Billionaire Andrew Forrest set to take on corporate watchdog

A long-running legal battle between the Australian Securities and Investments Commission and billionaire Andrew Forrest moves to Perth’s Federal Court today, with the mining baron facing the prospect of being disqualified as a director and being fined up to $4.4 million.

ASIC’s civil action against Forrest and his company Fortescue Metals Group concerns announcements made by Fortescue in 2004 concerning “binding” contracts it had signed with Chinese customers.

But after Fortescue revealed more detail of the contracts in early 2005, ASIC took action, claiming it had “seriously misled” investors by overstating the state of the agreements.

“During this period many millions of shares were traded by both sophisticated and unsophisticated investors – all of whom relied on FMG to provide continuous and accurate disclosure,” ASIC said in a statement released on Friday.

“When the true contents of the agreements were disclosed by the media, FMG’s share price dropped by more than 25% in one day.”

ASIC’s media statement on the eve of the trial caused Fortescue’s shares to fall 8% on Friday, as investors pondered life without Forrest in charge.

Fortescue says it will defend the action vigorously.

“We are very conscious that what’s been presented has not been supported by the facts, and we will defend it vigorously,” executive director Graeme Rowley told reporters in Melbourne.

The trial is set to run for five weeks in front of Justice John Gilmour.

Forrest is unlikely to appear, and will be represented by one of Australia’s top commercial lawyer, Allan Myers.

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