rio tintoIn yet another securities suit following on news of a bribery or corruption investigation, and in the latest securities suit involving a global mining company, on December 12, 2016, a plaintiff shareholder filed a securities class action lawsuit in the Southern District of New York against the world’s second-biggest mining company, U.K.-based Rio Tinto plc, and certain of its current and former officers. The complaint arises out of the company’s recent announcement of a corruption investigation involving its operations in the Simandou iron mine, located in southern Guinea. As discussed below, this latest lawsuit exemplifies a number of the key securities litigation filing trends that have arisen this year.



On November 9, 2016, Rio Tinto issued a press release (here) in which the company announced that on August 29, 2016, the company had “become aware of email correspondence from 2011 relating to contractual payments totaling US$ 10.5 million made to a consultant providing advisory services on the Simandou project in Guinea.” The press release the company had launched an investigation led by outside counsel, and that based on that investigation, the company had notified or would be notifying the relevant authorities in the U.S, the U.K., and Australia.


A November 14, 2016 Bloomberg article (here) provided additional details about the allegedly improper payment. The article reported that the $10.5 million payment had been made to Francois de Combret in 2011 for assisting with negotiations with Guinea’s President Alpha Condé. The Bloomberg article also reports that “an e-mail exchange discussing the payment shows former CEOs Tom Albanese and Sam Walsh, who was then head of Rio’s iron ore unit, were aware of the payment.” The Bloomberg article also quotes an internal memo from current CEO Jean Sabastien Jacques as saying that “many people across Rio Tinto are still shell-shocked,” that the company will fully cooperate with authorities,” and that the investigation “may take several years.”


The $20 billion Simandou project was, according to the Bloomberg article, “once one of the world’s most prized mineral assets,” which spawned a struggle among the world’s largest mining companies. On October 28, 2016, Rio Tinto announced that it was exiting the Simandou project and handing over its stake to partner Aluminum Corp. of China, known as Chinalco.


The Securities Lawsuit Complaint

On December 12, 2016, a plaintiff shareholder filed a securities class action lawsuit in the Southern District of New York against Rio Tinto; Sam Walsh, who served as the company’s CEO from January 2013 to July 2016; Tom Albanese, who serves as CEO from May 2007 to January 2013; Christopher James Lynch, who has served as the company’s CFO since April 2013; and Guy Robert Elliott, who served as CFO from 2002 until April 2013. The plaintiff shareholder purports to represent  all persons or entities who purchased or otherwise acquired Rio Tinto American Depositary Receipts (“ADRs”) between March 16, 2012 and November 14, 2016.


According to the plaintiff’s counsel’s December 12, 2016 press release (here), the plaintiff’s complaint, a copy of which can be found here, alleges that


Defendants made false and/or misleading statements and/or failed to disclose that:  (i) Rio Tinto violated anti-corruption laws in connection with its operations with respect to the Simandou project; (ii) the foregoing violations would expose the Company to significant scrutiny and large fines; and (iii) as a result of the foregoing, Rio Tinto’s public statements were materially false and misleading at all relevant times.


The plaintiff further alleges  that the defendants made these misrepresentations in violation of the liability provisions  of the Securities Exchange Act of 1934, as a result of which, the plaintiff claims, the plaintiff class is entitled to the recovery of damages.



I have frequently noted (for example, here) the recurring phenomenon of follow-on securities suits filed in the wake of a company’s announcement of a bribery or corruption-related investigation. These kinds of corruption-related follow on securities suits have been a significant factor in the surge in securities class action lawsuits during 2016, which I noted in a recent post (here).


There have been a number of these kinds of corruption related securities class action lawsuits filed during 2016, including the January 2016 lawsuit involving Freeport McMoRan (here); the lawsuit filed in March 2016 against PTC, Inc. (here); the lawsuit filed in March 2016 involving Platform Specialty Products Corp. (here); the April 2016 action involving Alere, Inc. (here); the May 2016 action involving Gerdau (here); the June 2016 action involving Banco Bradesco (here); the August 2016 action involving Embraer (here).With the addition of the Rio Tinto lawsuit, there have now been a total of at least eight securities class action lawsuits filed in 2016 as follow-ons to a bribery or corruption investigation.


The lawsuit against Rio Tinto is also the latest securities class action lawsuit to be filed against a non-U.S. company. With the Rio Tinto lawsuit, there have now been a total of 44 securities class action lawsuits filed against non-U.S. companies so far in 2016, as compared to a total of 34 in both 2015 and 2014. The 44 lawsuits against foreign companies represent about 17 percent of all securities class action lawsuits filed this year.


The securities lawsuit filings in 2016 have not only been characterized by the number of filings involving bribery and corruption and investigations, and the surge of lawsuits involving non-U.S. companies, but the 2016 filings have also included a significant number of lawsuits involving mining companies. In addition to the lawsuit filed against Rio Tinto, there have also been actions filed this year against or involving Freeport-McMoRan (here); involving Primero Mining Corp. (here); BHP Billiton (here); Mines Management Inc. (here); Goldcorp (here); and Samarco Mineracao (here). This development is all the more noteworthy given that this industrial sector is not one that has been characterized by a high level of securities litigation activity in the past, yet this year there has been a total of at least seven securities class action lawsuits involving companies in this sector.


There have also been an additional four companies involving oil and gas production companies, including lawsuits filed against Memorial Resource Development Corp. (here); Warren Resources, Inc. (here); Northern Oil and Gas (here);  Chesapeake Energy Corporation (here); and Exxon Mobil (here). Taking these five additional lawsuits into account, there has been a total of at least twelve securities class action lawsuits filed so far in 2016 involving companies in extractive industries, representing more than two percent of all securities class action lawsuits filed this year.


All of these are important contributing factors to the onset during 2016 of the securities litigation “storm,” which I noted briefly here and which I will be analyzing in a more detailed post after year-end.