Alcoa unit pleads guilty to Bahrain bribery – by Joe Mankak (USA Today – January 9, 2014)

PITTSBURGH (AP) — A subsidiary of Alcoa pleaded guilty Thursday and, along with the parent company, will pay a total of $384 million in penalties for bribing officials in the kingdom of Bahrain through a London-based middleman.

A company official on Thursday entered the plea on behalf of Alcoa World Alumina, which will pay $223 million in fines and criminal penalties for violating the anti-bribery provisions of the Foreign Corrupt Practices Act. The law governs the conduct of American businesses abroad.

Parent company Alcoa must guarantee those payments and on Thursday also agreed to a separate $161 million civil penalty for related Securities and Exchange Commission violations. “Alcoa lacked sufficient internal controls to prevent and detect the bribes, which were improperly recorded in Alcoa’s books and records as legitimate commissions or sales to a distributor,” the SEC said in a news release.

The U.S. Justice Department said Alcoa World Alumina earned $446 million in profits by using the middleman to cut a long-term deal to sell raw materials to Aluminum Bahrain BSC, through other affiliated companies, including Alcoa of Australia. The criminal conduct occurred from 2004 to 2009.

Aluminum Bahrain, also known as Alba, is a government-controlled aluminum manufacturer in the Middle Eastern country.

Federal prosecutors began investigating the transactions in 2008, when Alba filed a federal lawsuit accusing Alcoa and affiliated companies controlled by the alleged middleman — London billionaire Victor Dahdaleh — of paying $9.5 million in bribes to Bahrain officials and Alba executives. That resulted in Alba overpaying for raw materials, the lawsuit alleged.

When Alba amended its lawsuit in July 2011, Alcoa called it “a patchwork of claims about the alleged misdeeds of Victor Dahdaleh and Bahraini officials. The vague allegations against Alcoa personnel amount to no more than a series of guesses and overdrawn inferences.”

Fifteen months later, Alcoa settled all claims against it by Alba for $85 million, meaning Alcoa will have paid $469 million in criminal fines, civil penalties and settlements for the Alba transactions. Alcoa and its subsidiary will pay the $384 million in penalties imposed Thursday in five installments over four years to lessen the financial impact on the companies and Alcoa shareholders.

Meanwhile, Alba’s lawsuit is proceeding against Dahdaleh and others, as is the government’s criminal investigation.

Dahdaleh’s attorney, David Kendall, declined to comment on the federal investigation, but he told The Associated Press that last month Dahdaleh “was found not guilty on all counts in London of allegations regarding payments in Bahrain.”

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