US Alcoa agrees to $384m in penalties in Bahrain bribery scandal

09 January 2014 17:48  [Source: ICIS news]

US Alcoa agrees to $384m in penalties in Bahrain bribery scandalHOUSTON (ICIS)--A subsidiary of global aluminium major Alcoa has agreed to pay $384m in penalties for repeatedly paying bribes to Bahrain government officials, the US Securities and Exchange Commission (SEC) announced on Thursday.

Alcoa World Alumina (AWA) violated the Foreign Corrupt Practices Act (FCPA) by making more than $110m in corrupt payments between 1989 and 2009 to Bahraini officials with influence over contract negotiations between US-based Alcoa and Aluminium Bahrain (Alba), the SEC said.

Alba, one of the world’s largest aluminium smelters, is controlled by Bahrain’s government, and Alcoa’s mining operations in Australia were the source of the alumina that Alcoa supplied to Alba, the SEC said.

AWA used a London-based consultant with connections to Bahrain’s royal family as an intermediary to negotiate with the government officials and funnel illicit payments to retain Alcoa’s business as a supplier to the Alba plant, according to the US agency.

Alcoa did not have sufficient internal controls in place to prevent or detect the bribes, which were recorded by the company as legitimate commissions or sales to a distributor, the SEC said.

As part of Alcoa’s settlement with the US Department of Justice (DOJ), AWA will pay the $223m – which includes a $209m fine – in five equal installments over four years, Alcoa said in a statement.

AWA is pleading guilty to the one count of violating the FCPA as part of the settlement, Alcoa said.

Also, Alcoa said that it has agreed to pay $175m as part of a settlement of civil charges filed by the SEC relating to the anti-bribery, internal controls and books and records provisions of the FCPA. Alcoa will be given credit for the $14m one-time forfeiture payment, which is part of the DOJ resolution, making the total cash payment to the SEC $161m. It also will be paid in five equal installments over four years.

The settlement agreement is subject to final court approval, which is expected later on Thursday.

“As the beneficiary of a long-running bribery scheme perpetrated by a closely controlled subsidiary, Alcoa is liable and must be held responsible,” said George Canellos, co-director of the SEC’s Enforcement Division. “It is critical that companies assess their supply chains and determine that their business relationships have legitimate purposes.”

In its statement, Alcoa said it “welcomes the resolution of this legacy legal matter with the US government”.

Aluminium is derived from an ore called alumina, which is created in a process that uses caustic soda. Alumina production is one of the key downstream consumers of caustic soda, which is a co-product of chlorine in the chlor-alkali process.

By: Jeremy Pafford
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