Alcoa affiliate to pay $384M, pleads guilty in bribery case; $2.3 billion 4Q loss
By John D. Oravecz
Published: Thursday, Jan. 9, 2014, 10:24 a.m.
A joint venture controlled by Alcoa Inc. pleaded guilty on Thursday to a criminal charge and agreed to pay $384 million in penalties to end investigations by the Department of Justice and the Securities and Exchange Commission of bribery allegations made by a Bahraini aluminum maker.
The guilty plea involved violations of the Foreign Corrupt Practices Act of 1977, which was written to stop kickbacks by American companies to public and private officials overseas.
Jeffrey Heeter, an Alcoa World Alumina official, entered the guilty plea before U.S. District Court Judge Donetta Ambrose, who imposed a sentence of four years of probation in addition to the fines. Heeter declined to comment afterward.
Alcoa World Alumina is owned by Alcoa and Alumina Ltd. of Australia, a separate company.
U.S. Attorney David Hickton said the settlement ends the prosecution of Alcoa World Alumina, but not the criminal investigation of individuals connected to the bribery. He said the probe involves offshore bank accounts in Switzerland, Luxembourg, Liechtenstein and Guernsey.
“This is a complex investigation with thousands of documents,” he said, declining to comment further.
Alcoa employs about 2,000 in Western Pennsylvania. Its executive offices are in New York.
The criminal charges are related to a civil lawsuit filed in 2008 by Aluminium Bahrain BSC, known as Alba.
Alba contended that Alcoa affiliates controlled by London billionaire businessman Victor Dahdaleh bribed Bahraini officials and Alba executives, resulting in Alba's overpaying $420 million for raw materials, including alumina, from 1997 to 2009. The government has traced about $50 million in payments to Bahraini officials.
Dahdaleh has denied the charges.
Alain J.P. Belda was Alcoa's CEO from 1999 to 2008 when most of the conduct in question occurred. Alcoa said there are no allegations that “anyone at Alcoa Inc. knowingly engaged in the conduct at issue.”
Alcoa in October 2012 agreed to pay $85 million to settle the civil lawsuit filed by Aluminium Bahrain.
Alcoa's cooperation in the settlement and its financial condition were important factors in reducing potential penalties, the government said in court papers. The aluminum maker's business and reputation, if damaged at all, will recover quickly, anti-corruption experts said.
Alcoa World Alumina agreed to pay a fine of $209 million and forfeit $14 million to the Internal Revenue Service as part of the Justice Department settlement. Federal guidelines indicated a fine in the range of $446 million to $892 million.
“Alcoa had to be punished in some way, but it was substantially less than the guidelines, and the Justice Department went out of its way to say Alcoa cooperated,” said Lloyd T. O'Carroll, aluminum industry analyst with Davenport & Co. LLC in Richmond, Va.
When such allegations surface, they tarnish reputations whether they are valid or not, O'Carroll said.
“Maybe they should have known, but there's no evidence,” he said. “I don't see anybody not doing business with Alcoa or a government saying it doesn't want them there because of this.”
Attorney Dan Newcomb, who heads an anti-corruption practice at Shearman & Sterling in New York, said, “These kinds of things are rarely fatal to a company. The worst impact is at the time of the announcement of the allegations, not at the time of their resolution.
“Generally, resolutions result in the stock increasing, or doing better relative to their peers, because the problem is behind them.”
Alcoa shares closed at $10.65, down 18 cents.
The Justice Department said Alcoa's cooperation included appointing a special committee to investigate, providing documents and making employees available for interview. It hired senior legal and ethics and compliance officers, implemented reviews of third-party agents and consultants, and enhanced anti-corruption compliance procedure.
In addition to the SEC settlement, Alcoa World Alumina agreed to pay $161 million to settle civil charges by the SEC related to the anti-bribery and other provisions of the act.
Alcoa said it will pick up 85 percent of the costs of the investigations. In the second quarter of 2013, Alcoa recorded a $103 million expense for the investigations.
Under the settlement with the Justice Department, Alcoa World Alumina will pay the $209 million fine in five equal installments over four years.
Alcoa reported a fourth-quarter loss of $2.3 billion, or $2.19 per share, which included a $288 million expense for all costs from the investigations, and a $1.7 billion write-down of smelter acquisitions at Alumax and Reynolds Metals more than a decade ago.
CEO Klaus Kleinfeld called them “decisive actions” in his continuing restructuring of the company.
The loss compared with a profit of $242 million, or 21 cents a share, a year ago.
John D. Oravecz is a staff writer for Trib Total Media. He can be reached at 412-320-7882 or email@example.com. Staff writer Brian Bowling contributed to this report.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Wages have soared in Pittsburgh, but economy appears to have stalled
- Emboldened by Italy move, QVC to expand into France
- Facebook feature lets users locate nearby pals
- PPG shareholders vote against proposals; sales, profit see double-digit increases
- Former BP employee settles insider-trading charges
- Target expands subscription service tenfold
- Secret Service close to understanding Target data breach
- Applications for jobless aid edge up
- Wal-Mart rolls out money transfer service
- Judge won’t order recalled GM cars to be parked
- NBA player plans Russia’s 1st Hooters