asic hearing update, page-4

ASIC sure of strong case against TwiggyFont Size: Decrease Increase Print Page: Print Nicolas Perpitch | May 06, 2009
Article from: The Australian
AUSTRALIA'S corporate watchdog claims it has a stronger case against Fortescue Metals Group for misleading and deceptive conduct than it had against James Hardie in its recent win over an asbestos compensation fund.

Last month, the NSW Supreme Court found former James Hardie board members had made deceptive and misleading comments in 2001 that it could fully fund its compensation liabilities.

In closing submissions of a five-week civil case, Australian Securities and Investments Commission lawyer Neil Young QC yesterday said FMG and its chairman, Andrew "Twiggy" Forrest, had gone much further.

He said instead of making an overstated or exaggerated declaration to the stock market, they had made "blatantly false statements" regarding the nature of agreements with three Chinese companies to build and finance a Pilbara iron ore mine.

An August 2004 framework agreement with the Chinese Engineering and Railway Corporation was claimed to be a binding agreement where CREC took full risk under a fixed-price agreement.

But Mr Young said there was no full risk agreement and no fixed price. And there was no build and transfer agreement, but just an agreement to further discuss key aspects of the deal.

"There's been no defence, either in evidence or submissions, advanced about the misleading character of these statements," Mr Young said.

"Fortescue has not been engaged in these ... because there simply is no answer to these misleading statements."

FMG has argued the three deals were accurate and made in a context where it was abundantly clear to the market there were still important milestones to be achieved before the project could go ahead, such as a definitive feasibility study.

ASIC also alleges FMG and Mr Forrest breached continuous disclosure obligations by not informing the market as its negotiations with the Chinese companies fell apart.

FMG has said it had no obligation to declare each new twist in the sensitive negotiations, which collapsed when the Chinese demanded a majority equity share in the project.

ASIC also accuses Mr Forrest of breaching his duties as a director. It wants him banned from acting in the position and fined up to $4.4 million.

FMG's share price increased markedly on the back of the 2004 announcements, but then plunged 25 per cent in late March 2005 when it was forced to release the full terms of the agreements. Closing submissions continue today.