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.

The Alba Files

Checking on loose ends is a year-end thing around here. Falling into that category is the two-year old civil suit against Alcoa by Aluminium Bahrain BSC. Alba, as it's known, is majority-owned by the government of Bahrain.

To refresh: in 2008, Alba sued Alcoa Inc., its long-time raw materials supplier, for corruption and fraud. The suit in federal court in Pittsburg alleged that over a 15-year period Alba was overcharged $2 billion (yes, two billion). 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.

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." Strong stuff.

Just weeks after Alba sued Alcoa, the U.S. 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 and that's where the story stops, at least for now.

The civil case is classified in the court records as "terminated." That doesn't mean the suit is dead, however. Just dormant until the stay is lifted.

How's the DOJ's criminal investigation into Alcoa and the individuals going? No word from the feds or the company on that one.

Alba launched another big civil suit a year later, this time in Houston against Japanese trading company Sojitz Corp. and its U.S. subsidiary. Alba asked for $31 million in damages, claiming 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.

The Justice Department intervened in that case too, again saying discovery could interfere with the government's own investigation into potential criminal wrongdoing, including possible violations of the Foreign Corrupt Practices Act. And again, no word from Uncle Sam or Sojitz about the criminal investigation.

The civil suit still shows up in court records as active, but all proceedings are stayed. Nothing has happened for a year.

Alba didn't oppose the DOJ's requests for stays in either the Alcoa or Sojitz suits.

We assume the government is still investigating both companies and some of their people. Otherwise, the stays would have been lifted and the civil cases would be steaming along. So let's put the Alcoa and Sojitz criminal investigations on our watch list for 2011.

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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.

Bribery Allegations Against Sojitz

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. 

Another Alba-Related Investigation

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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The Unnamed Party

Last February, Aluminum Bahrain BSC, or Alba for short, made big headlines by filing an explosive federal lawsuit against Alcoa. Bahrain-owned Alba accused its long-time U.S. supplier of overcharging for raw materials during a 15-year period, and using some of the money to bribe Alba's executives for more contracts. "Defendants’ conspiracy," Alba said in a complaint filed in Pittsburgh, "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."

Commercial disputes between multinational companies and overseas, government-linked customers are arbitrated in private or settled behind closed doors -- they're rarely decided in open court. And while the public brawl was unusual, what happened next was stranger still.

The Justice Department intervened in the case, asking the court to stay all discovery. It said the facts of Alba's allegations, if true, might violate the Foreign Corrupt Practices Act and mail and wire fraud statutes. Therefore, the DOJ said, it wanted to conduct a criminal investigation into Alcoa and its executives. But it couldn't do that if discovery in the civil suit was steaming ahead. Alcoa, meanwhile, denied all wrongdoing, and neither it nor Alba opposed the government's request. So for nearly a year now, the blockbuster lawsuit has been completely dormant.

Why did the government need to stop the discovery? Why couldn't the DOJ investigate Alba's allegations while the parties continued their battle in civil court? The Justice Department answered those questions in its memo arguing for the stay. The court, as we said, granted the government's request, and the stay remains in effect. Here's some of what the DOJ had to say about the handling of witnesses:

[W]itnesses identified through such civil discovery could be intimidated. See, e.g., Campbell, 307 F.2d at 487. This is of particular concern in FCPA investigations, in which witnesses often reside overseas, where legal protections for witnesses may not be readily available. Thus, commencement of full civil discovery in this case could substantively harm the interests of the United States in investigating and prosecuting the criminal case. De Vita v. Sills, 422 F.2d 1172, 1181 (3d Cir. 1970) (recognizing policy of "preventing defendants in criminal cases from using civil process to obtain information from the government's file which would in the criminal case be privileged.")

Compelling information from potential grand jury and trial witnesses by requiring them to sit for depositions, answer interrogatories or answer requests for admission in the civil action would impede the United States' ability to investigate these matters relating to Alcoa's alleged conduct. In an investigation such as this, numerous witnesses are interviewed whose statements would never be revealed to potential subjects and targets prior to indictment, but for the existence of the civil action. In sum, for all these reasons, the proposed stay is necessary to avoid prejudice to the government's criminal investigation and any potential prosecution.

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. Further, disposition of the criminal action could potentially result in more effective vindication of the public's interest than disposition through a private civil action, particularly given the importance of the government's FCPA enforcement program. . . . Under these circumstances, the public interest is best served by the proposed stay.

(Some footnotes omitted.)

No word yet from the government about the status of its almost year-old criminal investigation. Alba and Alcoa have also been quiet about the civil suit and whether they might settle their differences out of court.

Download Alba's complaint here.

Download the government's memo in support of the stay here.
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