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Rio trial ends, verdict could take some time

By Lucy Hornby and Rujun Shen

SHANGHAI (Reuters) - The trial of four Rio Tinto executives ended in Shanghai on Wednesday, with three contesting charges of stealing commercial secrets in a case that has highlighted China's sensitivities over its rich steel sector.

The trial of Australian citizen Stern Hu and his Chinese colleagues, in which all four admitted to taking bribes, has strained ties between Australia and its largest trading partner. The four face jail terms of at least five years for bribery.

It has raised worries about China's secretive legal system, but also forced mining giant Rio Tinto, the world No. 2 iron ore producer, to examine the way it conducts business in China. Iron ore is the main raw material in steel-making.

"It's not just Australia that's watching this trial very closely, but the eyes of the world are focused on the way in which this trial is conducted and what happens as a result of it," Australia's Mandarin-speaking Prime Minister Kevin Rudd told reporters in Perth.

Hu, head of the China iron ore business, his subordinates Liu Caikui and Ge Minqiang, and iron ore salesman Wang Yong, pleaded guilty on Monday to taking kickbacks but they have contested the amounts alleged by prosecutors.

Rio, seeking to improve relations with China, had maintained since the men were detained last July during sensitive annual iron ore price negotiations that they had done nothing wrong.

"We would always investigate thoroughly any allegations of serious wrongdoing," Tony Shaffer, Rio's principal adviser for media relations, wrote in a statement emailed to Reuters.

"We cannot comment on the case of our employees in China at the moment as the legal process is still under way."

No verdict or sentence had been reached, Zhai Jian, lawyer for defendant Ge, said on his way out of the court.

A verdict may be likely before the World Expo 2010 opens on May 1, drawing tourists and heads of state to Shanghai, China's financial hub and most modern city.

"There may well be some time, a matter of days between the end of the hearing today, and those further processes," Australia's Foreign Minister Stephen Smith told Australian radio.

In London, Britain's serious fraud office said it was "assessing" information about the trial. No other details were available.

The trial comes at a time of increased strain between China, the world's third-largest economy, and foreign businesses. On Monday, internet giant Google Inc. said it would redirect users of its mainland Chinese-language search engine to one based in Hong Kong over a censorship and hacking row.

The tension with China over the Shanghai case and the scrapping of a $19.5 billion tie-up with Chinalco last June has had no impact on Rio's share price or its bottom line.

Rio Tinto has been producing iron ore at full tilt, barely able to keep up with demand from China, which became its biggest customer last year, accounting for a quarter of its sales.

Days before the trial began, Rio Tinto signed a $2.9 billion deal with Chinese metals group Chinalco to develop an African iron ore mine. China boasts the world's largest steel industry and is consequently the top iron ore consumer.

Others have also not been deterred. China National Offshore Oil Corp and BG Group signed Australia's biggest-ever liquefied natural gas supply deal on Wednesday, a multi-billion dollar, 20-year contract.

KICKBACKS

Lawyers say the four executives have testified that Rio Tinto did not know about the kickbacks, which came mostly from smaller or private steel mills desperate for iron ore at stable and relatively low term prices.

They included Rizhao Steel, formerly one of China's largest private steel mills, whose billionaire founder Du Shuanghua gave written testimony about a $9 million payment to defendant Wang Yong, according to trial reports.

Three of the four Rio employees have denied stealing commercial secrets, Zhang Peihong, a lawyer for defendant Wang, said on Wednesday. Liu did not contest the commercial secrets charge, his lawyer Tao Wuping said.

Smith expressed disappointment that the portion of the trial concerning commercial secrets was closed to Australian diplomats.

For its part, Rio Tinto has conducted an independent internal audit to clear itself of any wrongdoing and determine whether there was evidence the company paid bribes to, or received illegal payments from, Chinese steel mills, The Australian newspaper reported on Wednesday.

A team of forensic accountants and lawyers found nothing that would uphold a claim the company had supported any illegal activity or could have been aware of the alleged misbehavior, the paper said, adding the audit team could not give Rio similar assurances about the activities of the four executives.

Rio's website (www.riotinto.com/) said "bribery in all its forms is prohibited." Other companies said they were cautious.

"With our employees, the reality in China is that areas that are black and white here in Australia are much greyer over there," said Andrew Forrest, chief executive of Fortescue Metals Group, Australia's third-largest iron ore miner.

(Additional reporting by Ben Blanchard in BEIJING, Rob Taylor and Jim Regan in SYDNEY, Fayen Wong in PERTH and Sonali Paul in MELBOURNE; Editing by Ken Wills and Paul Tait)

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