Originally published April 29, 2008

Keywords: Foreign Corrupt Practices Act, FCPA, bribery, foreign officials, DOJ, SEC, Aluminum Bahrain (Alba), Alcoa Corporation

The investigation and prosecution of violations of the Foreign Corrupt Practices Act (FCPA), a statute targeting bribery of foreign officials, is a top priority of the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). The FCPA provides no private right of action. As a result, commercial litigation based on claims of US companies engaging in corrupt practices abroad have been rare & until now. In the past two months, at least two civil lawsuits have been filed in the United States that contain allegations of foreign bribery against companies doing business in the United States which, if true, would violate the FCPA. These civil lawsuits will almost certainly attract the attention of DOJ and SEC investigators and could lead to criminal investigations.

Civil Complaints Filed Against Alcoa and BP

In the first case, Aluminum Bahrain (Alba), a company controlled by the country of Bahrain, filed a complaint in a Pennsylvania federal court against Alcoa Corporation alleging that Alcoa paid bribes to senior officials in Bahrain. Aluminum Bahrain v. Alcoa, Inc. (W.D. Pa. Feb. 27, 2008). For many years, Alba and Alcoa had a business relationship in which Alcoa supplied Alba with alumina, the principal raw material used in the manufacture of aluminum. During the course of the supply contract, Alba asserts that Alcoa paid bribes to Bahrain officials through the use of shell companies, and that, in exchange for these payments, the officials induced Alba to pay inflated prices for alumina. According to the suit, the alleged bribery constitutes a violation of the Racketeer Influenced and Corrupt Organizations (RICO) Act, which, unlike the FCPA, contains a private, civil remedy. Click here to view full complaint.

In the second case, Jack Grynberg, president of oil company Grynberg Production Corporation, filed a civil lawsuit in a New York federal court against oil company BP, BP executives, and several other companies relating to a joint venture to develop oil business in Kazakhstan in which Grynberg had an interest. Grynberg v. BP, et al. (S.D.N.Y. April 2008). The Grynberg lawsuit alleges that BP and the other defendants offered illegal payments to Kazakhstan officials, and covered up those bribes through misrepresentation, in an attempt to win oil and gas rights in Kazakhstan for the joint venture. Grynberg asserts that he and his company were unknowing and unwilling participants in the bribery. Although this lawsuit was filed under seal, press reports explain that, similar to the Alba complaint, Grynbergs complaint alleges that the defendants actions violated the RICO Act.

The novel application of the RICO Act in these lawsuits, if successful, could result not only in a significant award of damages to the plaintiffs, but would likely also cause the DOJ and/or SEC to initiate investigations of the defendants under the FCPA.

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