Legal News

Role-Reversal: Bahraini Firm Sues Alcoa, Alleging Corruption

By Dan Slater

It’s relatively rare for foreign governments to accuse a U.S. company of corruption in American courts. But that’s what happened yesterday when a state-owned aluminum company in Bahrain filed a suit against Alcoa, a $30 billion metals company, in federal court in Pittsburgh.

The Bahraini firm, known as Alba, alleges that, for 15 years, Alcoa has overcharged it for alumina, a precursor ingredient for aluminum, apparently by paying kickbacks to a Bahraini “senior government official.” A 1977 law called the U.S. Foreign Corrupt Practices Act makes it a crime for U.S. companies to pay kickbacks abroad. Here’s the WSJ’s front-pager.

While the suit didn’t name the Bahraini officials who took the money, or cite direct evidence of payments, bank records and invoices reportedly show that more than $2 billion of Alba’s payments for alumina passed from Bahrain to companies in Singapore, Switzerland and the Isle of Guernsey, and that some of the money then found its way back to the Bahraini officials involved in granting the contracts.

According to the WSJ, Alcoa’s contracts with Bahrain are negotiated by a Canadian businessman of Jordanian origin, Victor Dahdaleh, who receives the payments from Bahrain and passes them along to Alcoa. The small firms into which Bahrain’s payments for alumina were channeled had been set up by Dahdaleh, who helped bring Alba and Alcoa together. Dahdaleh is also a part-owner with Alcoa of the national bauxite company of Guinea, an nation that consistently ranks as one of the world’s most corrupt.

The allegations in the suit, writes the WSJ, emerged through an effort by Bahrain itself to root out misbehavior. Under a contract signed late last year with Kroll Associates, a U.S. investigative firm, Bahrain has uncovered cases of corruption in its state-owned enterprises, and numerous individuals have been arrested.

“We have not had the opportunity to review these allegations and are not in a position to comment,” saidn an Alcoa spokesman. “However, we are completely unaware of any wrongdoing by the company or its employees.”

Full post as published by Law Blog - WSJ.com on February 28, 2008 (boomark / email).