In the Matter of Alcoa, Inc.

File No. 3-15673

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In the Matter of Alcoa, Inc.

Securities and Exchange Commission
File No. 3-15673

  • Written by Heather Whittemore, JD

Facts

Alcoa, Inc. (defendant) was a United States-based manufacturer that refined alumina, a substance used to make aluminum. Alcoa’s alumina business operated through multiple subsidiaries, including Alcoa of Australia and Alcoa World Alumina (collectively, the subsidiaries). Between 1989 and 2009, the subsidiaries did business with Aluminium Bahrain B.S.C. (Alba), an aluminum manufacturer owned by the Kingdom of Bahrain and controlled primarily by the Royal Family of Bahrain. The subsidiaries worked with a consultant (Consultant A) to make sales of alumina to Alba. Alba was one of Alcoa’s largest alumina purchasers, buying almost 20 million metric tons of alumina over the relevant period of time. Over the course of the relationship between the subsidiaries and Alba, Alba complained that it was paying too much for alumina. To prevent losing Alba’s business, the subsidiaries decided to do business according to norms in the Middle East. The subsidiaries began supplying alumina through Alumet, a shell corporation owned by Consultant A, and paid Consultant A a commission fee. Consultant A would then use the commission fees to bribe the Royal Family of Bahrain to purchase the alumina. Consultant A also received a line of credit from Alcoa in order to purchase the alumina before receiving a payment from Alba. As a result of the arrangement, Alcoa facilitated Consultant A and the Royal Family of Bahrain’s foreign bribery scheme, resulting in up to $110 million in corrupt payments to officials in Bahrain. The Securities and Exchange Commission (SEC) (plaintiff) instituted an action against Alcoa alleging that Alcoa violated the Foreign Corrupt Practices Act by indirectly paying bribes to Bahraini officials. The SEC argued that, though no officer of Alcoa knowingly engaged in the bribery scheme, Alcoa facilitated the scheme by ignoring red flags and failing to conduct due diligence to ensure that there was a legitimate business purpose for hiring Consultant A to act as a middleman for its business with Alba.

Rule of Law

Issue

Holding and Reasoning (Per curiam)

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