Securities and Exchange Commission v. Rio Tinto PLC

Rio Tinto PLC and Rio Tinto Ltd. (collectively, Rio Tinto) (defendant) acquired a Mozambique coal mine for $3.7 billion. Rio Tinto’s management later learned that the mine had a negative value due to poor coal quality, inadequate infrastructure for transporting the coal, and related issues. However, Rio Tinto continued to represent the mine as having a value of at least $3 billion in various financial documents available to prospective securities investors. The board eventually adjusted this figure to less than $1 billion, but the valuation remained far higher than the value found by Rio Tinto’s in-house team. The federal Securities and Exchange Commission (SEC) brought an enforcement action against Rio Tinto, its chief executive officer, Thomas Albanese (defendant), and its chief financial officer, Guy Robert Elliott (defendant), alleging fraudulent-scheme liability under SEC Rule 10b-5. The United States District Court for the Southern District of New York dismissed the scheme claims on the ground that the alleged fraudulent conduct amounted to no more than a collection of misstatements and omissions—an insufficient basis for scheme liability. Following the United States Supreme Court decision in Lorenzo v. SEC, which held that scheme liability attached to a defendant who disseminated but did not make a false statement, the SEC moved for reconsideration. The district court declined, and the case went to the United States Court of Appeals for the Second Circuit on interlocutory appeal.