UPDATE 3-W.R. Grace acquitted in asbestos case, shares leap

* W.R. Grace and three execs acquitted in asbestos suit

* CEO "gratified" by verdict; shares leap 36 pct (Adds lawyer's, Justice Department's statements)

By Clare Baldwin

SAN FRANCISCO, May 8 (Reuters) - A federal jury in Montana acquitted chemical company W.R. Grace & Co (GRA.N) and three of its executives on Friday on all counts in a major asbestos environmental case, sending its stock up 36 percent.

The case, which a lawyer called one of the most significant criminal environmental cases in U.S. history, was brought by the Justice Department against the company and its executives for knowingly endangering the lives of mine workers and other residents of Libby, Montana, and ignoring warnings by state agencies.

"The knowing endangerment crime is almost tantamount to a murder charge," said Tom Frongillo, a lawyer for one of the executives. "It's really a heinous charge."

"We believe that there was extraordinary overreaching by the government," said Frongillo, adding that the asbestos contamination was a civil matter that had been addressed by a government-led clean up effort years ago.

"There are situations where people may get hurt but that doesn't mean that somebody was knowingly and intentionally trying to hurt them," he said.

Grace, which is based in Columbia, Maryland, owned and operated a vermiculite mine and vermiculite processing facilities in and around Libby from 1963 to 1990. Vermiculite ore contaminated with asbestos -- a known human carcinogen -- was found nearby, according to the U.S. government.

The EPA began removing asbestos contamination in 2000 and Grace filed for bankruptcy protection from cleanup costs in 2001. The EPA filed to recover costs in 2003 and Grace agreed to pay $250 million in March 2008. The payment was the largest cash recovery under the Superfund law for cleaning up polluted sites, the Justice Department said at the time.

"We at Grace are gratified by today's verdict," Grace Chief Executive Fred Festa said in a statement.

"We always believed that Grace and its former executives had acted properly and that a jury would come to the same conclusion when confronted with the evidence," he said.

The case had been brought by the Justice Department's Environment and Natural Resources Division and the U.S. attorney for the district of Montana.

"The jury has spoken and we thank them for their service," the Justice Department said in a statement.

Vermiculite is used in many common commercial products, including attic insulation, fireproofing materials, masonry fill, and as an additive to potting soils and fertilizers.

Shares in the company, which is worth $945 million, closed 36 percent higher at $13.06. The stock has now doubled so far in 2009, after hitting a four-year low of $2.96 in November. (Reporting by Clare Baldwin in San Francisco; Additional reporting by Steve James in New York; Editing by Braden Reddall, Bernard Orr, Gary Hill)