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« We need an amnesty for financial crimes | Main | India anti-graft party marks stunning election debut »
Tuesday
Dec102013

Dahdaleh prosecution collapses, key witnesses from Akin Gump refuse to testify

The London trial of former Alcoa super-agent Victor Dahdaleh ended Tuesday in a complete acquittal after two witnesses from a U.S. law firm involved in the investigation refused to testify and another witness changed his evidence, dealing a huge blow to the already embattled U.K. Serious Fraud Office.

The SFO had accused Dahdaleh of paying $67 million in bribes to former officials of Aluminium Bahrain (Alba), the world's fourth-biggest aluminum smelter, between 1998 and 2006 in return for raw material supply contracts for Alcoa and others worth over $3 billion.

The "SFO's lead counsel told a London court there was no longer a realistic prospect of conviction after a key witness changed his evidence and two U.S. lawyers who had played a crucial role in the case refused to testify in court," Reuters said.

The trial began on November 5 and was expected to run into January. It was supposed to be a chance for the tarnished SFO to repair its reputation and boost internal morale. Instead it's likely to lead to more calls for the SFO to be defunded, split up, and absorbed by other prosecuting agencies.

Dahdaleh, 70, a billionaire and high-profile philanthropist, was born in Jordan and holds dual Canadian and British citizenship. He had pleaded not guilty to seven charges of corruption and one charge of transferring criminal property.

Alcoa wasn't named as a defendant in the U.K. case.

"After careful consideration of all the circumstances of this case, the SFO has concluded that there is no longer a realistic prospect of conviction," Philip Shears, lead counsel for the prosecution, told the Southwark Crown Court, Reuters said.

Judge Nicholas Loraine-Smith then instructed the jury to return verdicts of not guilty on all eight charges. The jury complied and the judge discharged them.

Last week Judge Loraine-Smith had identified a conflict of interest for potential witnesses from the U.S. law firm, Akin Gump. The judge said a prior witness had testified that the SFO had delegated the investigation to the firm, but that Akin Gump was also involved in U.S. civil litigation on behalf of Alba involving Dahdaleh.

The Akin Gump witnesses refused to appear at the trial even after a call from SFO Director David Green to the firm's chairman, Reuters said.

The SFO also said Bruce Hall, Alba's former CEO who had earlier pleaded guilty to conspiracy in the case, "significantly changed his evidence in court compared with what he had said in his witness statements to the SFO."

Dahdaleh had admitted making payments to Alba officials but pleaded not guilty, relying on the defense of "principal's consent" under Britain's Prevention of Corruption Act 1906.

His defense, his lawyers had said, was that the payments to Alba officials were essentially a tax or "government sponsorship" that were common practice in Bahrain.

The "principal's consent" defense isn't available under the U.K. Bribery Act, which became effective in 2010, after the acts occurred that Dahdaleh was charged with.

He was arrested in London in October 2011. The SFO's investigation started in 2009.

The U.S. Justice Department opened a criminal investigation in 2008 into allegations that Alcoa and some individuals violated the Foreign Corrupt Practices Act and other laws by bribing officials in Bahrain, including employees of Alba.

The U.S. investigation was triggered weeks after Alba filed a civil lawsuit in federal court in Pittsburgh accusing Alcoa, Dahdaleh and others of a 15-year conspiracy linked to overcharging, fraud, and bribery. The suit alleged that 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.

Akin Gump lawyers represent Alba in the U.S. civil litigation. The docket report on Pacer (the online information system for the U.S. federal courts) for Aluminum Bahrain B.S.C. v. Alcoa, Inc. et al (Case #: 2:08-cv-00299-DWA) shows the suit as still active against Dahdaleh, the only remaining defendant. He's represented by lawyers from Williams & Connolly.

Alcoa said in October last year it had reached a settlement with Alba to end the civil lawsuit. In announcing the settlement, Alcoa said it didn't admit liability but agreed to make a cash payment to Alba of $85 million, with half paid at settlement and the other half a year later.

In the London trial, Dahdaleh was accused of paying about $62 million to the former Alba chairman, Sheikh Isa Bin Ali Al Khalifa.

The Bahrain government owned 77 percent of Alba when the payments were made. The remainder was owned by a Saudi government-linked firm and a German company.

After his acquittal, Dahdaleh said through his lawyer he was "overwhelmed and relieved" by the outcome.

"He is concerned, and wishes those who have a supervisory role, within the SFO and outside, to consider how it was that part of the investigation was outsourced to a firm of American lawyers who refused to attend court to give a full account of their involvement," his lawyer said.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.