Rio Tinto sentence a 'wake-up call'

Australian Consul-General Tom Connor finishes speaking to the media outisde a courthouse in Shanghai on following the convinction of four employees of mining giant Rio Tinto -- March 29, 2010.


Bill Radke: A few hours ago in Shanghai, an Australian executive at the mining behemoth Rio Tinto was sentenced to 10 years in prison for bribery and stealing commercial secrets. Three Chinese Rio Tinto managers got between seven and 14 years. From Shanghai, Marketplace's Scott Tong joins us live. Hi Scott.

Scott Tong: Bill, good morning.

Radke: Ten years for a foreign businessman. Is that a lot?

Tong: Well Bill, I got a text message not long ago from a friend in the steel industry, and it simply read, "Wow." There's a sense of severity here. The Australian foreign minister a couple of hours ago. said the sentences were "very tough." This whole decision has to do with the iron ore business. Rio Tinto sells is, Chinese steel mills buy it to make steel. It's a very complicated business, but there's ample room for corruption.

Radke: And what messages does this sentence send to the foreign business community?

Tong: Some are saying this is a wake-up call, as an initial reaction. There are a lot of sectors -- steel, health care, automotive, -- where you hear stories of "creative giving and receiving." And now this case comes along and says, well, you better be careful. I spoke a bit ago to Malcolm Cook at the Australian think tank the Lowy Institute:

Malcolm Cook: It's very rare for a senior executive to be arrested. So I think overall it kind of shows that the legal system in China, for commercial cases, works differently than in the Western world.

Radke: And Scott, could this decision drive any foreign companies out of China?

Tong: No sign of exodus, Bill. I mean we have heard about Google, but aside from that, everyone knows China can be a tough place to do business, and it may in fact be getting tougher. But the prevailing wisdom seems to be, you know, this is still the biggest emerging market there is, Bill.

Radke: Marketplace's Scott Tong in Shanghai. Scott, thank you.

Tong: You're welcome.


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