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Australian company head Sentenced to 10 years, China business and political environment unpredictable

Posted by Author on March 29, 2010

JOHN GARNAUT AND SANGHEE LIU, Sydney Morning Herald, Australia, March 29, 2010 –

Australian
Stern Hu has been sentenced to 10 years’ jail by a Chinese court for stealing commercial secrets and receiving bribes.

His three Rio Tinto colleagues will face between seven and 14 years for the same charges.

The sentences were at the higher end of expectations and will add to fears that China’s business and political environment is becoming increasingly unpredictable.

The case against Hu has strained relations between Australia and China, with the three-day hearing taking place last week in a closed court and Australian consular officials barred from hearing some evidence.

Australian officials were allowed into the court for today’s verdict, while journalists were able to watch on a video screen in an adjoining room.

Hu, the head of the Anglo-Australian miner’s Shanghai office, and the three Chinese men – Wang Yong, Liu Caikui and Ge Minqiang – had pleaded guilty to taking $US13 million ($A14.33 million), and one admitted to commercial espionage.

The men have been in custody for more than eight months.

The four Rio employees were arrested last July during contentious iron-ore contract talks between top mining companies and the steel industry in China, the world’s largest consumer of the raw material. The talks collapsed.

Australian Prime Minister Kevin Rudd said the world would be watching the trial, which has been widely seen as a test of the rule of law in China and has sparked concerns about doing business in the world’s third-largest economy.

Three decades after China opened up to the world, US and European businesses are now complaining of increasingly onerous rules, preferential treatment for local firms and growing nationalism.

A prosecutor had recommended that Hu be given a lenient sentence after he apologised to the court and to Rio, saying he took more than $US900,000 ($A994,475) to help childhood friends in need, his lawyer Jin Chunqing said.

At the three-day trial of the Rio employees, the court heard evidence that millions of yuan in bribes had been stuffed into bags and boxes for the accused, according to state media.

Hu took money from small private steel companies, which before the global financial crisis were locked out of buying iron ore from Rio because the mining giant prioritised large state-run steel companies, Jin said.

When the global economic crisis hit in September 2008, demand for iron ore plummeted and the smaller players paid bribes “to squeeze into the club and join the buyers,” he said.

Wang strongly objected to the bribery allegations, saying he simply borrowed the money from one of China’s richest men, Du Shuanghua, the National Business Daily said.

Du, the former head of Shandong-based Rizhao Iron & Steel group, has contradicted Wang’s account, saying he paid the Rio employee $US9 million ($A9.94 million) for preferential treatment, the newspaper said.

Australian Foreign Minister Stephen Smith chastised China last week for locking the country’s diplomats out of the courtroom during the hearings on the commercial espionage allegations.

China appeared to have broken its own laws by excluding Australia’s consular staff from the hearings, according to New York University professor Jerome Cohen, a leading US expert on Chinese legal issues.

The decision “to exclude the Australian consuls violated existing Chinese law, which since 1995 has explicitly instructed China’s courts to permit foreign consular representation even at non-public trials,” Cohen wrote in an article co-authored with Yu-Jie Chen, a fellow at the US Asia Law Institute.

Hu’s lawyer Jin Chunqing told The Associated Press by telephone that an appeal had not yet been decided.

“We haven’t decided yet if we would appeal to the higher court or what we should do for the next step, as we need to meet and discuss with Stern face to face, and as soon as possible,” Jin said.

Sydney Morning Herald

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