Alcoa 2013 Annual Report Download - page 53

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.
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. On
October 9, 2013, pursuant to the settlement agreement, AWA paid the remaining $42.5 million. Based on the
settlement agreement, in the 2012 third quarter, Alcoa recorded a $40 million charge in addition to the $45 million
charge it recorded in the 2012 second quarter in respect of the suit (see Agreement with Alumina Limited).
Government Investigations
As previously reported, 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.
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 million, including a fine of
$209 million payable in five equal installments over four years. The first installment of $41.8 million, plus a one-time
administrative forfeiture of $14 million, was paid on January 22, 2014, and the remaining installments of $41.8 million
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 million, but will be given credit for the
$14 million one-time forfeiture payment, which is part of the DOJ resolution, resulting in a total cash payment to the
SEC of $161 million payable in five equal installments over four years. The first installment of $32.2 million was paid
to the SEC on January 22, 2014, and the remaining installments of $32.2 million 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.
Agreement with Alumina Limited
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)
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