A few years ago, many enforcement actions involving violations of the law that bars companies from bribing foreign officials would be settled for less than $1 million per case in a given year, according to an analysis this week by the law firm Gibson Dunn. But the fines and penalties have been climbing, and only two cases closed below eight figures last year, the analysis said.
The largest settlement ever involved the $1.6 billion that Siemens paid in 2008 to resolve bribery accusations by U.S. and German authorities. Since then, global firms have beefed up their compliance efforts and regularly self-report suspicious activities to get more lenient treatment. Alcoa notified the U.S. government about potential problems at its subsidiary in Australia and an associated company called Alcoa World Alumina.
“There’s absolutely no doubt that the needle has been pushed hard to the right, and it’s impossible to compare the range of penalties before and after Siemens,” said Robert Luskin, a partner at the Patton Boggs law firm. “The settlements are a different order of magnitude.”
The Justice Department reached an agreement resolving charges against Alcoa World Alumina, which pleaded guilty Thursday to one count of violating the anti-bribery provisions of the law. The SEC settled civil claims with the parent company Alcoa Inc. The deals end U.S. government probes into Alcoa that date back to 2008, according to company filings. The company will make its payment in five installments over four years.
In a statement, Alcoa Inc. said that neither the Justice Department nor the SEC had found that “anyone at Alcoa Inc. knowingly engaged in the conduct at issue.”
In court filings, the government said that the Alcoa subsidiaries worked with a consultant in London who was well-connected with senior members of Bahrain’s royal family and used him to secure business with Aluminum Bahrain BSC, also known as Alba, one of the largest aluminum smelters in the world.
The consultant, who was not identified in court filings, did not provide any legitimate services, the U.S. government said. Instead, he served as a conduit, delivering tens of millions of dollars in bribes to senior Bahraini officials, including members of the royal family. U.S. authorities did not name the individuals who received the bribes.
They said the consultant acted as a sham sales agent, setting up shell companies that were supposedly distributing products to Alba. He was paid a commission and marked up the price of Alcoa products by about $188 million from 2005 through 2009, the government said. He then used the markups to pay kickbacks to Bahraini officials.
The Justice Department said the consultant worked with Alcoa at the request of members of the kingdom’s royal family.
“Alcoa World Alumina today admits to its involvement in a corrupt international underworld in which a middleman, secretly held offshore bank accounts, and shell companies were used to funnel bribes to government officials in order to secure business,” Mythili Raman, the Justice Department’s acting assistant attorney general, said in a statement.
In its complaint, the SEC said that at least one in-house attorney raised concerns about the arrangement with the consultant, but the issue was ignored. More than $110 million in illegal payments were made to Bahraini officials, the agency said.
The Embassy of the Kingdom of Bahrain in Washington did not return a call requesting comment.