Alcoa 2013 Annual Report Download - page 134

Based on the resolutions with both the DOJ and SEC, in the 2013 fourth quarter, Alcoa recorded a $288 charge, which
includes legal costs of $7, in addition to the $103 charge it recorded in the 2013 second quarter in respect of the
investigations (see Agreement with Alumina Limited below).
Agreement with Alumina Limited. AWA is a U.S.-based Alcoa World Alumina and Chemicals (“AWAC”) company
organized under the laws of Delaware that owns, directly or indirectly, alumina refineries and bauxite mines in the
Atlantic region. AWAC is an unincorporated global bauxite mining and alumina refining venture between Alcoa and
Alumina Limited. AWAC consists of a number of affiliated operating entities, including AWA, which own or operate
bauxite mines and alumina refineries in seven countries. Alcoa owns 60% and Alumina Limited owns 40% of these
individual entities, which are consolidated by the Company for financial reporting purposes.
In October 2012, Alcoa and Alumina Limited entered into an agreement to allocate the costs of the Alba civil
settlement and all legal fees associated with this matter (including the government investigations discussed above)
between Alcoa and Alumina Limited on an 85% and 15% basis, respectively, but this would occur only if a settlement
is reached with the DOJ and the SEC regarding their investigations. As such, the $85 civil settlement in 2012 and all
legal costs associated with the civil suit and government investigations incurred prior to 2013 were allocated on a 60%
and 40% basis in the respective periods on Alcoa’s Statement of Consolidated Operations. As a result of the resolutions
of the government investigations, the $384 charge and legal costs incurred in 2013 were allocated on an 85% and 15%
basis per the allocation agreement with Alumina Limited. Additionally, the $85 civil settlement from 2012 and all legal
costs associated with the civil suit and government investigations incurred prior to 2013 were reallocated on the 85%
and 15% basis. The following table details the activity related to the Alba matter:
2013 2012
Alcoa
Alumina
Limited Total Alcoa
Alumina
Limited Total
Government investigations(1) $326 $ 58 $384 $ - $ - $ -
Civil suit(1) ---513485
Reallocation of civil suit 21 (21) - - - -
Reallocation of legal costs 20 (20) - - - -
Loss before income taxes 367 17 384 51 34 85
Benefit for income taxes 66 - 66 18 - 18
Net loss(2) $301 $ 17 $318 $33 $34 $67
(1) The amount in the Total column was recorded in Restructuring and other charges (see Note D).
(2) In 2013 and 2012, the amount for Alcoa was included in Net (loss) income attributable to Alcoa, and the amount
for Alumina Limited was included in Net income (loss) attributable to noncontrolling interests.
Other Matters
In November 2006, in Curtis v. Alcoa Inc., Civil Action No. 3:06cv448 (E.D. Tenn.), a class action was filed by
plaintiffs representing approximately 13,000 retired former employees of Alcoa or Reynolds Metals Company and
spouses and dependents of such retirees alleging violation of the Employee Retirement Income Security Act (ERISA)
and the Labor-Management Relations Act by requiring plaintiffs, beginning January 1, 2007, to pay health insurance
premiums and increased co-payments and co-insurance for certain medical procedures and prescription drugs.
Plaintiffs alleged these changes to their retiree health care plans violated their rights to vested health care benefits.
Plaintiffs additionally alleged that Alcoa had breached its fiduciary duty to plaintiffs under ERISA by misrepresenting
to them that their health benefits would never change. Plaintiffs sought injunctive and declaratory relief, back payment
of benefits, and attorneys’ fees. Alcoa had consented to treatment of plaintiffs’ claims as a class action. During the
fourth quarter of 2007, following briefing and argument, the court ordered consolidation of the plaintiffs’ motion for
preliminary injunction with trial, certified a plaintiff class, and bifurcated and stayed the plaintiffs’ breach of fiduciary
duty claims. Trial in the matter was held over eight days commencing September 22, 2009 and ending on October 1,
2009 in federal court in Knoxville, TN before the Honorable Thomas Phillips, U.S. District Court Judge.
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