Alcoa in $384m Deal With US Authorities to Settle Bahrain Bribery Charges

Alcoa, the largest US aluminium producer, has reached a settlement with the US Securities and Exchange Commission and the US Department of Justice over charges of bribing Bahraini officials and members of the Gulf state's royal family.

Two deals worth $384m (£233m, €282m) settle criminal and civil allegations that Alcoa, and a joint venture controlled by the American firm, bribed officials of state-controlled Aluminium Bahrain (Alba) through a London-based middleman between 1989 and 2009.

The US SEC and the DOJ had pressed civil and criminal charges respectively under the Foreign Corrupt Practices Act.

The settlement with the US government was revealed on the same day that Alcoa released downbeat fourth-quarter earnings, which missed estimates owing to high inventories of rolled metal used in the aviation industry.

Staggered Payments

As part of Thursday's deals, Alcoa settled with the SEC, agreeing to pay $161m in five tranches over four years.

The DOJ struck a deal with Alcoa World Alumina, the joint venture with Australia's Alumina. The venture agreed to pay $223m in five tranches over four years.

LME Legal Action

Meanwhile, Alcoa chief executive Klaus Kleinfeld said his company had no plans to pursue legal action against the London Metal Exchange (LME), aimed at reversing reforms to its warehousing policy.

Rusal, the world's biggest aluminium producer, has dragged the LME to court, insisting the world's oldest and largest metals exchange abandon changes that increase the rate at which metal is delivered out of storage locations.

Customers have complained that the new warehousing policy has inflated physical prices and altered supplies at a time when the market is reeling under massive oversupply.

The LME's new rules are expected to come into effect in April.

"We understand where those folks are coming from," Kleinfeld said in a conference call to discuss the company's results.

"At this time, we don't have any plans to file a suit against the LME," he added.

Earlier, welcoming the resolution of the bribery scandal, Alcoa said in a statement: "There is no allegation in the filings by the DOJ and there is no finding by the SEC that anyone at Alcoa Inc knowingly engaged in the conduct at issue."

George Canellos, co-director of the SEC Enforcement Division, said in a statement: "As the beneficiary of a long-running bribery scheme perpetrated by a closely controlled subsidiary, Alcoa is liable and must be held responsible. It is critical that companies assess their supply chains and determine that their business relationships have legitimate purposes."

"Power Broker"

The announcement of the deal with US authorities came nearly a month after Britain's' Serious Fraud Office (SF) abandoned the prosecution of British-Canadian businessman Victor Dahdaleh, a prominent Labour Party donor and a "power broker" for Alcoa.

Dahdaleh had been accused of paying bribes of $67m to former managers of Alba, the world's fourth largest aluminium smelter, and to a member of Bahrain's royal family in return for contracts worth $3bn.

The SFO was forced to call of its prosecution of Dahdaleh on 10 December, after a key witness changed his evidence and after two important witnesses from the US refused to attend the London trial.