Dubai: Alcoa Inc will pay $85 million (Dh311.9 million) in cash and enter long-term raw material supply contracts with Aluminium Bahrain (Alba) to settle the Bahraini firm’s racketeering and fraud lawsuit against Alcoa, the companies said on Tuesday.

Alba had accused Alcoa in US federal court of conspiring with a businessman to orchestrate bribes in Bahrain and to overcharge it for alumina, the crucial material used to make aluminium. Alba had sought damages in excess of $1 billion.

Alcoa admitted no liability in the settlement but still faces investigations by the US Justice Department and the Securities Exchange Commission into the allegations.

Shares of Alcoa, which was due to issue its third-quarter financial results later on Tuesday, were three cents higher in early afternoon trading at $9.15 on the New York Stock Exchange.

Alba put the value of the contracts at $362 million. Alcoa declined to give a value, but said it expects them to be profitable.

“We are very happy with this settlement, this is great news for Alba and Bahrain,” Alba Chairman Mahmoud Hashim Al Kooheji, who is also chief executive of Bahrain’s sovereign wealth fund Mumtalakat, said in an interview from Manama.

Cash payment

In a news release, Alcoa confirmed it had resolved the civil lawsuit with Alba that had been pending in the US District Court for the Western District of Pennsylvania since 2008.

Alcoa agreed to make the cash payment to Alba of $85 million in two instalments. The settlement amount is within the range Alcoa previously estimated as its reasonably possible losses, it said.

It said the settlement with Alba “represents the best possible outcome and avoids the time and expense of complex litigation.”

Based on the settlement, Alcoa recorded a $40 million charge in the third quarter in addition to the $45 million charge it recorded in the second quarter.

Alcoa said it estimated an additional possible after-tax charge of $25-30 million to reflect an agreement between the shareholders of Alcoa World Alumina LLC regarding the cash costs of the settlement. Such a charge would be recognised in the event that a settlement is reached with the Department of Justice and the SEC on ongoing investigations.

Alba’s Kooheji said the alumina supplies will be delivered “as per our requirements ... I would say it’s around six to seven years of supply.”

Alba, the fourth largest aluminium smelter in the world, is 69-per cent owned by Mumtalakat. Saudi Arabia holds another 20 per cent.

Positive

Alba’s total losses from the alleged fraud were estimated to be around $400 million. Aside from Tuesday’s settlement, Alba had managed to recover $31 million from European companies.

Kooheji said the settlement would be “positive” for Alba’s results and expected pending cases against other firms to be concluded following the Alcoa agreement.

Alba’s lawsuit against businessman Victor Dahdaleh continues in the United States.

Alcoa supplied the alumina from its Australian unit to a Singapore-based company controlled by Dahdaleh, a Canadian citizen who lives in Britain and who, according to the lawsuit, facilitated the bribes that caused Alba to overpay for the material, starting in 1993.

Dahdaleh, a former donor to Britain’s Labour party and former US president Bill Clinton’s charitable activities, is facing corruption charges in Britain linked to the Bahrain case. A provisional trial is scheduled for next April.

Alba also filed a suit in December 2009 against the Japanese trading company Sojitz Corp in US District Court in Houston in connection with bribery allegations linked to the sale price for finished aluminium sold by Alba.

Alba’s Kooheji said on Tuesday the Bahraini firm would maintain a “good” commercial relationship with Alcoa.