Alcoa 2010 Annual Report Download - page 46

and therefore no state aid is present in the tariff system. While Alcoa does not believe that an unfavorable decision is
probable, management has estimated that the total potential impact from an unfavorable decision could be in the range
of $50 to $100 million (€40 to €70 million) pretax. Also, while Alcoa believes that any additional cost would only be
assessed for the year 2005, it is possible that the EC could extend its investigation to later years. A decision by the EC
is expected in 2011. If the EC’s investigation concludes that the regulated electricity tariffs for industries are unlawful,
Alcoa will have an opportunity to challenge the decision in the EU courts.
As previously reported, on February 27, 2008, Alcoa Inc. received notice that Aluminium Bahrain B.S.C. (Alba) had
filed suit against Alcoa Inc. and AWA (collectively, “Alcoa”), 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 alleges that certain Alcoa
entities and their agents, including Victor Phillip Dahdaleh, have engaged in a conspiracy over a period of 15 years to
defraud Alba. The complaint further alleges 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 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.
As previously reported, on July 21, 2008, the Teamsters Local #500 Severance Fund and the Southeastern Pennsylvania
Transportation Authority filed a shareholder derivative suit in the civil division of the Court of Common Pleas of
Allegheny County, Pennsylvania against certain officers and directors of Alcoa claiming breach of fiduciary duty, gross
mismanagement, and other violations. This derivative action stems from the civil litigation brought by Alba against Alcoa,
AWA, Victor Phillip Dahdaleh, and others, and the subsequent investigation of Alcoa by the DOJ and the SEC with
respect to Alba’s claims. This derivative action claims that the defendants caused or failed to prevent the matters alleged
in the Alba lawsuit. The director defendants filed a motion to dismiss on November 21, 2008. On September 3, 2009, a
hearing was held on Alcoa’s motion and, on October 12, 2009, the court issued its order denying Alcoa’s motion to
dismiss but finding that a derivative action during the conduct of the DOJ investigation and pendency of the underlying
complaint by Alba would be contrary to the interest of shareholders and, therefore, stayed the case until further order of
the court. This derivative action is in its preliminary stages and the company is unable to reasonably predict an outcome or
to estimate a range of reasonably possible loss.
As previously reported, on March 6, 2009, the Philadelphia Gas Works Retirement Fund filed a shareholder derivative
suit in the civil division of the Court of Common Pleas of Philadelphia County, Pennsylvania. This action was brought
against certain officers and directors of Alcoa claiming breach of fiduciary duty and other violations and is based on
the allegations made in the previously disclosed civil litigation brought by Alba against Alcoa, AWA, Victor Phillip
Dahdaleh, and others, and the subsequent investigation of Alcoa by the DOJ and the SEC with respect to Alba’s claims.
This derivative action claims that the defendants caused or failed to prevent the conduct alleged in the Alba lawsuit. On
38