The charges, filed in federal court in Manhattan this morning, relate to the 2011 acquisition of Riversdale Mining for US$3.7 billion.

The acquisition of the company, which held coal assets in Mozambique, was nothing short of a disaster for Rio, and the assets were sold off in 2014 for $50 million.

The SEC’s complaint alleges that Rio, Albanese, and Elliott failed to follow accounting standards and company policies to accurately value and record its assets. 

According to the SEC, once the project started to suffer setbacks, Rio and the executives “sought to hide or delay disclosure of the nature and extent of the adverse developments from Rio Tinto’s board of directors, Audit Committee, independent auditors, and investors”.

“As alleged in our complaint, Rio Tinto’s top executives allegedly breached their disclosure obligations and corporate duties by hiding from their board, auditor, and investors the crucial fact that a multi-billion dollar transaction was a failure,” SEC Enforcement Division co-director Stephanie Avakian said.

Rio said it would vigorously defend itself against the allegations.

“Rio Tinto believes that the SEC case is unwarranted and that, when all the facts are considered by the court, or if necessary by a jury, the SEC’s claims will be rejected,” the company said.

The Riversdale acquisition came just after Rio had announced impairments relating to the even more disastrous and poorly timed $38.1 billion takeover of Alcan in 2007.

The SEC said that after impairing Alcan twice, Rio, Albanese and Elliott knew that publicly disclosing “its second failure and rapidly declining value would call into question their ability to pursue the core of Rio Tinto’s business model to identify and develop long-term, low-cost, and highly-profitable mining assets”

“Rio Tinto and its top executives allegedly failed to come clean about an unsuccessful deal that was made under their watch.  They tried to save their own careers at the expense of investors by hiding the truth,” SEC Enforcement Division co-director Steven Peikin said.

Instead, the SEC alleges they concealed the adverse developments, allowing Rio to release misleading financial statements days before a series of US debt offerings. 

“Rio Tinto raised $5.5 billion from US investors, approximately $3 billion of which was raised after May 2012, when executives at Rio Tinto Coal Mozambique had already told Albanese and Elliott that the subsidiary was likely worth negative $680 million,” the SEC said. 

The complaint alleges Albanese then repeated and reinforced the false positive outlook for the project in public statements.

The SEC alleges the fraud continued until January 2013, when an executive in Rio’s Technology & Innovation Group discovered that the coal assets were being carried at an inflated value on the company’s financial statements. 

Albanese resigned the following month and the company wrote the acquisition down by over $3 billion.

Rio, Albanese and Elliott are charged with violating the antifraud, reporting, books and records and internal controls provisions of US securities laws.  

The SEC is seeking permanent injunctions, return of allegedly ill-gotten gains plus interest, and civil penalties from all the defendants, and seeks to bar Albanese and Elliott from serving as public company officers or directors.

Elliott is a current director of Royal Dutch Shell, as well as a member of the British Takeovers Panel. Albanese resigned as CEO of London-listed Indian mining conglomerate Vedanta Resources in August, but is on the board of streaming major Franco-Nevada Corporation.

The UK Financial Conduct Authority (FCA) and the Australian Securities and Investments Commission assisted the SEC in its investigation.

Rio noted today that it had reached a settlement with the FCA over the timing of the Riversdale impairment, with the FCA determining that it should have come six months earlier in the company’s August 2012 half-year results.

It was determined that Rio had breached the FCA’s Disclosure and Transparency Rules and the company was fined £27.38 million.

ASIC is still reviewing the impairment.

Rio is also co-operating with an investigation by the UK's Special Fraud Office relating to its conduct in Guinea.

Last year, Rio discovered a Rio discovered a US$10.5 million payment had been made to a consultant working on the Simandou iron ore project in Guinea.

The discovery led to the termination of Energy & Minerals boss Alan Davies and Legal & Regulatory Affairs group executive Debra Valentine, as well as the deferral of former CEO Sam Walsh’s incentives.

Shares in Rio fell by 1.2% to A$70.58 in early trade.