What was the nature of the investigations by the DOJ and SEC?

The investigations by the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) concerned certain legacy alumina contracts between Alcoa Inc. and Aluminium Bahrain B.S.C. (Alba), specifically relating to alleged violations of anti-bribery, internal controls, and books and records provisions of the Foreign Corrupt Practices Act (FCPA).

What is the financial impact of these settlements on Alcoa?

Alcoa's subsidiary, AWA, will pay a total of $223 million to the DOJ (including a $209 million fine and $14 million forfeiture). Alcoa will pay $175 million to the SEC, but this is reduced by the $14 million forfeiture, resulting in a net cash payment of $161 million to the SEC. These amounts will be paid in installments over four years.

Are there any implications for Alcoa's current operations or management?

The filing explicitly states that there were no allegations or findings by the DOJ and SEC that anyone at the Company knowingly engaged in the conduct at issue. Furthermore, both agencies recognized Alcoa for its cooperation and compliance efforts, suggesting that the issues were related to legacy practices and not indicative of current systemic problems.

What is the significance of the AWAC joint venture in this matter?

AWAC (Alcoa World Alumina and Chemicals) is an unincorporated joint venture between Alcoa and Alumina Limited, focused on bauxite mining and alumina refining. The subsidiary Alcoa World Alumina LLC (AWA), which pleaded guilty, is part of this venture. Alcoa consolidates AWAC for financial reporting and owns 60% of its entities.

HWM 8-K: Earnings & Results & Material Agreements

Summary

Howmet Aerospace Inc. (HWM), formerly Alcoa Inc., filed an 8-K on January 10, 2014, to report the resolution of investigations by the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) concerning legacy alumina contracts with Aluminium Bahrain B.S.C. (Alba). Under a plea agreement, a subsidiary, Alcoa World Alumina LLC (AWA), admitted to violating the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA) and agreed to pay a total of $223 million to the DOJ, including a $209 million fine and a $14 million forfeiture. Concurrently, Alcoa settled civil charges with the SEC for $175 million, with a credit for the $14 million forfeiture, resulting in a net cash payment of $161 million to the SEC. Both resolutions involve installment payments over four years, with initial payments due in Q1 2014. Importantly, there were no allegations or findings that anyone at the Company knowingly engaged in the conduct, and the SEC and DOJ recognized Alcoa's cooperation and compliance efforts.

Key Highlights

1Resolution of DOJ and SEC investigations regarding legacy alumina contracts with Alba.
2Subsidiary AWA pleads guilty to FCPA anti-bribery violations.
3Total payments to resolve investigations amount to $223 million (DOJ) and $175 million (SEC, net $161 million after forfeiture).
4Payments will be made in five equal installments over four years, starting in Q1 2014.
5Company emphasizes no findings of knowing misconduct by current employees and acknowledges cooperation and compliance efforts.
6The filing also includes the release of Q4 and full-year 2013 financial results.

Howmet Aerospace Inc. 8-K Report, Material Agreement (Jan 10, 2014)

Summary

Key Highlights

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