June 23 (Bloomberg) -- The U.S. Supreme Court turned away appeals by W.R. Grace & Co. and six former executives, refusing to limit the criminal case against them for allegedly releasing asbestos that killed and injured residents of Libby, Montana.

The appeals sought to derail a prosecution that could result in a fine as large as $280 million against Grace, the chemical maker forced into bankruptcy by asbestos and environmental claims. The individual defendants face as much as 15 years in prison.

The rebuff, released today, leaves intact a ruling that adopted the government's definition of ``asbestos'' in the U.S. Clean Air Act. Grace urged a narrower definition that would have excluded 95 percent of the asbestos released through its mining and processing operations in Libby.

The lower court ruling ``left the scope of the criminal provision indeterminate and potentially boundless and deprived individuals and businesses of fair warning about what substances they may, and may not, release under the act,'' Grace argued in its appeal, filed in Washington in April.

The Supreme Court rebuff is a victory for the Bush administration, clearing an obstacle that had stood in the way of trial. The company, based in Columbia, Maryland, is also accused of interfering with a government clean-up.

``We're disappointed,'' said Greg Euston, a Grace spokesman. When the judge sets a trial date, ``we'll be prepared to defend ourselves.''

Asbestos Exposure

Prosecutors said the defendants were part of a conspiracy that exposed workers and Libby residents to asbestos-contaminated vermiculite, a mineral used in fireproofing, insulation and potting soil. Grace mined and processed vermiculite near Libby from 1963 to 1990.

Assistant U.S. Attorney Jessica Fehr didn't immediately return a voicemail message seeking comment.

More than 1,200 people in and near the town 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. Grace and the former executives deny any wrongdoing.

The question in the high court appeal was whether the Clean Air Act criminalizes the release of all forms of asbestos, as the government contended, or only some, as Grace argued. Grace's approach would have excluded winchite and richterite, which accounted for about 95 percent of the asbestos in the vermiculite.

Clean Air Act

The criminal provision in the Clean Air Act refers only to ``asbestos,'' along with a reference number for a registry run by the American Chemical Society. That registry adopts the broader definition of asbestos, one that the Bush administration said has been established ``for decades.''

Grace pointed to a narrower definition adopted by the Environment Protection Agency in emissions standards the agency established to implement the clean-air law.

The San Francisco-based 9th U.S. Circuit Court of Appeals sided with prosecutors, throwing out a trial judge's ruling in favor of the company.

Asbestos-injury claims forced Grace to file for bankruptcy protection in 2001. In April the company agreed to pay as much as $1.8 billion to settle remaining claims.

In May, Grace won an appeals court ruling blocking prosecutors from adding to their list of 233 prosecution witnesses. The two appeals have delayed the trial, once scheduled to begin in September 2006 before U.S. District Judge Donald Molloy in Missoula, Montana.

Grace makes specialty chemicals, including catalysts used by petroleum refiners and silica-based materials used in industrial and consumer products. The company also makes sealants and coatings for the construction and food-packaging industries.

The case is W.R. Grace & Co. v. United States, 07-1286.

To contact the reporters on this story: Greg Stohr in Washington at gstohr@bloomberg.net; Bob Van Voris in New York at rvanvoris@bloomberg.net.

Last Updated: June 23, 2008 15:11 EDT