Alcoa 2009 Annual Report Download - page 117

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 alleges that Alcoa and the other defendants violated the
Racketeer Influenced and Corrupt Organizations Act (RICO) and committed fraud. Alba’s complaint seeks
compensatory, consequential, exemplary, and punitive damages, rescission of the 2005 alumina supply contract, and
attorneys’ fees and costs. Alba seeks treble damages with respect to its RICO claims.
On February 26, 2008, Alcoa Inc. had advised the U.S. Department of Justice (DOJ) and the Securities and Exchange
Commission (SEC) that it had recently become aware of these claims, 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 and Alcoa has been cooperating with the government.
In response to a motion filed by the DOJ on March 27, 2008, the Court ordered the suit filed by Alba to be
administratively closed and that all discovery be stayed to allow the DOJ to fully conduct an investigation without the
interference and distraction of ongoing civil litigation. The Court further ordered that the case will be reopened at the
close of the DOJ’s investigation. The Company is unable to reasonably predict an outcome or to estimate a range of
reasonably possible loss.
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 allege these changes to their retiree health care plans violate their rights to vested health care benefits.
Plaintiffs additionally allege that Alcoa has breached its fiduciary duty to plaintiffs under ERISA by misrepresenting to
them that their health benefits would never change. Plaintiffs seek injunctive and declaratory relief, back payment of
benefits, and attorneys’ fees. Alcoa has 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, bifurcated and stayed the plaintiffs’ breach of fiduciary duty
claims, struck the plaintiffs’ jury demand, but indicated it would use an advisory jury, and set a trial date of
September 17, 2008. In August 2008, the court set a new trial date of March 24, 2009 and, subsequently, the trial date
was moved to September 22, 2009. In June 2009, the court indicated that it would not use an advisory jury at trial. 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. At the conclusion of evidence, the
court set a post-hearing briefing schedule for submission of proposed findings of fact and conclusions of law by the
parties and for replies to the same. Post trial briefing was submitted on December 4, 2009. No schedule was set for
handing down a decision. Alcoa believes that it presented substantial evidence in support of its defenses at trial.
However, at this stage of the proceeding, the Company is unable to reasonably predict the outcome. Alcoa estimates
that, in the event of an unfavorable outcome, the maximum exposure would be an additional postretirement benefit
liability of approximately $300 and approximately $40 of expense (includes an interest cost component) annually, on
average, for the next 11 years.
In addition to the litigation discussed above, various other lawsuits, claims, and proceedings have been or may be
instituted or asserted against Alcoa, including those pertaining to environmental, product liability, and safety and health
matters. While the amounts claimed may be substantial, the ultimate liability cannot now be determined because of the
considerable uncertainties that exist. Therefore, it is possible that the Company’s financial position, liquidity, or results
of operations in a particular period could be materially affected by certain contingencies. However, based on facts
currently available, management believes that the disposition of matters that are pending or asserted will not have a
material adverse effect, individually or in the aggregate, on the financial position, liquidity, or the results of operations
of the Company.
109