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Rio Tinto Execs Admit to China Bribery

Four Rio Tinto executives unexpectedly admit to taking bribes as a high-profile case opens in Shanghai Monday.
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) -- Four

Rio Tinto

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executives held in dentention by Chinese authorities since last July unexpectedly admitted to accepting bribes as their trial began Monday in a Shanghai court, according to reports.

The executives, all based in the Shanghai office of the Anglo-Australian mining giant, had been charged with taking bribes and stealing commercial secrets, a high-profile case that has tested diplomatic and business relations between Australia and China. According to reports, the admissions Monday involve only the bribery and not the industrial espionage charges.

The lead defendant in the case is Stern Hu, an Australian citizen and Rio Tinto's one-time negotiator in its important contract talks with the biggest Chinese steelmakers over the price of iron ore. He pleaded guilty to accepting $1 million in bribes, the lawyer of another of the defendants told

The New York Times


But other statements from those who were in the courtroom indicate that Hu and the others -- all three are Chinese nationals -- will attempt to contest the alleged size the bribes as the trial continues.

The four men were

indicted in early February


Reporters were barred from the courtroom Monday, and details about the case remained murky even nine months after the initial arrests.

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The exact nature of the bribery wasn't entirely clear, for example. Apparently, Hu and the others took payouts from smaller steel mills in China in exchange for guaranteeing them access to iron ore, reports

The Wall Street Journal

, citing people who were inside the courtroom.

The commercial espionage charges -- again, their exact nature isn't entirely clear -- will be answered later in the trial, scheduled to last three days.

Meanwhile, as a backdrop to the trial, iron-ore price talks between the biggest Chinese steelmakers and the world's biggest miners continued. Brazilian giant


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has evidently pressed for a 90% to 100% increase in its contract iron-ore price from a year ago, according to statements from the China Iron & Steel Association.

The iron-ore tensions between Sydney and Beijing are thought to be related to the Rio Tinto executives' cases. The anxiety last year was heightened after a deal collapsed between Rio and Chinalco, the huge state-owned Chinese aluminum company. Chinalco would have bailed out the then-debt-ridden Rio with a much-needed equity infusion. But partly because of homegrown political angst over foreign ownership, Rio spiked the arrangement and instead agreed to form a joint venture with its native rival BHP Billiton.

Under the JV deal, the two miners would combine their iron-ore properties in Western Australia, saving on operational costs. But China saw the joint venture as a way for Rio and BHP to control iron ore pricing, and has led a global push to question the tie-up on antitrust grounds.

Earlier this month the European steelmaking trade group Eurofer urged the EU's competition ministers to look into the Rio-BHP joint venture for possible problems, and expressed "outrage" over the big three miners' plan to hike iron ore prices substantially from a year ago, arguing that it would lead to increased steel prices and lessen the chances of economic recovery in Europe.

Rio Tinto's New York-listed American depositary receipts reversed course after slipping in early trading Monday, ending the session at $226.50, up $4.30, or nearly 2%. Rival

BHP Billiton's

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ADRs gained 89 cents, or 1%, to $78.69, and Vale's rose 27 cents, or 1%, to $29.80.

-- Written by Scott Eden in New York

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.