Top Stories Of 2011

Some picks for the year's hottest FCPA headlines are these:

#1: Drop in corporate enforcement actions. In 2010, 23 companies settled FCPA cases for $1.8 billion; in 2011, just 15 companies settled for $508.6 million. Reason? The DOJ was distracted by an unprecedented number of FCPA-related trials. But there's no shortage of corporate investigations in the pipeline so look for enforcement to pick up next year. (We'll post our 2011 enforcement index right after the New Year holiday.)

#2: Mistrial in the first Africa sting case. A hung jury in July showed that the DOJ's FCPA unit isn't invincible after all. And in December, the judge dismissed the conspiracy counts against six other defendants in the case, resulting in one defendant's outright acquittal.

#3: Lindsey and Lee dismissals. Why would the government cheat in an FCPA prosecution when it usually wins without breaking a sweat? The judge found the DOJ's tactics so outrageous he dismissed the indictments after the jury heard the case and decided to convict the defendants on all counts. The DOJ is appealing the dismissals. If it loses, will it clean its own house?

#4: Putting the 'foreign' in Foreign Corrupt Practices Act. With the Magyar / Duetsche Telekom settlement this week, nine of the top ten FCPA cases involve non-U.S. companies. We think there's a message there from Washington to the rest of the world.

 #5: The DOJ - SFO partnership is in full bloom. The U.K.'s Serious Fraud Office is prosecuting three former Innospec execs. It charged Alcoa's super agent, Victor Dahdaleh, with corruption and proceeds-of-crimes offenses. And the SFO is leading the global investigation into Paris-based Alstom, a Siemens-sized scandal in the making.

#6: Enforcement actions are getting bigger. The top ten cases now account for criminal and civil penalties and disgorgement of $3.28 billion. Eight were settled in the past two years.

#7: An attitude adjustment at the DOJ? Associate AG Lanny Breuer promised to release detailed FCPA guidance next year, after a thirty-year wait. This month, the DOJ indicted eight former Siemens execs and agents, answering criticism that big companies plead and pay while their people walk.

#8: Fifteen-year prison term. Joel Esquenazi, one of the Haiti telco defendants, took his chances at trial and lost big. His sentence is the longest in FCPA history. Despite the DOJ's missteps in the Africa sting and Lindsey trials, Esquenazi's sentence shows how dangerous and devastating FCPA prosecutions can be.

#9: 'Foreign officials' galore. Motions by FCPA defendants to dismiss based on who's a foreign official failed in the Carson, Lindsey, and Esquenazi cases. The DOJ's view that foreign state-owned enterprises are 'instrumentalities' under the FCPA and their people are therefore 'foreign officials' is the law. Really.

#10: TSKJ keeps on giving. With a mega-settlement this year by JGC and a humongous forfeiture by Jeffrey Tesler, the feds' take on the case climbed to $1.65 billion. No wonder a dozen or so other countries want their own version of the FCPA. There's a fortune to be made in anti-corruption enforcement.

Alba's Suit Against Alcoa Reopened

The Wall Street Journal's Joe Palazzolo reported Friday that Aluminum Bahrain BSC's civil suit against Alcoa has been reopened, and that Alcoa will ask that it be dismissed.

Alba, as state-owned Aluminum Bahrain BSC is known, filed the suit in 2008 in federal court in Alcoa's hometown, Pittsburgh. The suit accused Alcoa of a 15-year conspiracy of overcharging, fraud, and bribery. The suit alleged that more than $2 billion in Alba's payments under raw-material 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.

Alba's federal lawsuit was based not on the FCPA but on common law fraud and RICO -- the Racketeer Influenced & Corrupt Organizations Act found at 18 U.S.C. §§1961-68. Private parties have no right of action under the FCPA; only the DOJ and SEC can enforce it.

Three weeks after Alba filed the suit, the judged stayed it at the request of the DOJ. Prosecutors said the United States had a "direct and substantial interest" in Alba's allegations and that the civil suit could threaten the DOJ's criminal investigation.

At the time, a spokesperson for Alcoa said, "We will cooperate fully with the DOJ and believe this will help bring this matter to a speedy conclusion."

The DOJ said it was investigating whether Alcoa, its executives, and agents "have engaged in conduct with respect to their commercial relationship with Alba in alleged violation of various criminal laws, including the FCPA, and the mail and wire fraud statutes. . . . The Alba complaint alleges numerous facts which, if true, could be relevant to the government's criminal investigation and a potential criminal trial."

Bahrain's own investigation, according to 2008 reports, centered on Sheikh Isa bin Ali al-Khalifa, the country's former minister of petroleum and chairman of Alba, and on Jordan-born Canadian businessman Victor Dahdaleh, who acted as Alcoa's agent in Bahrain.

Last month, Dahdaleh, who lives in London, was arrested there and charged under U.K. law for bribing officials at Alba. The alleged payments were made in 2001 to 2005, the Serious Fraud Office said, in connection with contracts between Alcoa and Alba for supplies of alumina shipped to Bahrain from Australia.

According to the Wall Street Journal, Alcoa asked for the civil suit in the U.S. to be reopened so that it can make a motion to dismiss it.

Did Dahdaleh Choose A U.K. Arrest?

Did Alcoa's former super-agent Victor Dahdaleh, left, engineer his own arrest in London last week  to avoid indictment and prosecution in the United States?

We don't know the answer. But there are plenty of reasons why the sixty-three old billionaire might have done that. Here are some:

• A U.K. arrest on corruption and proceeds-of-crimes charges would probably prevent an indictment in the U.S. for FCPA and money-laundering offenses. The DOJ isn't likely to chase a suspect who's already in the dock in London.

• The U.K. probably wouldn't extradite anyone to the U.S. who's already being prosecuted on similar charges in the U.K.. That's more true for a U.K. citizen like Dahdaleh, who also has a Canadian passport.

• Bail for a U.K. citizen would be easier to arrange in London than in the U.S., where flight-risk concerns would dominate. In fact, last week Dahdaleh was granted 'police bail.' At the latest hearing, his bail was set at £10 million and he surrendered his U.K. and Canadian passports.

• Any one-percenter these days is under suspicion from the start. So a foreign billionaire like Dahdaleh would be wise to do whatever he can to avoid a federal jury trial in the United States.

• Dahdaleh's a big shot in the U.K. He's a governor at the London School of Economics and, according to his website, 'a leading donor to the school' and a member of its fundraising committee. He also supports cancer research at Imperial College, London, and is a fellow of the Duke of Edinburgh Award World Fellowship. Social standing and political juice in your home court may not win cases but it usually doesn't hurt.

• Dahdaleh's alleged bribery scheme, according to the Serious Fraud Office, stretched from 2001 to 2005. So prosecutors apparently have evidence of a series of allegedly illegal payments. In the U.S., multiple payments can result in stacked charges. Every FCPA conspiracy and substantive count carries a maximum five-year prison sentence, and jail time for money-laundering offenses can be twenty years. Sure, Dahdaleh could receive jail time in a U.K. prosecution, but not a U.S. style white-collar mega-sentence.

• A multi-year bribery scheme, as Dahdaleh would know, was behind the U.S. indictment of Jeffrey Tesler -- another U.K. citizen who, like Dahdaleh, was an agent for a U.S.-based company. Tesler was charged with one count of conspiring to violate the Foreign Corrupt Practices Act and ten substantive FCPA offenses. He faced up to fifty-five years in prison. After losing his extradition battle in London, he pleaded guilty in federal court in Houston. He hasn't learned his final jail sentence yet.

• The federal forfeiture law reaches any assets derived from proceeds traceable to a violation of the FCPA, or a conspiracy to violate the FCPA. As part of his  plea, Tesler had to forfeit $149 million to the DOJ. If there's evidence that Dahdaleh engaged in a five or even fifteen-year corruption scheme -- as claimed by the alleged victim, Aluminium Bahrain BSC -- then his forfeiture risk could be even bigger than Tesler's. Virtually all of Dahdaleh's assets -- apparently worth billions -- could be at risk.

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Victor Dahdaleh himself said he 'voluntarily attend[ed] an appointment at Bishopsgate police station [in] accordance with agreed arrangements ... to face charges of bribery and offences under the Proceeds of Crime Act 2002.'

That means he wasn't surprised last Monday by his arrest in London. Does it also mean he weighed his options before deciding to face the music in the U.K. instead of the U.S.?

Victor Dahdaleh: A Huge Fortune, Famous Friends, And Philanthropy

Alcoa's former agent Victor Dahdaleh, arrested this week in London, seen here with former U.S. President Bill Clinton. Photo courtesy of the National Post'Victor Dahdaleh, a billionaire Canadian businessman and philanthropist has dined with the Queen and played host to a U.S. President and British Prime Minister, but his arrest in Britain on bribery and corruption charges has brought attention of a different sort.'

-- From 'Canadian billionaire Victor Dahdaleh faces bribery charges in Britain,' by Adrian Humphreys in the National Post, October 26, 2011 here.

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'Victor Phillip Michael Dahdaleh is owner and chairman of Dadco and affiliated companies. Dadco Group is a privately-owned investment, manufacturing and trading group. Its founding company was established in 1915. Dadco has operations and investments in Europe, North America, the Middle East, Africa and Australia. . . .

'Victor Dahdaleh is president of the Canada-United Kingdom Chamber of Commerce. He is a Board Trustee of the William J Clinton Presidential Foundation, and a trustee of the McGill University Trust, Canada. He is a Board member of the International Aluminium Institute (IAI). He is a fellow of the Duke of Edinburgh Award World Fellowship.

'The Victor Phillip Dahdaleh Charitable Foundation grants scholarships to needy students at several universities. It supports a range of causes including the Heart and Lung Foundation at Imperial College, London, Cancer Research and other types of medical research. The Foundation has also contributed to a wide range of other causes such as the economic and social development of poorer countries.'

-- From victordahdaleh.com

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'October 24, 2011

'LONDON – Victor Dahdaleh today interrupted his busy scheduled business commitments to voluntarily attend an appointment at Bishopsgate police station.  In accordance with agreed arrangements, he attended to face charges of bribery and offences under the Proceeds of Crime Act 2002.

'A spokesman for Allen & Overy, Mr Dahdaleh's lawyers said: "Mr Dahdaleh believes the investigation into his affairs was flawed and that he has done absolutely nothing wrong. He will be vigorously contesting these charges at every stage, confident in clearing his good name."

'Mr Dahdaleh was released on police bail.'

-- From victordahdaleh.com

Alcoa Agent Arrested In U.K.

The Serious Fraud Office on Monday said Victor Dahdaleh, Alcoa's former agent for sales to Bahrain, was arrested in London and charged with corruption.

Dahdaleh, 63, a dual citizen of Britain and Canada who lives in Belgravia, London, is alleged to have bribed officials of Aluminium Bahrain B.S.C. ('Alba'), a smelting company in Bahrain with majority state ownership, according to the SFO. 

The alleged payments were made in 2001 to 2005, the SFO said, in connection with contracts between Pittsburgh-based Alcoa and Alba for supplies of alumina shipped to Bahrain from Australia.

Dahdaleh was released on 'conditional police bail' and is scheduled to appear at the City of Westminster Magistrates' Court on October 31.

He was charged not under the new U.K. Bribery Act but older laws:

• Corruption contrary to Section 1, Prevention of Corruption Act 1906

• Conspiracy to corrupt contrary to Section 1, Criminal Law Act 1977

• Acquiring and transferring criminal property contrary to Sections 329(1) and 327(1) of the Proceeds of Crime Act 2002

The SFO's investigation started in July 2009, the agency said, and it has been 'in liaison' with the U.S. Department of Justice and Swiss authorities.

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The DOJ in March 2008 opened a criminal investigation into allegations that Alcoa Inc. and some individuals violated the Foreign Corrupt Practices Act and other laws by bribing officials in Bahrain.

The federal investigation was triggered three weeks after Alba filed a civil lawsuit in federal court in Pittsburgh accusing Alcoa 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. Alba's suit also named Dahdaleh as a defendant.

Just weeks after Alba brought the civil suit, the DOJ intervened in the case. It asked the court for a stay while the government investigated 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.

Alba's civil case is classified in the court records as "terminated." That doesn't mean the suit is dead -- just dormant until the stay is lifted.

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According to Alcoa's site, the company 'is the world's leading integrated aluminum company, providing jobs to 59,000 employees across 31 countries.' Revenues last year were $24.6 billion.

It made our 2011 watch list for potential FCPA enforcement actions.

Alcoa Inc. trades on the NYSE under the symbol AA.

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View the SFO's October 24, 2011 release here.

Download the February 27, 2008 civil complaint in Aluminium Bahrain BSC v. Alcoa, Inc, Alcoa World LLC, William Rice, and Victor Dahdaleh here.