Australia's Fortescue on Trial over China Deals

Fortescue Metals Group, Australia's third-largest iron ore miner, misled markets five years ago about deals it struck with Chinese firms, Australia's securities watchdog told a court hearing on Monday.
The Australian Securities and Investments Commission laid the charges last week, seeking fines of up to A$6m ($4.3m) from Fortescue and A$4.4m from its chief executive and billionaire founder, Andrew Forrest.
At the heart of the five-week trial is a series of statements Fortescue made in 2004 about agreements with China Railway Engineering Corp (CREC), China Metallurgical Engineering Construction Group Corp (CMCC) and China Harbour Engineering Corp (CHEC) on the financing and building of a A$1.85bn rail and port project for Fortescue in north-west Australia.
ASIC said the nature of the agreements was overstated as they were actually framework agreements and were not legally binding.
"Despite their knowledge of the terms of the three framework agreements and the many opportunities to release the true position, Fortescue and Forrest maintained and fostered the cloud of illusion that its position with respect to the three Chinese companies was better than it was," Neil Young, a lawyer for ASIC, told the court in opening submissions.
Forrest, who did not appear on the first day of the Federal Court hearing in the western Australian city of Perth, could also be barred from being a company director if ASIC wins its case.
Fortescue, represented by law firm Clayton Utz, said the agreements signed with the three state-owned Chinese firms were subject to various conditions, including the feasibility of the project being met, according to court papers.
Fortescue said on Friday it would defend itself.
"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 on Friday.
Shares in Fortescue fell 2% to A$2.45 on Monday in a broader market up 0.6%.
By Fayen Wong, Reuters