A&O Shearman FCPA Digest | In the Matter of Alcoa Inc. (2014)

Source Documents

Foreign Official
Officials and board members of Aluminum Bahrain B.S.C. (“Alba”), whose majority shareholder is the Kingdom of Bahrain.

Nature of Business
Aloca Inc. (“Alcoa”), a Pennsylvania corporation, is a global provider of primary aluminum, fabricated aluminum, and smelter-grade alumina (the raw material that is supplied to smelters to produce aluminum). Alcoa’s publicly traded securities are registered pursuant to Section 12(b) of the Securities Exchange Act.

Influence to be Obtained
Between 1989 and 2009, two Alcoa subsidiaries—Alcoa of Australia (“AA”) and Alcoa World Alumina (“AWA”)—retained a consultant to act as a middleman for purposes of structuring an alumina supply arrangement that allowed Alcoa and its subsidiaries to mark-up the cost of alumina sold to Aluminium Bahrain B.S.C. (“Alba”), an aluminum smelter majority owned by a state holding company of the Kingdom of Bahrain.. According to the SEC, the consultant provided no legitimate services to Alcoa, but received sales commissions and mark-ups which were subsequently used to bribe Bahraini officials. As a result of the corrupt payments, from at least 1989 until 2009, Alcoa was able to secure a series of multi-year contracts with Alba, making Alba among Alcoa’s largest alumina customers.

Multiple officials and employees at Alcoa expressed concern over the use of the consultant but nevertheless approved the arrangement without conducting appropriate due diligence into the arrangement. Furthermore, according to the SEC, the sales commissions and mark-ups made pursuant to the supply

Enforcement
Shortly after Alba filed a civil suit against Alcoa in U.S. federal court in 2008, the DOJ and SEC initiated a probe into Alcoa’s activities in Bahrain. On January 9, 2014, the SEC announced that it had settled the charges against Alcoa, citing violations of the FCPA’s books-and-records and internal control provisions. As part of the settlement, Alcoa Inc. agreed to pay $175 million in disgorgement, $14 million of which was deemed satisfied by Alcoa’s forfeiture in the parallel DOJ proceedings.