The US Securities and Exchange Commission (SEC) has laid charges of fraud against diversified miner Rio Tinto and its former CEO Tom Albanese and CFO Guy Elliott.

The SEC in a statement this week said that the company and the former two executives had inflated the value of Mozambique coal assets, which were initially acquired for $3.7-billion in 2011, and then divested for A$50-million.

Rio in 2014 struck a deal with International Coal Ventures Private to divest of its Mozambique assets, which included the Benga coal mine and other projects in the Tete province, for $50-million.

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.

“As alleged in our complaint, Rio Tinto’s top executives allegedly breached their disclosure obligations and corporate duties by hiding from their board, auditor, and investors the crucial fact that a multibillion-dollar transaction was a failure,” the SEC’s co-director of the enforcement division, Stephanie Avakian, said.

Based on the complaint’s allegations, the three parties are charged with violating the antifraud, reporting, books and records and internal controls provisions of the federal securities laws.

The SEC is seeking permanent injunctions, return of allegedly ill-gotten gains plus interest, and civil penalties from all the defendants, and is seeking to bar Albanese and Elliott from serving as public company officers or directors.

Rio on Thursday told shareholders that the SEC case was unwarranted and that, when all the facts were considered by a court, or if necessary a jury, the SEC’s claims would be rejected.

In a statement to shareholders, Rio also noted that it had reached a settlement with the UK’s Financial Conduct Authority (FCA) in relation to the timing of the impairment to the Mozambique assets, with the FCA determining that Rio should have carried out an impairment review for its 2012 interim results, and if it had done so, the results published in August of that year would have reflected the impairment it recorded six months later.

In January 2013, Rio 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 FCA fined Rio $36.2-million, but made not findings of fraud or of any systematic or widespread failure by Rio.

The Australian Securities and Investment Commission is also reviewing the Mozambique coal impairment charges

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