Alcoa 2013 Annual Report Download - page 133

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 $1,000. 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.
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 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, and all claims against the Alcoa Parties were dismissed with prejudice. On October 9, 2013 pursuant
to the settlement agreement, AWA paid the remaining $42.5. Based on the settlement agreement, in the 2012 third
quarter, Alcoa recorded a $40 charge in addition to the $45 charge it recorded in the 2012 second quarter in respect of
the suit (see Agreement with Alumina Limited below).
Government Investigations. On February 26, 2008, Alcoa Inc. advised the Department of Justice (“DOJ”) and the
Securities and Exchange Commission (“SEC”) that it had recently become aware of the claims by Alba as alleged in
the Alba civil suit, had already begun an internal investigation and intended to cooperate fully in any investigation that
the DOJ or the SEC may commence. On March 17, 2008, the DOJ notified Alcoa that it had opened a formal
investigation. The SEC subsequently commenced a concurrent investigation. Alcoa has been cooperating with the
government since that time.
In the past year, Alcoa had been seeking settlements of both investigations. In the second quarter of 2013, Alcoa
proposed to settle the DOJ matter by offering the DOJ a cash payment of $103. Based on this offer, Alcoa recorded a
charge of $103 in the 2013 second quarter. Also in the second quarter of 2013, Alcoa exchanged settlement offers with
the SEC. However, the SEC staff rejected Alcoa’s offer of $60 and no charge was recorded. During the remainder of
2013, settlement discussions with both the DOJ and the SEC continued.
On January 9, 2014, Alcoa resolved the investigations by the DOJ and the SEC. The settlement with the DOJ was
reached with AWA. Under the terms of a plea agreement entered into with the DOJ, effective January 9, 2014, AWA
pled guilty to one count of violating the anti-bribery provisions of the Foreign Corrupt Practices Act of 1977, as
amended (the “FCPA”). As part of the DOJ resolution, AWA agreed to pay a total of $223, including a fine of $209
payable in five equal installments over four years. The first installment of $41.8, plus a one-time administrative
forfeiture of $14, will be paid in the first quarter of 2014 (paid on January 22, 2014), and the remaining installments of
$41.8 each will be paid in the first quarters of 2015-2018. The DOJ is bringing no case against Alcoa Inc.
Effective January 9, 2014, the Company also settled civil charges filed by the SEC in an administrative proceeding
relating to the anti-bribery, internal controls, and books and records provisions of the FCPA. Under the terms of the
settlement with the SEC, the Company agreed to a settlement amount of $175, but will be given credit for the $14 one-
time forfeiture payment, which is part of the DOJ resolution, resulting in a total cash payment to the SEC of $161
payable in five equal installments over four years. The first installment of $32.2 will be paid to the SEC in the first
quarter of 2014 (paid on January 22, 2014), and the remaining installments of $32.2 each will be paid in the first
quarters of 2015-2018.
There was no allegation in the filings by the DOJ and there was no finding by the SEC that anyone at Alcoa Inc.
knowingly engaged in the conduct at issue.
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