THE corporate watchdog has been savaged over its decision to prosecute one of Australia's richest men, after a Federal Court judge threw out claims that mining magnate Andrew ''Twiggy'' Forrest and his Fortescue Metals Group deceived investors.
Justice John Gilmour also awarded costs to Mr Forrest and the company after throwing out the civil proceeding brought by the Australian Securities and Investments Commission.
Those costs are likely to run past $10 million.
The ruling is the third blow for the corporate watchdog in recent months, after courts in NSW and Victoria respectively threw out high-profile claims against One.Tel founder Jodee Rich and former AWB boss Andrew Lindberg. ASIC intends to appeal against those decisions.
Justice Gilmour deliberated for seven months before handing down his verdict in the Federal Court in Perth yesterday.
Mr Forrest said he thanked ''God, the Australian judicial system, and my family and friends for their unswerving support throughout the proceedings''.
Fortescue chairman Herb Elliott said the the outcome of the case ''clearly vindicates the company's actions in the strong defence of its position''.
ASIC said it was considering whether to appeal. Success by ASIC could have seen Mr Forrest banned as a director of the company in which he holds a $4.3 billion stake.
ASIC had claimed Mr Forrest and Fortescue misled the market over the status of agreements it had signed with Chinese companies in 2004, when the then-fledgling miner announced ''binding contracts'' with Chinese companies to build and finance its Pilbara iron ore projects.
ASIC - which began its investigation after a newspaper article in 2005 - claimed the deals were merely ''framework agreements'' that were not binding on either party, but the announcements led to a surge in Fortescue's share price. Fortescue disputed this, claiming the Chinese backflipped on the deals after negotiations about an equity stake in the miner broke down.
In his 299-page judgment, Justice Gilmour called ASIC's claim that Mr Forrest had no legal basis to make the claim about the agreements ''surprising''.
''It is difficult to discern why ASIC ran a case alleging that [Fortescue's] board could not have made the disclosures it did if it had obtained competent legal advice,'' he said.
The newspaper article that sparked the investigation was ''engineered'' by powerful Chinese bureaucrat He Lianzhong as a ''blunt commercial tactic'' to wrest control of the iron ore project from Fortescue.
''It is important that allegations of dishonesty should be made only where there is a reasonable evidentiary basis for them,'' Justice Gilmour said.
''It is my opinion that on the totality of the evidence available to ASIC there was no such basis in this case.''
ASIC said yesterday that when it brought the case it outlined the importance in examining the responsibility of listed companies and their executives to keep the market properly informed in relation to disclosable agreements.
Justice Gilmour will resume the hearing to hear submissions on costs.
Those costs are likely to exceed $10 million. Mr Forrest engaged Australia's wealthiest lawyer, Allan Myers, QC, while the taxpayer will also have to pick up the tab for John Karkar, QC, for Fortescue, the watchdog's own silk, Neil Evans, QC, and the more than 20 lawyers working on the case on behalf of all three parties.
