Alcoa 2011 Annual Report Download - page 43

30 days thereafter for the limited purpose of allowing Alcoa to move to dismiss Alba’s lawsuit. Pursuant to the
November 8, 2011 order, briefing on the motion to dismiss is to be completed by March 2012. Separately, the DOJ’s
and SEC’s investigations are ongoing. While Alcoa has been engaged in dialogue with both the DOJ and SEC, it is
unable to reasonably predict an outcome or to estimate a range of reasonably possible loss with regard to any of the
governmental or private party matters discussed above, but such losses may be material in a particular period to
Alcoa’s results of operations.
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
August 7, 2009, the director and officer defendants filed an unopposed motion to coordinate the case with the
Teamsters Local #500 suit, described immediately above, in the Allegheny County Common Pleas Court. The
Allegheny County court issued its order consolidating the case on September 18, 2009. Thereafter, on October 31,
2009, the court assigned this action to the Commerce and Complex Litigation division of the Allegheny Court of
Common Pleas and on November 20, 2009, the court granted defendants’ motion to stay all proceedings in the
Philadelphia Gas action until the earlier of the court lifting the stay in the Teamsters derivative action or further order
of the court in this action. 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.
Before 2002, Alcoa purchased power in Italy in the regulated energy market and received a drawback of a portion of
the price of power under a special tariff in an amount calculated in accordance with a published resolution of the Italian
Energy Authority, Energy Authority Resolution n. 204/1999. In 2001, the Energy Authority published another
resolution, which clarified that the drawback would be calculated in the same manner, and in the same amount, in
either the regulated or unregulated market. At the beginning of 2002, Alcoa left the regulated energy market to
purchase energy in the unregulated market. Subsequently, in 2004, the Energy Authority introduced regulation no.
148/2004 which set forth a different method for calculating the special tariff that would result in a different drawback
for the regulated and unregulated markets. Alcoa challenged the new regulation in the Administrative Court of Milan
and received a favorable judgment in 2006. Following this ruling, Alcoa continued to receive the power price drawback
in accordance with the original calculation method, through 2009, when the European Commission declared all such
special tariffs to be impermissible “state aid.” In 2010 the Energy Authority appealed the 2006 ruling to the Consiglio
di Stato (final court of appeal). On December 2, 2011, the Consiglio di Stato ruled in favor of the Energy Authority and
against Alcoa, thus presenting the opportunity for the energy regulators to seek reimbursement from Alcoa of an
amount equal to the difference between the actual drawback amounts received over the relevant time period, and the
drawback as it would have been calculated in accordance with regulation 148/2004. Any such reimbursement would
have to be made by way of a separate claim to Alcoa from the energy authorities and, thus far, no such claim has been
presented. At this time, the company is unable to reasonably predict an outcome for this matter.
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