Court reinstates Grace charge

Company and 6 former executives must face conspiracy count

September 21, 2007|By Bloomberg News

A U.S. appeals court reinstated yesterday a conspiracy charge against Columbia-based W.R. Grace & Co. and six former executives in a case involving residents of a Montana town who suffered serious health problems after being exposed to asbestos from a former Grace mine.

The U.S. Court of Appeals for the 9th Circuit in San Francisco overturned decisions by U.S. District Judge Donald S. Molloy to throw out a conspiracy charge and limit evidence that prosecutors can use to prove the defendants knowingly endangered residents and workers in Libby, Mont.

The defendants had claimed the conspiracy charge was filed too late.

U.S. Circuit Judge Betty Fletcher wrote on behalf of the three-judge panel that "the District Court erred" in throwing out the charge.

Prosecutors charged Grace and the former executives with violating the federal Clean Air Act and obstruction of justice, claiming they released asbestos-containing vermiculite in Libby and interfered with a government cleanup.

If convicted, Grace could face a fine of up to $280 million, the company said in a filing with the Securities and Exchange Commission in August.

The individual defendants could be sentenced to up to 15 years in prison if convicted. Asbestos-injury claims forced the chemical maker to file for bankruptcy protection in 2001.

Grace and the former executives say they're innocent. In their appeal, they called the case "novel and aggressive."

Grace spokesman William Corcoran didn't return a call seeking comment. Assistant U.S. Attorney Kurt Alme declined to comment.

Prosecutors claim the defendants were part of a conspiracy to expose workers and Libby residents to the tainted vermiculite, a mineral used in fireproofing, insulation and potting soil. Grace mined and processed it near Libby from 1963 to 1990.

In July 2006, Molloy ruled that prosecutors waited too long to charge the defendants with conspiring to endanger the town's residents. The charge was reinstated yesterday.

The appeals court upheld Molloy's decision to exclude some scientific studies the government planned to use at trial. However, the court ruled that Molloy was wrong to bar the prosecution's expert witnesses from relying on the data for their opinions.

The government's appeal delayed a scheduled September 2006 trial. In arguments before the court in June, a prosecutor claimed the combined effect of Molloy's rulings "eviscerates" the government's case.

More than 1,200 people in and around Libby developed diseases caused by asbestos exposure, including asbestosis, a progressive scarring of the lungs, and mesothelioma, a fatal form of lung cancer, the government claims.

In addition to Grace, the defendants are William McCaig, former manager of operations at the Libby mine; Robert Walsh and Robert Bettacchi, former presidents of Grace's Construction Products Division; Jack Wolter, ex-general manager of the Construction Products Division; Henry Eschenbach, a former director of health and safety at Grace; and Mario Favorito, a former legal counsel for Grace.

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