to investors.
Rio at the start of 2013 announced impairment charges of about $14-billion post tax for its 2012 full-year results, including a $3-billion impairment relating to the Mozambique coal assets.
The law firm has encouraged Rio’s US shareholders, which held American Depositary Receipts between October 2012 and February 2013, to contact the firm in order to join into the class action.
