Smelter's RICO Suit Paved Way for Alcoa Bribery Deal
As part of a $384 million settlement with U.S. regulators on Thursday, a unit of the aluminum producer Alcoa Inc. admitted to bribing government officials in Bahrain in violation of the Foreign Corrupt Practices Act. The settlement is something of a vindication for a company called Aluminum Bahrain B.S.C. and its lawyers at Akin Gump Strauss Hauer & Feld, who beat prosecutors to the punch with a lawsuit over the same conduct—and won a hefty settlement of their own in 2012.
At a hearing on Thursday in U.S. district court in Pittsburgh, an Alcoa subsidiary called Alcoa World Alumina LLC pleaded guilty to violating the FCPA's antibribery provisions through a 2004 transaction. The Alcoa unit will pay a $209 million criminal fine to the U.S. Department of Justice and will make a $14 million criminal forfeiture payment to the Internal Revenue Service. The company will also pay $161 million to resolve civil charges filed by the U.S. Securities and Exchange Commission.
Evan Chesler of Cravath, Swaine & Moore represented Alcoa, along with cocounsel at Dechert.
The DOJ and SEC didn't indict Alcoa World Alumina. Instead, prosecutors filed a 25-page criminal information against the Alcoa subsidiary. The filing alleges a long-running bribery scheme in which the Alcoa entity paid "tens of millions of dollars" through a London-based middleman to members of the Bahraini royal family. In exchange, Alcoa allegedly got mark-ups on a raw-materials supply contract with Aluminum Bahrain ("Alba"), an aluminum smelting company owned primarily by the Bahraini royals.
It was Alba that first accused Alcoa of bribery, suing the company for fraud and racketeering in U.S. district court in Pittsburgh in 2008. Alba named as a codefendant Victor Dahdaleh, the London-based billionaire accused of acting as a middleman in the bribery scheme. A few weeks after Alba filed its suit, the DOJ secured a stay in the private civil case so that it could pursue a criminal probe into the allegations.
Judge Donetta Ambrose finally lifted that stay in November 2011. Alcoa's defense lawyers at Cravath and K&L Gates lost a motion to dismiss in June 2012, as we reported here. Alcoa agreed to settle Alba's case in October 2012 in a deal valued at $447 million. (The settlement included an $85 million cash payment on top of credits for Alba, a major purchaser of Alcoa alumina.) Alba's legal team was led by Mark MacDougall and W. Randolph Teslik in Akin Gump's Washington, D.C., office.
Alba's racketeering claims are still pending against Dahdaleh, who's represented in the Pittsburgh case by Williams & Connolly. The billionaire got good news in December, when the United Kingdom's Serious Fraud Office dropped a criminal bribery case against him related to his dealings with Alcoa. As we explained here, the case unraveled after Akin Gump attorneys refused to testify as part of the government's case, citing conflicts of interest.