China Charges 4 Employees of Mining Giant Rio Tinto

By DAVID BARBOZA

SHANGHAI — China formally arrested four employees of the British-Australian mining giant Rio Tinto, including an Australian citizen, late Tuesday, and charged them with commercial bribery and trade secrets infringement in a case that has rocked the global steel industry.

But a brief statement on the arrests, reported by the country’s official Xinhua News agency, did not mention the much more serious charges of espionage that Beijing had earlier alleged and that have frayed relations between China and Australia in recent weeks. It was unclear if the Chinese government included those charges in its more detailed filing on the case or had backed away from them under international pressure.

The case has generated significant anxiety among foreign corporations and investors worried that China could stifle business by targeting executives with state secrets charges.

In a statement released through Xinhua, prosecutors said the four Rio Tinto employees had used “improper means” to obtain commercial secrets from China’s government-controlled iron and steel industry. Although commercial bribery is a criminal charge, the sentence for anyone convicted of the crime is significantly shorter than those for states secrets violations.

The announcement came more than a month after the four employees were detained in Shanghai and accused of stealing state secrets from China’s steel industry and harming the nation’s economic interests. It also followed weeks of diplomatic pressure from the Australian government, which had complained about a lack of transparency in the case.

Following the detentions, Australian Prime Minister Kevin Rudd had cautioned China to deal fairly, openly and judiciously with the employees because the world would be watching how it handles the case. Australian government officials did not reply early Wednesday to requests for comment on the statement of charges.

If China indeed chose not to charge the employees with violating the country’s state secrets law, it would dramatically alter the case because legal scholars say prosecutions under the state secrets law are not transparent and are notoriously difficult to defend against.

Jerome Cohen, a professor of law at New York University and a expert on China’s legal system, said the language used in the prosecutor’s announcement was unclear but suggested that Beijing may have chosen to downgrade the charges.

“It doesn’t sound like they are doing this under the state secrets law,” Mr. Cohen said after being read the Xinhua statement. “They may be trying to lower the temperature in the world by getting it out of the state secrets context.”

The detentions of the four employees, among whom are three Chinese citizens, had stunned many multinational companies doing business here because the government had invoked its murky state secrets law in a case that many legal experts said sounded like commercial bribery rather than espionage.

The allegations in the case have also caused turmoil in China’s steel industry, the world’s largest, and disrupted the country’s already contentious annual iron ore negotiations with some of the world’s biggest producers, including Rio Tinto.

A spokesman at Rio Tinto’s headquarters in London said late Tuesday that the company was not yet aware the charges had been filed.

In recent weeks Rio Tinto has strongly denied any wrongdoing in the case, and insisted the company had no evidence that its employees, including Stern Hu, a Chinese born Australian citizen, had ever engaged in bribery or wrongdoing.

Mr. Hu, the general manager of Rio Tinto’s Shanghai office and the company’s top iron ore salesman in China, is believed to be one of the highest ranking foreign executives ever charged with commercial bribery and trade secrets infringement involving a state-controlled industry.

Even before formal charges were brought, the Chinese government lashed out harshly at the actions of Mr. Hu and the three other Rio Tinto employees, saying they caused China “enormous economic losses.”

Australian officials said a few weeks ago that they were told by Beijing that the allegations related to Rio Tinto’s iron ore negotiations with the Chinese steel industry, which has complained bitterly in recent years about being charged extremely high prices.

In recent weeks, Beijing has also allowed the state-run news media to publish a series of articles filled with sensational claims, including one that said Rio Tinto had bribed virtually the entire Chinese steel industry, including 16 of the biggest steel makers, in order to get hold of confidential documents that allowed the company to overcharge Chinese mills for iron ore.

And last weekend, a Web site affiliated with China’s State Secrets Bureau published an article claiming the fraud had gone on for six years and hiked China’s iron ore costs by an extra $100 billion.

On Monday, however, the site was shuttered and an official with the state secrets bureau told Dow Jones news agency that no one at the agency had been authorized to speak publicly on the case.

The author of the article, who works at the state secrets bureau, also told several news publications that he was simply writing his own opinion and did not have details of the case.

Some steel industry analysts and China experts have accused China’s leaders of going after Rio Tinto to retaliate for its decision in June to scrap a deal that would have allowed a Chinese company to pay $19.5 billion to acquire a minority stake in the company.

That deal collapsed after Australian officials publicly worried about whether the company was giving away some of their country’s most valuable natural resources.

China has strongly denied the claim of retaliation, presenting the Rio Tinto case in its state-run newspapers as one of simple corporate greed.

According to Xinhua, prosecutors in the case say they also have suspects from China’s steel and iron industry who provided trade secrets to the Rio Tinto employees.