Four Rio Tinto executives faced charges of stealing commercial secrets in China on Tuesday after pleading guilty to taking bribes in a trial that has thrown a spotlight on the country's opaque business practices.
Lawyers said Australian Stern Hu and three Chinese employees of giant miner Rio could face jail terms of more than five years.
Hu, Liu Caikui, Ge Minqiang and Wang Yong were detained last July during sensitive annual price negotiations over iron ore, the main raw material for steel.
They admitted on Monday, the first day of the trial in Shanghai, that they had taken bribes. However, their lawyers and domestic media said they contended that the amount of kickbacks they took were far lower than the sums alleged by prosecutors.
Rio Tinto, which has moved to improve relations with China, its largest customer, had no official comment on the guilty pleas. Until now it has maintained the four did nothing wrong.
The company did not know about the bribes, Zhai Jian, who is representing Ge Minqiang at the Shanghai trial, said by phone. The defendants said in the court that the company was not aware of what they did.
Rio Chief Executive Tom Albanese told an audience in Beijing on Monday he did not want to jeopardize business ties with China, which boasts the world's largest steel industry and is the biggest consumer of iron ore.
And Rio's iron ore division chief, Sam Walsh, said in Perth on Tuesday that China remains a preferred partner in future projects for the world No. 2 iron ore producer.
The trial now moves into a closed phase to consider the charges of infringing commercial secrets.
Australia's consul-general in Shanghai, Tom Connor, told reporters outside the court after Tuesday's morning session that the four accused were given an opportunity to personally respond to the allegations and make any points they wished to in response to what the prosecution has been saying.
Lawyers for the Chinese accused declined to comment.
Australia has protested China's exclusion of its diplomats for the session dealing with commercial secrets. Foreign reporters have been barred from covering any part of the trial.
The trial takes place at a time when foreign business sentiment is souring against China, where legal boundaries can be vague and courts closely tied to the state, creating pitfalls for businesses seeking profits in the world's third-biggest economy.
Google Inc. said on Monday it would redirect users of its mainland Chinese-language search engine to one based in Hong Kong, ending self-censorship demanded by Beijing.
Many U.S. businesses feel shut out in China because of discriminatory government policies and inconsistent legal treatment, according to an American Chamber of Commerce in China survey released on Monday.
It is not clear when the sentences will be handed down in the trial, though the Shanghai authorities may want the case over quickly, before the city's showcase 2010 World Expo opens in May.
Court proceedings detailed in the National Business Daily on Tuesday linked at least some of the alleged bribes to China's medium-sized steel mills, whose scramble to secure iron ore frustrates efforts by the largest state-owned mills and the China Iron and Steel Association to cap term prices.
China's industry, the world's largest, is rent between the most powerful mills, who buy iron ore from Rio and other miners at relatively lower term prices, and the medium sized mills, who fight to secure ore at any price in order to stay large enough to stave off mergers with bigger state-owned firms.
Industry sources said desperate mills would offer cash to ensure they got their term allocations whenever Rio reduced term supply or diverted cargoes to the pricier spot market.
Connor, the Australian consul general, told reporters on Monday that Stern Hu was accused of taking bribes worth 1 million yuan ($146,500) and $790,000.
Lawyers for the three Chinese defendants said they also acknowledged taking bribes, but maintained the amounts alleged by prosecutors were inflated.
(Additional reporting by Sonali Paul in Melbourne and David Stanway in Beijing; Editing by Bill Tarrant)