Alcoa 2012 Annual Report Download - page 51

retiree benefits are vested subject to an annual cap and an injunction preventing Alcoa, prior to 2017, from modifying
the plan design to which plaintiffs are subject or changing the premiums and deductibles that plaintiffs must pay. Also
on March 23, 2011, plaintiffs filed a motion for award of attorneys’ fees and expenses. Alcoa filed its opposition to
both motions on April 11, 2011. On June 11, 2012, the court issued its memorandum and order denying plaintiffs’
motion for clarification and/or amendment to the original judgment order. On July 6, 2012, plaintiffs filed a notice of
appeal of the court’s March 9, 2011 judgment. On July 12, 2012, the trial court stayed Alcoa’s motion for assessment
of costs pending resolution of plaintiffs’ appeal. The appeal is docketed in the United States Court of Appeals for the
Sixth Circuit as case number 12-5801. On August 29, 2012, the trial court dismissed plaintiffs’ motion for attorneys’
fees without prejudice to refiling the motion following the resolution of the appeal at the Sixth Circuit Court of
Appeals. Briefing on the appeal is complete and oral argument is scheduled for March 6, 2013.
Alba Civil Suit
As previously reported, on February 27, 2008, Alcoa Inc. (Alcoa) received notice that Aluminium Bahrain B.S.C.
(Alba) had filed suit against Alcoa, AWA, and William Rice (collectively, the Alcoa Parties), and others, in the U.S.
District Court for the Western District of Pennsylvania (the Court), Civil Action number 08-299, styled Aluminium
Bahrain B.S.C. v. Alcoa Inc., Alcoa World Alumina LLC, William Rice, and Victor Phillip Dahdaleh. The complaint
alleged that certain Alcoa entities and their agents, including Victor Phillip Dahdaleh, had engaged in a conspiracy over
a period of 15 years to defraud Alba. The complaint further alleged that Alcoa and its employees or agents (1) illegally
bribed officials of the government of Bahrain and/or officers of Alba in order to force Alba to purchase alumina at
excessively high prices, (2) illegally bribed officials of the government of Bahrain and/or officers of Alba and issued
threats in order to pressure Alba to enter into an agreement by which Alcoa would purchase an equity interest in Alba,
and (3) assigned portions of existing supply contracts between Alcoa and Alba for the sole purpose of facilitating
alleged bribes and unlawful commissions. The complaint alleged that Alcoa and the other defendants violated the
Racketeer Influenced and Corrupt Organizations Act (RICO) and committed fraud. Alba claimed damages in excess of
$1 billion. Alba’s complaint sought treble damages with respect to its RICO claims; compensatory, consequential,
exemplary, and punitive damages; rescission of the 2005 alumina supply contract; and attorneys’ fees and costs.
In response to a motion filed by the U.S. Department of Justice (DOJ) on March 27, 2008 (see Government
Investigations below), the Court ordered the Alba civil suit administratively closed and stayed all discovery to allow
the DOJ to fully conduct an investigation. On November 8, 2011, at Alcoa’s request, the Court removed the case from
administrative stay and ordered Alba to file an Amended Complaint by November 28, 2011, and a RICO Case
Statement 30 days thereafter for the limited purpose of allowing Alcoa to move to dismiss Alba’s lawsuit. Alcoa filed a
motion to dismiss, which was denied on June 11, 2012.
During the second quarter of 2012, Alcoa proposed to settle the suit by offering Alba a cash payment of $45 million.
Alcoa also offered Alba a long-term alumina supply contract. Based on the cash offer, Alcoa recorded a $45 million
($18 million after-tax and noncontrolling interest) charge in the 2012 second quarter representing Alcoa’s estimate of
the minimum end of the range probable to settle the case, and estimated an additional reasonably possible charge of up
to $75 million to settle the suit.
On October 9, 2012, the Alcoa Parties, without admitting any liability, entered into a settlement agreement with Alba.
The agreement called for AWA to pay Alba $85 million in two equal installments, one-half at time of settlement and
one-half one year later, and for the case against the Alcoa Parties to be dismissed with prejudice. Additionally, AWA
and Alba entered into a long-term alumina supply agreement. On October 9, 2012, pursuant to the settlement
agreement, AWA paid Alba $42.5 million, and all claims against the Alcoa Parties were dismissed with prejudice.
Under the agreement, AWA is obligated to pay an additional $42.5 million, without interest or contingency, on
October 9, 2013. Based on the settlement agreement, in the 2012 third quarter, Alcoa recorded a $40 million ($15
million after-tax and noncontrolling interest) charge in addition to the $45 million ($18 million after-tax and
noncontrolling interest) charge it recorded in the 2012 second quarter in respect of the suit. In addition, based on an
agreement between Alcoa and Alumina Limited (which holds a 40% equity interest in AWA), Alcoa estimates an
additional reasonably possible after-tax charge of between $25 million to $30 million to reallocate a portion of the
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