U.S. v. Alcoa World Alumina (Agreed Motion to Waive Presentence Report)

8/13/2019 U.S. v. Alcoa World Alumina (Agreed Motion to Waive Presentence Report)

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UNITED STATES DISTRICT COURT FOR THE

WESTERN DISTRICT OF PENNSYLVANIA

UNITED STATES OF AMERICA

v.

A LCO A WORLD ALUM IN A LLC,

Defendant.

C R IMIN A L NO. ri

A G R E E D M O T I O N T O W A I V E T H E P R E S E N T E N C E R E P O R T

The United States o f America, by and through the Fraud Section o f the Criminal Division

of the United States Department of Justice and the United States Attorney's Office for the

Western District of Pennsylvania (the "Department"), and the defendant, Alcoa World Alumina

LLC (the "Defendant"), by and through its undersigned attorneys, respectfully submit this

Agreed Motion to Waive the Presentence Report ("Agreed Motion") for the Court's

consideration i n resolving the corporate plea of guilty in the case captioned above. For the

reasons set forth below, the Department and the Defendant respectfully request that the Court

accept the guilty plea of the Defendant pursuant to Federal Rule of Criminal Procedure

consolidate the entry of the plea of guilty and the sentencing into one proceeding;

waive the presentence inves tigation pursuant to Federal Rule o f Criminal Procedure

32(c)(l)(A)(i i) ; and sentence the Defendant in accordance with the terms o f the plea agreement

(the "Plea Agreement") filed simultaneously herewith. The parties submi t that the information


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contained i n the record o f this case is sufficient to enable the Court to exercise its sentencing

authority under Title United States Code, Section 3553, without the necessity of thepreparation of a presentence investiga tion report.

I . I N T R O D U C T I O N

Federal Rule of Criminal Procedure 32(c)(l)(A)(ii) permits the Court to impose a

sentence without the preparation of a presentence report i f the Court finds that the information in

the record is sufficient to enable it to exercise its sentencing authority meaningfully under Title

United States Code, Section 3553, and the Court explains this finding on the record. The

parties submit that the information contained in the Information, Plea Agreement, and Agreed to

Statement o f Facts, drafts o f which are being submitted to the Court in advance o f formal

proceedings, satisfy the Requirements o f Rule and provide a basis for the Court toexercise its sentencing authority meaningfully under Title 18, United States Code, Section 3553.

A. The Foreign Corrupt Practices Act

The Foreign Corrupt Practices A ct of 1977 ("FCPA"), as amended, 15 U.S.C. §78 dd-l ,

et seq., certain classes o f persons and entities from corruptly making payments toforeign government officials to assist i n obtaining or retaining business.

Pertinent to the charges herein, the FCPA prohibit ed U.S. companies such as the

Defendant from mak ing use of the mails or any means or instrumentality of interstate commerce

corruptly i n furtherance of an offer, payment, promise to pay, or authorization o f the payment of

money or anything of value to any person, while k nowing that al l or a portion o f such money or

thing of value would be or had been offered, given or promised, di rectly or indirectly, to a

foreign official for the purpose of obtaining or retaining business for, or directing business to,

any persons. U.S.C. §78dd-2(a).2


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B. The Defendant

The Defendant, Alcoa World Alumina LLC, was a Limited Liability Company formed

under Delaware law which maintained its principal place in Pittsburgh, Pennsylvania,in the Western District of Pennsylvania. In addition, the Defendant was an enterprise company

of Alcoa Wor ld Alumina and Chemicals an unincorporated g lobal bauxite miningand alumina refining enterprise formed in between Alcoa Inc. ("Alc oa") and AluminaLimited, the majority and minority owners of WAC, respectively. The Defendant owned andoperated (either directly or indirectly) bauxite mining and alumina refining assets i n North

America, Europe, South America, Africa and the Caribbean. The Defendant was a "domestic

concern" wi thin the meaning of the FCPA, Title United States Code, Section 78dd-2(a).Beginning i n or around 2000, executives at the Defendant's offices in Pittsburgh and

Knoxville, Tennessee, assumed primary responsibility for the relationship with a global alumina

customer, Aluminium Bahrain B.S.C. ("Alba"), a state-owned and state-controlled aluminium

smelter i n Bahra in.

C . The Charged Conduct

In the case presently before the Court, the Department has filed a criminal information

charging the Defendant with one count of violating the anti-bribery provisions of the FCPA, U.S.C. §78dd-2 and 18 U.S.C. §2. Subject to certain contingencies set forth in the Plea

Agreement, the Defendant has agreed to enter a plea of guilty to the Information, based upon

admissions in the Agreed to Statement of Facts, and to persist in that plea through sentencing.

The charge is based on the Defendant's role in 2004 in procuring a ten-year agreement to sell

approximately 1.7 million metric tons o f alumina to Alba from AWAC's Australian refineries.

The Defendant caused Alcoa o f Australia to enter into a purported distributorship with a shell

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company owned by Consultant A, an international middleman who had close contacts with

certain members of Bahra in's Royal Family, rather than contract direc tly with Alba. The

Defendant consciously disregarded that the mark-up imposed by Consultant A on sales of

alumina to Alba was facilitating corrupt payments to certain Bahraini government officials who

controlled Alba's tender process.

D. The Relevant Conduct

The relevant conduct admitted by the Defendant in connection with the Plea Agreement

is set forth in the Agreed to Statement of Facts, which is Exhibit 3 to the Plea Agreement that is

being filed simultaneously with this Agreed Motion. 1 The Parties respectfully refer the Court to

that Exhibit to the Plea Agreement.

In accordance wi th Part below, the parties agree that the Court should look to thegross profits earned on the 2004 transaction for purposes o f calculating the criminal underthe Sentencing Guidelines. See Part III.B below. With respect to the calculation of the the

Government represents that at trial i t would prove the following:

From 2005 to 2009, approximately $446 million in gross profit was earned on the

corruptly secured alumina supply agreement with Alba (after accounting for profits retained by

Alcoa o f Australia's minority owner, Alumina Ltd.).

As a result o f the Defendant's conduct from 2005 through 2009, Consultant A's shell

companies received in excess of $188 million on the mark-up of alumina sales to Alba. I n 2005

and 2006, the Government was able to trace approximately $50 mill ion i n corrupt payments to

As set forth in the Statement of Facts, the Defendant admits to the information in the Statement of Facts to theextent it relates to its actions and the actions of its officers and employees, but the Defendant does not admit to theconduct of any other entity or person. Nothing in this Agreed Motion is intended to add to, or expand, theadmissions contained in the Statement of Facts.

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Bahraini government officials. A W A had no knowledge of the particulars of these payments,

and some o f these payments were made from accounts containing commingled funds from some

of Consultant A ' s other transactions in the region.

I I . T H E R E C O R D C O N T A I N S S U F F I C I E N T I N F O R M A T I O N T H E C O U R TT O I M P O S E S E N T E N C E

Under Federal Rule of Criminal Procedure 32(c)(l)(A)(i i) , the Court may proceed to

sentencing wi thout the benefit o f a presentence report i f "the court finds that the information in

the record enables it to meaningfully exercise its sentencing authority under Title UnitedSates Code, Section 3553, and the court explains its finding on the record." Fed. R. Crim. P.

Courts imposing sentence on corporate defendants for violations of the FCPA

have combined the plea and sentencing hearings into one proceeding. See, e.g., United States v.

Siemens et al., (D.D.C. Dec. 15, 2008); United States v.Panalpina, Inc., (S.D. Tex. Dec. 7, 2010).

The parties respectfully submit that the record presently before the Court contains

sufficient information to al low the Court to impose sentence without additional presentence

investigation and a report. The facts described in the Informat ion , Statement o f Facts and the

Plea Agreement, detail not only the Defendant's violations of law, but also the Defendant's and

Alcoa's timely internal investigat ion o f the violations, their extensive cooperation with the

Department and the U.S. Securities and Exchange Commission ("SEC"), and their remedial

actions. This information satisfies the requirements of Rule 32(c)(l)(A)(ii) and permits the

Court to impose sentence under 18 U.S.C. §3553.

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I I I . S E N T E N C I N G G U I D E L I N E S C A L C U L A T I O N

In the Plea Agreement, the parties stipulate that the following Guidelines calculation,

using the edit ion of the Sentencing Guidelines Manua l, is the proper application o f theSentencing Guidelines to the criminal charge i n the Information. The Sentencing Guidelines

analysis in this case results in a Guidelines range o f $446,000,000 to $892,000,000.A. Calculation of the Offense Level

Based upon U.S.S.G. § the tota l offense level is 48, calculated as follows:

(a) (2) Base Offense Level (1) Multiple Bribes +2

Value o f benefit received

More than $400,000,000 +30

(b)(3) Offense involved a high-level decision-making +4

public official

T O T A L 48

B. Calculation of the Base Fine

The parties agree that the pecuniary gain which underlies the Defendant's anti-bribery

plea is $446,000,000. The parties further agree that the pecuniary gain from the offense is

greater than either the level from the Offense Level Fine Table or the total kno wn bribepayments the offense. The pecuniary ga in of $446,000,000, therefore, is the correct base

for the offense under the sentencing guidelines. See U.S.S.G. §8C2 .4( a)( l) and § 2Cl . l (d) .

C . Calculation Culpabi lity ScoreBased upon U.S.S.G. § the culpability score is 5, calculated as follows:

(a) Base Culpability Score 5

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(b)(4) the organization had 50 or more employees and

an individual within substantial author ity

personnel participated i n, condoned, or was

willfully ignorant o f the offense +2

(g)(1) The organization fully cooperated in the

investigation and clearly demonstrated recognition

and affirmative acceptance of responsibility for its

criminal conduct

- 2

T O T A L D. Calculation of the Fine Range

The range is calculated pursuant to U.S.S.G. §§8C2.6 and 8C2.7 as follows:

Base Fine $446,000,000

Multipliers (min)/2.0 (max)Fine Range $446,000,000 / $892,000,000

E . SentencePursuant to the Plea Agreement, and consistent with Fed. R. Crim. P. the

parties have agreed that the Defendant w i l l pay a criminal fine o f $209,000,000 in equalannual installments.

I V . T H E A G R E E D - U P O N F I N E I S T H E A P P R O P R I A T E D I S P O S T I O N

The parties submit that the imposition o f a criminal penalty o f $209,000,000 is the

appropriate disposition of this case, based upon the following, as set forth in the Agreed to

Statement of Facts and Paragraph 35(a) of the Plea Agreement:

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A. Nature of the Conduct

The Defendant consciously disregarded the fact that the mark-up imposed by Consultant

A on his companies' sales o f alumina to Alba was facilitating millions o f dollars in corrupt

payments to Bahrain i government officials who controlled A lba 's tender process. The

Government submits that this conduct merits the significant penalty recommended to the Court,

but, at the same time, that other factors mitigate against a penalty within the guideline range.

B. Alcoa's Financial Condition

Alcoa has agreed to guarantee, secure and ensure delivery by the Defendant o f all

payments due from the Defendant under the Plea Agreement. The significant discount from the

guidelines range is warranted because o f the impact that a penalty within the guidelines range

would have on Alcoa's financial condition and its potential to "substantially jeopardiz[e]" the

company's ability to compete, see U.S.S.G. §8C3.3(b), including, but not limited to, its ability to

fund its sustaining and improving capital expenditures, its ability to invest in research and

development, its ability to fund its pension obligations, and its ability to maintain necessary cash

reserves to fund its operations and meet its liabilities. The Defendant has also agreed to

administratively forfeit to the Inte rnal Revenue Service $14,000,000, which is at least the amount

involved in transactions described i n the Agreed to Statement o f Facts. Thus, total fines and

penalties i n this matter amount to $223,000,000. In addition, in the event that a settlement is

reached and approved by the SEC, the Department is cognizant that such settlement would

impose a significant disgorgement order on Alcoa as a civil remedy for Alcoa's conduct in this

matter.

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C . Alcoa's Cooperation

In addition, another factor in the assessment appropriate is the level o fcooperation received from the Defendant and Alcoa. After the allegations arose, Alcoa

cooperated fully with the Department's investigation.

When Al coa 's Board learned o f the allegations, the Board appointed a Special Committee

to investigate the allegations. The Special Committee retained independent counsel to conduct

an extensive internal investigation of the allegations, who provided the government with factual

proffers o f conduct related to the allegations. Alcoa's counsel also provided the Department

with numerous documents and materials from its U.S. offices and abroad, searched for relevant

documents, including very old documents, and helped to collect, analyze and organize

voluminous evidence and information. Alcoa also voluntarily made its employees available for

interviews.

D . Alcoa's Remediation

A n additional factor i n the assessment appropriate fine level is the series o fremedial compliance measures that Alcoa has taken, which affect both Alcoa and the Defendant.

These remedial measures include the hiring o f new senior legal and ethics and compliance

officers, the implementat ion o f enhanced due diligence reviews for the retention of third-party

agents and consultants, and Alco a' s implementation o f an enhanced anti-corrupt ion compliance

procedure and a commitment to continue to ensure that its compliance program satisfies the

criteria set forth i n Exhibit 4 to the Plea Agreement.

E . Annual Installment Payments of the Cr imina l Fine

Because the immediate payment of the entire "would pose an undue burden on" theDefendant and its majority shareholder, Alcoa, see U.S.S.G. §8C3.2(b), the United States and

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the Defendant agree that the entire shall be paid i n equal annual installments ofwith the first payment due in ful l on or before the tenth business day after

the date o f entry o f the of conviction. Thereafter, the second, third, fourth and fifthpayments shall each be due in ful l on the first, second, third and fourth-year anniversaries of the

date o f the entry o f judgment of conviction ("the recommended sentence").

/ / /

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V . C O N C L U S I O N

For the foregoing reasons, the Department and the Defendant respectfully recommend

that the Court accept the Plea Agreement of Alcoa World Alumina L L C pursuant to Federal Rule

of Criminal Procedure waive the presentence investigation pursuant to Federal Ruleof Criminal Procedure 32(c)(l)(A)(i i) , approve the disposition of this matter, and impose

sentence according to the terms of the Plea Agreement.

THE DEPARTMENT OF JUSTI CE:

JEFFREY H. KNOX

Chief, Fraud Section

Criminal Division

Department of Justice/]

By:

J. HICKTON

United States Attorney

No. 34524

V

Deputy Chief, Fraud Section

N Y ID No. 2657567

FOR A L C O A WORLD ALUMI NA LLC:

By: Robert J. Jossen

No. 1393719

Jonathan Streeter

No. 5034186

Counsel for

Alcoa World Alumina LLC

4 ,2014

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Documents

U.S. v. Alcoa World Alumina (Agreed Motion to Waive Presentence Report)