Alcoa Is Sued for Fraud, Bribery by Bahrain Firm
Friday, February 29, 2008
Alcoa was sued by a metals company controlled by the Persian Gulf nation of Bahrain for at least $1 billion on claims of fraud and bribery of officials overseas.
Aluminium Bahrain, or Alba, sued Alcoa in federal court in Pittsburgh on Wednesday, claiming it was overcharged for 15 years for alumina, an ingredient used to make aluminum. Alba, the 10th-largest aluminum producer, claims Alcoa bribed unidentified Bahraini government and company officials to get business. Alcoa is the world's largest producer of alumina and third-largest aluminum producer.
"This case arises from the conspiracy of defendants to defraud plaintiff Alba into ceding a substantial portion of its equity to defendant Alcoa, paying inflated prices for alumina, and corrupting the integrity of senior officials," Aluminium Bahrain said in its complaint.
The dispute comes as Alcoa slipped from its position as the world's largest aluminum producer. Rio Tinto Group's takeover of Alcan last year made it the largest producer, followed by United Company Rusal, a Russian firm produced last year by a merger. Alain Belda, Alcoa's chief executive, has said he may seek joint ventures in the Middle East, China and North America to boost smelting capacity.
Alba claims Pittsburgh-based Alcoa committed fraud and violated U.S. civil racketeering laws, according to a copy of the complaint, details of which were reported yesterday by the Wall Street Journal. Alba seeks the damages for what it called a "massive, outrageous fraud."
Alcoa spokesman Kevin Lowery said yesterday that "Alcoa is unaware of wrongdoing by the company or its employees." Alcoa hasn't reviewed the suit, he said.
Alba claims the scheme took place from 1993 to 2007. Alba, which said Alcoa is its principal supplier of alumina, claims it was overcharged for material by about $65 million per year.
Alumina is an ore refined from bauxite that is further processed to make aluminum. Alcoa produced about 15.1 million metric tons of alumina in 2006, more than half of which was supplied to outside customers like Alba.
Alba claims that, beginning in 1990, Alcoa began assigning parts of its alumina-supply contracts with Alba to a series of shell companies, controlled by Victor Dahdaleh, a Canadian, in Guernsey, Singapore and elsewhere.
"Dahdaleh, through the Dahdaleh-controlled companies, would receive money improperly siphoned from Alba while knowing that a portion of such money would be given to a senior government official," Alba said in the complaint.