The FCPA Blog

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.

There hasn't been a new FCPA enforcement action from the DOJ since Daimler's on April 1 and only Dimon's from the SEC. That's strange. The first three months of this year were the busiest in FCPA history. But since then, hardly a peep.

With around 150 cases pending and pressure building to resolve long-standing actions involving Panalpina, Technip, ENI, ABB, Alcatel-Lucent, Pride International, Inc., Alcoa, the medical device makers, and pharmas, you have to ask: Where are the enforcement actions for April and May?

In a typical year, we'd expect a couple of actions a month; this year, we'd expect more. So what's happening?

Here are a few guesses:

• Changing horses. Mark Mendelsohn, head of the DOJ's FCPA unit, left government service in mid-April. His departure would be a natural time for those still there or newly arrived to take inventory -- to use the white board to plot their present location and itinerary for the coming year.

• Resources are stretched. With all the pending prosecutions, including the 22-defendant shot-show case, the DOJ's FCPA group has to be stretched. Maybe they're taking a couple of months to catch their breath, bring in reinforcements, and lift their eyes above the trenches to make sure they aren't about to make any big mistakes.

• A new strategy. Could the DOJ be assessing its overall enforcement approach? Looking, perhaps, at how decisions are made to prosecute corporations (which are defenseless because of respondeat superior)? Or whether financial penalties that punish innocent stakeholders make sense? Or if enforcement should zero in on individuals, or find new ways to spotlight foreign officials who demand bribes . . . ?

There's precedent for the current FCPA moratorium. In February and March 2008, the DOJ also came to a dead stop. The reason was never announced but it could have been the controversy over the unregulated appointment of compliance monitors. Former Attorney General John Ashcroft's $52 million gig with Zimmer in a domestic kickback case threw Washington into a spin. The storm blew over and the DOJ was back in the FCPA business after about two months.

Georgetown Law: Eric E. Hotung International Law BuildingThanks to those who helped with our post Where The Money Is. One reader mentioned two more pending investigations likely to result in big-money enforcement actions: Panalpina and Alcoa. Panalpina's compliance problems have been in the news for nearly three years, and Alcoa's for two. Settlements soon? Could be.

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We also want to thank the folks at the Georgetown Journal of International Law for the invitation to their 2010 Symposium: Combating Global Corruption. It's happening March 22nd from 8am to 5pm at the Hart Auditorium at Georgetown Law (600 New Jersey Avenue, NW, Washington, D.C. 20001). Admission is free. Panel topics include Origins of International Anticorruption: Policy Formation, Enforcement by U.S. Government Agencies, Quasi-Enforcement Agencies and Alternative Enforcement Channels, and East Asia: A Case Study. Mike Koehler (the FCPA Professor) and Elizabeth Spahn are among the panelists. Download the brochure here.

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And finally, we're grateful to our hosts this week who arranged the visit to the National Museum of the Marine Corps at Quantico, Virginia (here). There wasn't much discussion inside; it's hard to talk with that lump in your throat. The museum is unforgettable and the sacrifice it represents is beyond description.

Aluminium Bahrain BSC -- known as Alba -- has filed a $31 million civil suit in federal court in Houston against Japanese trading company Sojitz Corp. and its U.S. subsidiary, Sojitz Corporation of America. The suit alleges 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.

There's no private right of action under the Foreign Corrupt Practices Act. So Alba's claims against Sojitz are based on 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 alleges that Sojitz 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."

In September, the Wall Street Journal reported the U.S. Justice Department's investigation into "payments that Bahraini prosecutors allege were made by units of Japanese commodities-trading giant Sojitz Group to employees of an aluminum producer in Bahrain." The DOJ has never commented on the story. See our post here.

This is the second civil action Alba has filed in U.S. courts with allegations about potential FCPA violations. 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 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 stay the court granted is still in effect. The DOJ hasn't commented on the status of its criminal investigation. Alcoa denied wrongdoing and said it is cooperating. See our post here.

Will the DOJ also intervene in Alba's suit against Sojitz? It needed the stay in the Alcoa case, it said, because:

The public is "an unnamed party in every lawsuit." United States v. Reaves, 636 F.Supp. 1575, 1578 (E.D. Ky. 1986) Here, the Complaint alleges that the defendants arranged for Alcoa, a public corporation, through its affiliates and agents, to make payments in violation of the anti-bribery provisions of the FCPA, among other crimes. The proposed stay enables the government to investigate these charges without potential prejudice to its investigation resulting from civil discovery . . . This would thus enable the government to vindicate the paramount public interest in the enforcement of federal criminal laws and resolution of the federal criminal investigation, should the government's investigation reveal evidence that federal criminal laws were violated. . . .

Sojitz Corp.'s website says that as of September 2009, its business consists of 555 companies including 165 subsidiaries and affiliates in Japan and 390 overseas, with 17,147 employees. Sojitz's U.S. subsidiary is headquartered in New York. The parent company's ADRs trade in the over-the-counter pink sheets under the symbol SZHFF.PK.

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. 

The Wall Street Journal reported yesterday (here) that the Justice Department is "investigating payments that Bahraini prosecutors allege were made by units of Japanese commodities-trading giant Sojitz Group to employees of an aluminum producer in Bahrain." The story says $8.7 million in alleged bribes to employees at Aluminum Bahrain BSC, or Alba, were paid into secret accounts they controlled in Liechtenstein banks. Some of the payments reportedly passed through U.S. banks.

Sojitz acts as a broker for Alba's products, including aluminum billet and alloys. It allegedly enjoyed lower prices in exchange for the payments. The DOJ investigation of Sojitz, which does some business in the U.S., is reportedly based on information provided by Bahraini authorities. The Journal said they "have shared their findings with U.S. Justice Department prosecutors, according to people briefed on the investigation." The payments were allegedly made by units of Nissho Iwai, which merged with Nichimen in 2004 to form Sojitz.

In March 2008, Alba -- majority owned by the government of Bahrain -- sued Alcoa Inc., its long-time raw materials supplier, for corruption and fraud. The federal court suit 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 and some was then used to bribe Alba's executives in return for more supply contracts. The Justice Department quickly intervened in the case, asking the court for a stay while the government investigates possible criminal violations of the Foreign Corrupt Practices Act and other laws by Alcoa and its executives and agent. Alcoa has denied any wrongdoing and said it is cooperating with the DOJ.

The Wall Street Journal said Bahrain filed a money-laundering indictment against two former Alba employees accused of taking kickbacks from Sojitz.

The Justice Department hasn't commented on the Alcoa investigation or the Wall Street Journal's story naming Sojitz.

Read prior posts about Alba and Alcoa here.
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