The Justice Department has intervened for the second time in civil suits brought by Aluminium Bahrain BSC -- known as Alba -- against its raw material suppliers and brokers. Last week, the DOJ asked for a stay in Alba's suit against Japanese trading company Sojitz Corp. and its U.S. subsidiary. More than two years ago, the Justice Department obtained a stay in Alba's civil suit against Alcoa, Inc. The DOJ said discovery in the cases could interfere with the government's own investigation into potential criminal wrongdoing by Alcoa, Sojitz and other parties, including possible violations of the Foreign Corrupt Practices Act.
Alba sued Sojitz in December 2009, filing a $31 million claim in federal court in Houston. The suit alleged that from 1993 to 2006, Sojitz paid $14.8 million in bribes to two of Alba's employees in exchange for access to metals at below-market prices. Alba is majority-owned by the government of Bahrain.
In March 2008, Alba sued Alcoa Inc., its long-time raw materials supplier, for corruption and fraud. The suit in federal court in Pittsburg alleged that Alba paid $2 billion in overcharges during a 15-year period. The money, according to the suit, first went to overseas accounts controlled by Alcoa's agent, London-based Victor Dahdaleh, and some was then used to bribe Alba's executives in return for supply contracts.
Just weeks after Alba sued Alcoa, the Justice Department intervened in the case. It asked the court for a stay while the government investigates possible criminal violations of the FCPA and other laws by Alcoa and its executives and agent. The DOJ said the stay was needed to protect potential witnesses against civil discovery. The court granted the stay, which is still in effect. The DOJ hasn't commented on the status of its criminal investigation. Alcoa denied wrongdoing and said it is cooperating. Sources with knowledge of the government's investigation have reported to the FCPA Blog that the Justice Department had questions about Alcoa's initial explanations, which may have delayed potential settlement talks.
Alba did not oppose the DOJ's requests for stays in the Alcoa and Sojitz cases.
There's no private right of action under the Foreign Corrupt Practices Act. So Alba's claims against Alcoa and Sojitz were based on other federal laws, including RICO (18 U.S.C. § 1962(c)), conspiracy to violate RICO (18 U.S.C. § 1962(d)), fraud, and civil conspiracy to defraud. The complaint against Sojitz alleged the Japanese company used bribes to buy underpriced product and then "resold the aluminum it bought from Alba at below-market rates to U.S. companies including Enron Corp." Alcoa's conspiracy, Alba said in the civil complaint, "succeeded in exacting hundreds of millions of dollars in over payments, which continue to accumulate to this day. Among other things, Plaintiff seeks damages in excess of $1 billion, including punitive damages, for this massive, outrageous fraud."
Sojitz Corp. consists of 522 companies including 147 subsidiaries and affiliates in Japan and 375 overseas. Together they have 17,331 employees. The parent company's ADRs trade in the over-the-counter pink sheets under the symbol SZHFF.PK.
Download a copy of the government's May 27, 2010 memorandum in support of a stay in Aluminium Bahrain B.S.C v. Sojitz Corporation and Sojitz Corporation of America here.
Download a copy of the December 18, 2009 federal civil complaint in Aluminium Bahrain B.S.C v. Sojitz Corporation and Sojitz Corporation of America here.