Alba chairman Mahmood Hashim al-Kooheji, also chief executive of Bahrain’s sovereign wealth fund Mumtalakat, said that Alba is very happy with the set

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Aluminum Bahrain (Alba) and US aluminum maker Alcoa have settled the Bahraini firm’s racketeering and fraud suit against Alcoa in return for $85m in cash plus long-term raw material supply contracts.

Alba had accused Alcoa of conspiring with a businessman to orchestrate bribes in Bahrain and to overcharge it for alumina, the raw material put through electrolysis to produce aluminum.

The Bahraini firm filed a lawsuit in US federal court in Pennsylvania in 2008, as Alcoa is based in the state’s town of Pittsburgh, and sought damages in excess of $1bn and punitive damages.

Alcoa has agreed to pay $85 million in cash to Alba without admitting liability. Alba puts the value of the additional material supply contracts at $362m. Alcoa declined to give a value.

“We are very happy with this settlement, this is great news for Alba and Bahrain,” said Alba chairman Mahmood Hashim al-Kooheji, also chief executive of Bahrain’s sovereign wealth fund Mumtalakat.

An Alcoa statement said that the settlement was “the best possible outcome”, avoiding the expense of litigation, and resuming supply to Alba, which owns one of the largest aluminum smelters in the world.

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The suit contended that Alcoa paid $9.5m in bribes to Bahrain officials and Alba executives through affiliated companies controlled by an agent known as Victor Dahdaleh that led Alba to overpaying for raw materials, including alumina, by a staggering $420m between 1997 and 2009.

Alcoa has previously stated that the Alba case rests on a “patchwork of claims” that Alcoa disputes.

Dahdaleh has already been charged in the UK with bribing Alba officials to score aluminum contracts for Alcoa. His lawyer has filed a motion in the US court asking the judge to exempt him from discovery, which could prejudice the UK criminal case against him in next April.

Dahdaleh is accused of earning at least $13.5m in illegal commissions for alumina deals.