A Case of Morphing Legal Charges in China

The Rio Tinto company of Australia is one of the largest producers of iron ore in the world. It is a major supplier to China, which has the largest steel industry in the world. This relationship, however, has been strained over the past several years. The tension and complexity of this relationship was highlighted by the prosecution of Rio Tinto executives by the Chinese government. The executives were originally charged with espionage, accused of bribing Chinese steel industry officials for information that would enable the company to inflate iron ore prices. The execu¬tives were detained in China for nearly a year pending the trial. The case was "considered the most closely watched prosecution of executives from a foreign country" This was due to the potential implications for the many companies that currently and hope to do business in China.

However, when the executives arrived at trial the charges had been changed. Now the Rio Tinto executives were charged with accepting $12 million worth of bribes from Chinese steel industry officials. These officials presumably attempted to gain pricing information for iron ore to aid in their negotiations for allocations.

Chinese prosecutors (and officials) did not explain why the charges were switched, why they would charge foreign executives for accepting bribes, or why they have not yet charged or arrested anybody from steel companies that offered bribes.

"Chinese police and prosecutors have considerable leeway to arrest and even indict suspects for one offense and then change course and bring than to trial on different charges. [Such practices) prompted fears among mining company executives, foreign workers, and investors that they could be subject to legal penalties if they get into disputes with their local partners "

What Would You Do?

Considering only the information above, answer the following questions.

Part A. Assume you are a high-potential, rising-star manager within Rio Tinto and are offered a position at a company facility in China.

Because China is the company's biggest customer, an assignment there is likely to advance your career.

1. Would you take the position? If yes. then explain why. Also describe what you might do to prevent a situation similar to the one above.

2. If no, then explain why you made this choice. Also explain bow you would communicate this decision to the manager who offered you the position.

Part B. Assume you are the CEO of Rio Tinto.

3. Considering only the information above, what changes if any would you make to company policy related to doing business in China?

Part C. Additional information came to light after the trial. Just before the executives were detained, the Chinese steel industry association complained about inflated iron ore prices and blamed Rio Tinto and others for a breakdown in iron ore contract talks. Additionally, "Rio Tinto scrapped plans to accept a $19.5 billion investment from Chinalco, one of China's biggest state-owned mining groups.

4. Based on this new information, do your answers to questions 1, 2, and 3 change? Explain why or why not.