Alcoa faces accusations of bribery in Bahrain, according to a lawsuit
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From its Pittsburgh headquarters over the last two decades, Alcoa directed the bribery of Bahraini officials and business leaders, which resulted in $400 million in profits for the global aluminum giant, according to a private racketeering suit filed by Aluminum Bahrain, or Alba.
A federal judge denied Alcoa's motion to dismiss the claim last week, meaning the case remains active, for now.
The case, which claims that Alcoa paid millions in bribes to officials and executives in the Middle Eastern nation of Bahrain to secure windfall profits, went on hiatus shortly after it was first filed in 2008 because the U.S. Department of Justice intervened, saying that it was pursuing a related criminal investigation.
"A decision on a motion to dismiss is not a ruling on the merits of the case, and we look forward to presenting the facts relating to Alba's allegations and to vigorously defending our position as this litigation unfolds," Lori Lecker, an Alcoa spokeswoman, said. Alcoa is represented by K&L Gates in Pittsburgh.
Previously,an Alcoa spokesman told the Pittsburgh Post-Gazette that, "Alba's amended complaint is a patchwork of claims about the alleged misdeeds of Victor Dahdaleh and Bahraini officials ... The vague allegations against Alcoa personnel amount to no more than a series of guesses and overdrawn inferences. Alcoa has always been a company committed to the highest standards of business conduct."
Alba alleges that the company conspired with Mr. Dahdaleh, a citizen of Canada and the United Kingdom who owned a company called Alumet Limited, and used its Australian subsidiary to overcharge Alba for the raw material used to make aluminum, called alumina, for decades.
Although Alcoa argued the allegations were against "an enterprise which is 'essentially foreign,' " U.S. District Judge Donetta Ambrose of the Western District of Pennsylvania said in her opinion, "I disagree."
The company argued that if the business is foreign, then the Racketeer Influenced and Corrupt Organizations Act would not properly apply.
Alba "alleges that Alcoa, through Alcoa of Australia, paid Dahdaleh and Alumet Limited more than $13.5 million in 'commissions,'" Judge Ambrose said. "Alba alleges that these 'commissions,' paid by Alcoa through the subsidiary that it directed and controlled, were made to compensate Dahdaleh for facilitating the payment of bribes to senior officials ... all of these decisions and directions were happening in Pittsburgh."
Mr. Dahdaleh had no experience in the alumina trade before he became involved with Alcoa, so, at the outset of the scheme in 1990, he "added no legitimate economic value to the transactions in which he was involved," Alba alleged in the RICO case statement it filed with the court last December.
Mr. Dahdaleh then established "a series of offshore shell companies" to pose as subsidiaries of Alcoa, court papers alleged.
"The true purpose and role of these shell companies in the defendants' criminal scheme was to purchase alumina from Alcoa at market rates and then re-sell the very same alumina to Alba at inflated prices," the statement alleged. Those companies were also used to funnel bribes to members of the Bahrain government, which owns a majority stake in Alba, it was alleged in the statement.
When the Justice Department intervened in 2008, it said in a 19-page motion: "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."
It went on to explain that the department's fraud section had begun investigating Alcoa and related entities with regard to Alba.
Late last year, Alcoa moved to reopen the civil case, saying, "In the three years since the court's March 27, 2008, order, the Alcoa defendants have cooperated in the DOJ's investigation and a related investigation by the SEC."
Neither the Justice Department nor the Securities and Exchange Commission would comment on the status of the investigation.
"Alba has exhaustively alleged that the defendants' fraudulent scheme caused it to enter into commercially unreasonable alumina purchase agreements that resulted in overpayments to the defendants in excess of $400 million," Judge Ambrose wrote.
"The trial court's ruling vindicates our claims," said Alba's lawyer, Charles Gibbons of Buchanan Ingersoll & Rooney in Pittsburgh.
He called the opinion a "very, very good beginning" to a "very long road."
First Published June 18, 2012 12:00 am