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Alcoa settles federal bribery lawsuit for $85M

| Tuesday, Oct. 9, 2012, 12:00 p.m.

Alcoa Inc. said on Tuesday it agreed to an $85 million settlement of a bribery lawsuit filed by a Bahrainian aluminum maker, resolving a case filed in federal court in Pittsburgh four years ago.

Aluminium Bahrain BSC, known as Alba, estimated the total value of the settlement at $447 million, which includes a new long-term sales agreement for alumina — the primary raw material for aluminum —with Alcoa.

“This is an historic day in our long campaign to recover losses suffered by Alba over more than 20 years,” Alba's Chairman Mahmood Hashim Al-Kooheji said in a prepared statement.

Alba originally sought more than $1 billion in damages for bribes it said Alcoa and its agents paid to company executives and Bahrainian government officials.

Alcoa, based in New York with technical and operations centers in Pittsburgh, called the settlement “the best possible outcome,” and said it avoids the time and expense of complex litigation.

Alcoa, saying it isn't admitting liability, took a $40 million charge against earnings related to the case in the three-month period that ended Sept. 30, in addition to $45 million in the previous three-month period. The settlement was reached hours before Alcoa reported third-quarter results. Its shares closed at $9.13, up a penny.

Alcoa said half of the $85 million has been paid and Alba will get the rest in a year.

Pittsburgh attorney Charles B. Gibbons, who represented Alba, said a move to settle the case accelerated after U.S. District Judge Donetta Ambrose rejected Alcoa's motions to dismiss the case in June.

“The Alba folks would say that's when the settlement discussions got serious,” Gibbons said, saying the company wouldn't elaborate on details beyond its statement.

The Bahrain government-controlled Alba sued Alcoa in February 2008, claiming that Alcoa reaped more than $400 million in illegal profits by overcharging for alumina, and that part of the money went to bribes for Alba senior executives.

The world's fourth-largest aluminum smelter claimed its racketeering and fraud lawsuit was the first case brought by a foreign business in a U.S. court to recover losses from allegations of corrupt activity by an American company or individuals.

In addition to Alcoa, the lawsuit named as defendants Victor Dahdaleh, an Alcoa agent in Bahrain, and William Rice, an executive at Alcoa's North Shore corporate center who allegedly made false representations.

Alba claimed Dahdaleh owned or ran overseas shell companies that funneled kickbacks to Alba leaders, bribes to Bahrain officials and $13 million in commissions to himself. Dahdaleh didn't take part in the settlement and remains a defendant, Alba said.

Dahdaleh has a pending motion asking Ambrose to exempt him from turning over evidence in the civil case while he's facing related criminal charges in the United Kingdom.

His trial on criminal bribery charges is to begin in April in London, Alba said.

The lawsuit against Alcoa was on hold for nearly four years, after the Justice Department asked for a delay to allow an investigation under the Foreign Corrupt Practices Act. A Justice Department spokesman declined to comment.

Alcoa said $25 million to $30 million charge could be taken, related to the deal's cash costs and matters involving subsidiary Alcoa World Alumina LLC, if a settlement is reached with the Justice Department and Securities and Exchange Commission over those agencies' investigations.

SEC spokeswoman Judith Burns declined to comment.

Kim Leonard is a staff writer for Trib Total Media. She can be reached at 412-380-5606 or kleonard@tribweb.com. Staff writer Brian Bowling and The Associated Press contributed to this report.

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