Market Scan
March 21, 2008
Ruthie Ackerman
Bribery allegations against corporations are commonplace. But those against Alcoa are a bit different since the company that allegedly took the bribe is claiming it's a "victim" of the scheme and seeking $1 billion in damages in a federal lawsuit.
Now The U.S. Justice Department is in on it, beginning its own criminal investigation into whether the world’s third-largest aluminum maker participated in bribery in the Persian Gulf state of Bahrain.
In documents filed Thursday in U.S. District Court, federal prosecutors asked a judge to halt a federal civil lawsuit that accused Pittsburgh-based Alcoa of bribing officials through overseas shell companies to secure hundreds of millions of dollars in over-payments.
Aluminum Bahrain, also known as Alba, and Alcoa did not object to the government's request to temporarily halt the civil proceedings, according to court documents.
“The United States has a direct and substantial interest in this case, as the subject matter giving rise to this case is also the subject of an ongoing federal criminal investigation,” prosecutors in the Justice Department's fraud section said in court filings.
The former chief of Fraud at the Department of Justice Josh Hochberg said that it is highly unusual for the Department of Justice to confirm it is conducting an investigation into a case that is pending.
The Bahrain government holds a 77.0% stake in Alba and is seeking more than $1 billion in damages from Alcoa and other affiliated defendants, according to the federal lawsuit filed by Alba in February.
Alba has been a customer of Alcoa for 30 years and buys most of its alumina, a material used to make aluminum, from Alcoa and its affiliated companies.
Alba, which operates one of the world's largest aluminum smelters, also sued Alcoa World Alumina, a global joint venture 60% owned by Alcoa and 40% owned by Australia's Alumina. The lawsuit also named William Rice, an Alcoa World Alumina executive, and Victor Dahdaleh, a Canadian citizen who has acted as an agent for Alcoa and Alcoa World Alumina.
Alba alleges Alcoa bribed one or more former senior officials of Alba and the Bahrain government to persuade the company to cede a controlling interest in the company to Alcoa and to pay inflated prices for alumina.
The lawsuit claims the bribery began 15 years ago, but was not found out until last year.
Alba approached Alcoa about the allegations in February and gave the company two weeks to settle the matter. Even though the two weeks “wasn’t enough time” Lowery said the company didn’t find any wrongdoing by Alcoa or any of its employees.
“Then they filed lawsuit,” Lowery said. “In the interim we continued to review the allegations and we still have yet to find any instance of wrongdoing.”
Lowery said Alcoa agreed to cooperate fully with the DOJ investigation. “We see this as an opportunity to bring a speedy resolution to the entire matter,” Lowery said.
Hochberg said the DOJ traditionally holds the company responsible for the behavior of their employees and agents, especially those of higher ups.
He says the U.S. only prosecutes the bribe payer; it doesn’t take action against the corrupt foreign official. “The interesting fact here is that the country of the bribe receiver is claiming it was damaged,” he said.
The penalties for bribery have been increasing, Hochberg said, with recent penalties reaching as high as $30 million. Usually the DOJ settles with the company and the illicitly-obtained profits are treated as a fine. But this situation is different, Hochberg said, because Bahrain is saying it’s a “victim” and is suing for $1 billion in damages, much greater than the DOJ has obtained in previous cases.
The Associated Press contributed to this article.