Today’s Wall Street Journal reports that Aluminum Bahrain BSC (“Alba”) has filed a lawsuit in federal court in Pittsburgh accusing Alcoa of a 15-year conspiracy linked to overcharging, fraud and bribery. The suit says more than $2 billion in Alba’s payments under supply contracts passed from Bahrain to tiny companies in Singapore, Switzerland and the Isle of Guernsey, and that some of the money was then used to bribe Bahraini officials involved in granting the contracts.
Alcoa hasn’t made any comment about the suit. With 116,000 employees in 44 countries, it’s one of the world’s largest producers and managers of primary aluminum, fabricated aluminum and alumina facilities.
Alcoa’s agent. The WSJ quotes the suit as alleging that from 1990, Alcoa began assigning its supply contracts with Alba to a series of companies set up by Alcoa’s agent, a Canadian businessman of Jordanian origin named Victor Dahdaleh. “…These assignments served no legitimate business purpose and were used as a means to secretly pay bribes and unlawful commissions as part of a scheme to defraud Alba.”
FCPA violations? According to the report, the suit grew out of an investigation commissioned by Bahrain itself to uncover corruption in its state-owned enterprises. The story notes that “[i]t is highly unusual for a country to use U.S. courts to accuse an American company of bribery. The dispute is likely to put Alcoa under the microscope of the Justice Department, which has been cracking down on questionable dealings between U.S. companies and foreign officials.”
The U.S. Foreign Corrupt Practices Act prohibits both direct and indirect corrupt payments to foreign officials for the purpose of obtaining or retaining business. Indirect payments typically pass through the hands of an overseas partner or agent and then end up with the foreign official for an unlawful purpose. Most FCPA violations happen that way.
But there is no private right of action under the FCPA. That means offenses can be prosecuted only by the U.S. Department of Justice or the Securities and Exchange Commission. The DOJ’s Lay Person’s Guide to the FCPA notes, however, that “[c]onduct that violates the antibribery provisions of the FCPA may also give rise to a private cause of action for treble damages under the Racketeer Influenced and Corrupt Organizations Act (RICO), or to actions under other federal or state laws.” Fraud and misrepresentation would be among such private causes of action.
A rare lawsuit. Dan Newcomb — author of the FCPA Digest — says in the WSJ story, “The reason it’s rare for governments to accuse U.S. companies of corruption in American courts is that once you raise a question of corruption, the sovereign runs the risk they will be embarrassed by the requests of discovery from the private party.” In this case, he added,”They have to be prepared to withstand Alcoa coming back to them and saying, ‘We want to look at every other corrupt transaction you have been involved in.’ “
Alcoa Inc. trades on the NYSE under the symbol AA.
View the Wall Street Journal’s February 28, 2008 report here.