Forrest again faces ASIC in court

Fortescue's Andrew Forrest is again meeting ASIC in court as the case comes to a head.

 Fortescue’s Andrew Forrest is again meeting ASIC in court as the case comes to a head.

In 2010 ASIC lost its initial case against Fortescue, which accused the  miner of misleading investors over the status of deals signed with Chinese companies in 2004.

The case stated that FMG had told the market it had secured contracts with Chinese interests to develop Fortescue’s Pilbara operations, but claimed that no such deal existed.

According to ASIC, FMG made a number of announcements about agreements with three Chinese companies to build and finance mining, rail and shipping infrastructure in the Pilbara, calling the deals “binding.”

The announcement of the deals is said to have led to Fortescue shares rising by as much as 35%.

ASIC said that when the contents of the deals were fully disclosed, it was revealed that they were framework agreements rather than binding.

The regulator claimed that Forrest and FMG failed to comply with continuous disclosure requirements, and failed to correct misleading statements.

“Mr. Forrest was well aware there was a significant and growing ‘gap’ between what the market had been told and what actually appeared in the agreements, but did nothing to correct the position and instead perpetuated the misleading statements,” ASIC said.

According to ASIC chairman Tony D’Aloisio, such failures to disclose is a serious breach of the share market’s integrity.

The case was completely dismissed by Justice Gilmour in 2010, with costs awarded to FMG and Forrest, however this dismissal was appealed against by ASIC.

At the time is said that "ASIC considers that the findings of Justice Gilmour raise important issues as to the proper interpretation and application of provisions of the Corporations Act".

"These issues warrant an appeal," it announced.

The case continued for another year, until ASIC won its appeal against the miner.

The following day Fortescue appealed against the court decision, launching a high court action.

In a company statement, Fortescue announced that it intended to seek leave to appeal to the High Court against the decision by the Full Bench to uphold an appeal by ASIC regarding civil penalty proceedings brought by ASIC against both Fortescue and Forrest.

Forrest had previously voiced his disappointment with the court decision, after originally being cleared of the charges, adding that he had been pursued by ASIC in "a mean and vengeful way" with no justification.

The court will now spend today and tomorrow debating the case, according to the ABC.

It Fortescue loses Forrest may face possible disqualification as a company director.

In August Forrest officially stepped down from the role of CEO of Fortescue, and was replaced by current chief Nev Power.

ASIC is also currently investigating junior explorer Paynes Find and its CEO Peter Salter.

ASIC has formed a special taskforce to examine how the company took nine months to spend almost all of the $9 million it raised from investors.

The ASX has also issued the company with a number of queries over its disclosure of price-sensitive news to the market.

In 2005 ASIC banned Salter from serving as a company director for 3.5 years after his role in two failed companies.



To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.