Memo to the commentariat: be careful treating business executives as rugged heroes of freedom.

Back in 2010, Rio Tinto CEO Tom Albanese led the charge of the mining industry against Labor’s mining tax, which involved a massive advertising campaign, blatant lying about the impact of the proposed tax and endless complaining about “sovereign risk” and “expropriation”. Along the way, they were cheered by the commentariat at The Australian, The Australian Financial Review and, as it then was, Business Spectator. When the tax was defeated and a prime minister removed, the mining companies led the fight against a carbon price as well. 

Let’s accept for a moment that the mining tax was some outrageous “heist” — one of the words used at the time — inflicted on mining company shareholders. As originally proposed, the Resource Super Profits Tax was going to generate $3 billion in its first year and $9 billion in its second from the entire mining industry. As events turned out, it wouldn’t have generated anything like that amount, given the subsequent collapse of the iron ore price.

But while they were fighting the good fight for freedom, Albanese and his board were engaging in decisions that would make even the most absurdly optimistic predictions of mining tax revenue and the carbon price look trivial. In 2007, Rio Tinto purchased Alcan. It proved to be a disastrous decision that would cost the company US$10-11 billion in write-downs — finally announced in early 2013. And in 2011, Rio Tinto spent more than US$3 billion (billion with a “b”) buying a coal mine in Mozambique, which turned out to be nearly worthless. They flogged it in 2014 for US$50 million. (That’s million with an “m”.) In that early 2013 announcement, Albanese and another executive responsible for the Mozambique debacle were punted as a result.

At around $14 billion in total, the write-downs suggest Albanese and his board were in no position to lecture any government about how to run things.

But now there’s been an even more damning sequel. Albanese — who is already in some hot water over a bribery scandal — was this morning charged by the US Securities and Exchange Commission (SEC) with fraud and a string of other offences relating to the Mozambique debacle. Rio Tinto itself and former chief financial officer Guy Elliott will also be in the dock.

The SEC version of events is that so hyper-sensitive were Albanese and the company after the Alcan write-down that they were terrified of revealing to investors that they were also losing billions in Mozambique — where the coal turned out to be poor and there was no means of getting it onto ships — and thus misled US investors, whom the company hit up for capital:

“The complaint alleges that after already impairing Alcan twice, Rio Tinto, Albanese, and Elliott knew that publicly disclosing its second failure and rapidly declining value would call into question their ability to pursue the core of Rio Tinto’s business model to identify and develop long-term, low-cost, and highly-profitable mining assets.  Instead, they concealed the adverse developments, allowing Rio Tinto to release misleading financial statements days before a series of U.S. debt offerings.”

The SEC goes on to allege why the write-downs, and Albanese’s departure, only happened in early 2013:

“The alleged fraud continued until January 2013, when an executive in Rio Tinto’s Technology & Innovation Group discovered that the coal assets were being carried at an inflated value on Rio Tinto’s financial statements.  After an internal review allegedly triggered by the executive’s report to Rio Tinto’s Chairman, Rio Tinto announced that Albanese had resigned and the company reduced the value of the coal assets by more than $3 billion, or more than 80 percent.”

Now these remain mere allegations at this point. The company, Albanese (who completely rejects the claims) and Elliott will all presumably “vigorously defend the charges”. But the outcome won’t change the loss of $14 billion.

And there’s another scandal that occurred while Albanese and Rio Tinto were complaining about the government: the so-called Guinea iron ore emails, which showed Albanese, another former CEO Sam Walsh (head of iron ore at the time) and another executive discussing a US$10.5 million payment to a political adviser in Guinea who had been helping the company secure leases over the Simandou iron ore project. The company itself reported the emails to regulators here, in the US and the UK. We’re still waiting to see what comes of that.

It seems that when it came to sovereign risk, Kevin Rudd and Julia Gillard had nothing on the people actually running Rio Tinto.