Pittsburgh Post-Gazette
March 22, 2008
Len Boselovic
Alcoa said yesterday it will cooperate with a federal criminal investigation of whether it violated bribery and racketeering laws in its dealings with a Bahrainian aluminum producer.
U.S. Justice Department attorneys filed papers in federal court Downtown late Thursday asking that a civil lawsuit filed against Alcoa be put on hold while their investigation continues.
The lawsuit was filed in Pittsburgh Feb. 27 by Aluminium Bahrain, which is 77 percent owned by the Bahrain government. Alcoa affiliates supply the company, also known as Alba, with alumina, the raw material used to produce aluminum. The commodity was provided through companies controlled by Victor Dahdaleh, a resident of the United Kingdom who was among those Alba named as a defendant.
Alba is seeking unspecified millions of dollars in damages. It alleges that Alcoa and its officers committed mail and wire fraud and violated the Foreign Corrupt Practices Act and racketeering laws. Alba sold alumina through Mr. Dahdaleh's companies "for the purpose of facilitating bribes to Alba officials that resulted in Alba paying excessive prices for alumina," according to the lawsuit.
The company also alleged Bahrain government officials were bribed to put pressure on the government to sell a controlling stake in Alba to Alcoa. Bahrain cancelled the sale after concluding Alcoa was offering $400 million less than the stake was worth.
"The subject matter giving rise to this case is also the subject of an ongoing federal criminal investigation," Steven A. Tyrrell, chief of the Justice Department's fraud section, said in a 17-page statement filed with the court.
The papers were filed after the market closed Thursday. Alcoa shares ended the week at $34.68, down $3.71 for the week and $1.87 for the year.
Alcoa spokesman Kevin Lowery said the company will cooperate with the Justice Department, seeing it "as a way to bring a speedy resolution to the entire matter." When the civil complaint was filed three weeks ago, Mr. Lowery said Alcoa was unaware of any wrongdoing by the company or its employees.
Alcoa has informed the Securities and Exchange Commission of the criminal probe, Mr. Lowery said.
Alba and Alcoa have agreed to delay proceedings in the civil lawsuit pending the outcome of the criminal probe.
The Justice Department has stepped up enforcement of the Foreign Corrupt Practices Act in recent years, according to Joshua R. Hochberg, a partner with McKenna Long & Aldridge in Washington, D.C., and former head of the Justice Department's fraud unit. Mr. Hochberg said the investigations can take two or three years as evidence is collected from overseas sources, including bank accounts protected by privacy laws.
"This one may go a lot quicker because the government of Bahrain has a lot of information," he said.
Mr. Hochberg said the Justice Department typically levies fines and orders companies to disgorge profits from transactions made possible by bribes. The fact that Alba is seeking damages on its own "may change the whole tone of how the Department of Justice handles these matters," Mr. Hochberg said.