In January, a unit of Alcoa Inc. (AA),
the biggest U.S. aluminum producer, pleaded guilty to foreign
bribery charges brought by the U.S. Justice Department. Alcoa
also settled claims by the Securities and Exchange Commission
and agreed to pay a $384 million fine — the fifth-largest such
penalty ever.

The Alcoa subsidiary admitted to paying bribes to
government officials in Bahrain for more than a decade to win
contracts to sell alumina, a compound essential in making
aluminum, to the Persian Gulf state’s processing plant. Not
named and not charged in the case was the person who made those
payments, whom the Justice Department identified in court only
as “Consultant A.”

In the thriving business of global bribery — which the
World Bank says amounts to $1 trillion in illicit payments
annually — guilty pleas like the one by Alcoa’s unit are rare.
Rarer still are convictions against the people who actually
arrange and deliver the payments, Bloomberg Markets will report
in its September issue.

Most of the time, these brokers aren’t even named. The
Alcoa guilty plea — together with related cases in the U.K. and
Norway — provides an unusual window into the modus operandi of
the middlemen who shuttle between companies and governments
striking deals.

Before the U.S. announced the fine against Alcoa, U.K.
prosecutors in October 2011 charged Victor Dahdaleh, a London-based businessman, with laundering money and making improper
payments to officials in Bahrain related to Alcoa contracts.

Not Illegal

His lawyers argued in a London court last year that the
payments Dahdaleh, 70, made to government officials in Bahrain
were sanctioned, akin to taxes in the country, and therefore
were not illegal.

Dahdaleh was acquitted in December after the prosecution
dropped its case, saying that two U.S. lawyers who were set to
be witnesses had refused to testify and that testimony by Bruce Hall, the plant’s former chief executive officer, differed from
earlier statements.

An Alcoa Australian unit sold the alumina to Consultant A’s
companies, which in turn sold it to Aluminium Bahrain BSC, known
as Alba, according to the U.S. case. Alba is one of the world’s
largest aluminum smelters. Norway, which fined a shipping
company $5 million in May for bribing foreign officials to win
the delivery agreements to move the Alcoa alumina from Australia
to Bahrain, cited Dahdaleh by name as the person who made those
payoffs. Norwegian authorities didn’t charge Dahdaleh.

Aluminum ingots are stored at Alba, one of the world’s largest aluminum smelters, in Bahrain. Close

Aluminum ingots are stored at Alba, one of the world’s largest aluminum smelters, in Bahrain.

Open

Photographer: Phil Weymouth/Bloomberg News

Aluminum ingots are stored at Alba, one of the world’s largest aluminum smelters, in Bahrain.

‘No Reason’

Dahdaleh declined to comment for this story. Norton Rose
Fulbright, his U.K. law firm, says in a written response to
questions from Bloomberg Markets that Dahdaleh was acquitted of
all charges in the U.K.

“There is therefore no reason for diluting the proper
effect of the acquittal,” the firm says. It says that Dahdaleh
wasn’t party to the Alcoa unit’s guilty plea in the U.S. nor the
Norwegian settlement. “Those agreements do not detract from Mr.
Dahdaleh’s acquittal by a competent court in the U.K., which
heard all the facts of the case given by witnesses on oath,”
the firm says.

The law firm didn’t answer most of the specific questions,
including whether Dahdaleh is Consultant A or whether he owns
any of the companies the U.S. Justice Department said were used
to make payoffs.

Revoked Bail

Dahdaleh’s U.K. trial had been slated to begin in April
2013. It was postponed until November after he and his lawyers
allegedly met with a key prosecution witness, Mahmood Hashim Al Kooheji, the current chairman of Alba. Judge Nicholas Loraine-Smith revoked Dahdaleh’s bail for failing to steer clear of
witnesses before the trial, as he’d been ordered to do. He sent
Dahdaleh to jail for a month.

For decades, multinational corporations have used little-noticed middlemen to make payments for contracts in murky Middle
Eastern deals, says Norman Bishara, associate professor of
business law and ethics at the University of Michigan’s Ross
School of Business.

“In the Middle East, there is a concept called wasta —
‘connectedness’ — a trust network that these intermediaries are
part of,” says Bishara, whose research focuses on Middle
Eastern business ethics. “You traditionally use middlemen to
avoid accountability and transparency, especially with this kind
of large corporation, such as Alcoa. You use intermediaries to
keep everything at arm’s length.”

Island State

Bahrain, a small island state of 1.3 million people, gained
its independence from the U.K. in 1971 and is ruled by a
constitutional monarchy. Bribery there is a criminal offense.

Bahrain has been condemned by human rights groups for a
deadly crackdown on pro-democracy protesters during the Arab
Spring rebellions in 2011 and the suppression of smaller
demonstrations since then. Transparency International, a Berlin-based nongovernmental organization that monitors business ethics
around the world, finds currently that 120 countries out of the
177 ranked are more corrupt than Bahrain.

While the U.S. plea agreement doesn’t identify Dahdaleh as
Consultant A, it does show that a company owned by Dahdaleh
played a role in the Alcoa unit payments to Alba. The plea
agreement says that Consultant A held an account in the name of
United Legal Engineering Consultants Ltd. That company — based
on Jersey, in the Channel Islands — was 70 percent owned by
Dahdaleh, according to annual reports filed by United Legal.

Wired Money

Consultant A transferred funds into the United Legal
account and wired money from it to accounts held by government
officials in Bahrain, the plea agreement says. U.S. prosecutors
say they haven’t ruled out pursuing individuals. So far, no one
has been indicted.

The plea agreement sheds light on how Consultant A managed
the payments between Alcoa units and Bahrain’s Alba. Under the
arrangement described in the case, Consultant A’s shell
companies, which are registered in the British Virgin Islands,
would buy alumina from Alcoa of Australia.

The unit would ship the alumina directly to Alba.
Consultant A would receive credit lines from Alcoa to cover the
cost until Alba paid his shell companies. Consultant A inflated
the alumina price for the sales to Alba by about $400 million
over 20 years, the U.S. charging document says.

That markup provided about $100 million for bribes paid by
Consultant A to members of Bahrain’s royal family and Alba
officials, according to the Justice Department.

‘With Connections’

“Alcoa’s subsidiary used a London-based consultant with
connections to Bahrain’s royal family as an intermediary to
negotiate with government officials and funnel the illicit
payments to retain Alcoa’s business as a supplier to the
plant,” the SEC wrote in January when it charged Alcoa Inc. in
a civil case with violating the Foreign Corrupt Practices Act.

Alcoa settled the SEC case by agreeing to pay a $175
million fine. Alcoa’s unit ended the criminal case, agreeing to
pay $209 million, guaranteed by the parent company. Because the
Alcoa unit pleaded guilty, there was no trial in the U.S. and no
one, including Dahdaleh, was called to testify.

The man the U.K. accused of conspiracy to corrupt,
corruption and money laundering in the multinational bribery
plot looks like a kindly grandfather. Short and pudgy with a
round face and balding head, Dahdaleh walks with his shoulders
slightly hunched. He has difficulty hearing, a matter addressed
in court when a British judge allowed him special seating in the
courtroom.

Management Degree

Victor Phillip Michael Dahdaleh was born in Ramleh, Jordan,
according to his Canadian passport. Dahdaleh is a citizen of
Jordan, Canada and the U.K. He was a part-time student at the
London School of Economics and Political Science in 1967; he
didn’t finish with a degree. He received a diploma in management
from McGill University in Montreal in 1975 and speaks English,
French and Arabic.

Dahdaleh owns Dadco, a private manufacturing and investment
business founded in 1915, according to Dahdaleh’s own website,
victordahdaleh.com. The company originally supplied construction
materials to Middle Eastern contractors and sold phosphate, a
chemical sometimes used in smelting, Dahdaleh has told
associates.

Dahdaleh is a man with a common touch, friends say. He’s a
fan of singers Johnny Cash and Gordon Lightfoot, and one of his
favorite songs is Cash’s “Folsom Prison Blues.” Friends say he
can recite most of the lyrics.

In one of his first jobs after college, Dahdaleh was in a
BP Plc (BP/) management training program in Canada. He drove a fuel
truck during that time. He hit it off with the other drivers and
drank beer with them, according to his friends.

‘Home-Cooked’

One of Dahdaleh’s distant cousins, John Dahdaly, president
of Cullitons Limousine Service LLC in Toronto, says that when
Victor lived in Canada in the 1970s, he enjoyed talking about
his favorite home-cooked dishes, music and the Antiochian
Orthodox Christian church at which the family worshiped.

Dahdaleh owns a five-story town house in London’s Belgravia
neighborhood, which U.K. real estate broker Savills Plc (SVS)
describes as one of the wealthiest enclaves in the world. He
also resides in Switzerland. British investigators who have
inspected Dahdaleh’s bank accounts say he has amassed a fortune
of more than $1 billion.

Dahdaleh moves in elevated circles. He donated at least $1
million to the Clinton Foundation from 2001 to 2008, foundation
records show. The organization was started by former U.S.
President Bill Clinton in 2001 in an effort to get governments,
businesses and people to work together to improve society.

Clinton Travels

Dahdaleh arranged in 2005 for Clinton to speak to the
Canada–United Kingdom Chamber of Commerce in London, an event
sponsored by Dadco, a chamber brochure shows.

In 2009, Clinton traveled to a refinery owned by Dahdaleh
near Hamburg and gave a speech there, according to a spokesman
for the Clinton Foundation. From there, Clinton and Dahdaleh
flew together to Vienna, where the former president spoke at a
benefit for people with AIDS.

Dahdaleh has served on the Court of Governors of the LSE
since 1999. For a decade, he held the position alongside Cherie Blair, wife of former British Prime Minister Tony Blair.
Dahdaleh arranged for Tony Blair to address the Canada-U.K.
group in 2006, according to chamber of commerce brochures.
“Victor, as you know, is very influential in the Global
Initiative of President Clinton,” Tony Blair told the group.
Blair and his wife declined to comment on their relationship
with Dahdaleh.

Robert Rubin

Dahdaleh has also donated more than 1 million pounds ($1.7
million) to the LSE since 1999. Over the past decade, he has
attended the LSE’s iXXi breakfast club, an exclusive gathering
of politicians and bank executives held at London’s Savoy hotel
that has hosted speakers such as former U.S. Treasury Secretary
Robert Rubin, says Meghnad Desai, emeritus professor at the LSE,
who created the club.

Dahdaleh’s foray into Bahrain began in the 1980s, when he
was an agent in the Middle East for Pechiney SA, a French
aluminum company that provided consulting to Alba. Dahdaleh
turned to the French embassy in Bahrain for help in getting the
proper introductions to members of the Bahraini royal family and
others, says Gudvin Tofte, a Norwegian who was CEO of Alba until
1999.

Jeremy Nottingham, a former Alba executive, recalls how
Dahdaleh demanded his attention at all hours. As Nottingham
drifted toward sleep one night in 2000, the phone rang. It was
almost midnight in Bahrain.

“Hello, Jeremy, I’ve just arrived. Got delayed by the
prime minister of Kuwait. Can I see you now?” the caller asked.
It was Dahdaleh. Nottingham, a South African who was deputy CEO
of Alba at the time, rose, threw on a suit and, against his
wife’s protests, drove 10 minutes to the Ritz-Carlton hotel on
the Persian Gulf.

Family Talk

Dahdaleh, in a dark suit and tie despite the hour, ushered
Nottingham into a lavish suite and offered him coffee,
Nottingham says. The two men talked for hours.

Nottingham says he had been summoned several times to these
late-night meetings with Dahdaleh, and the drill was always the
same. Dahdaleh asked at length about Nottingham’s family, a
chattiness that seemed out of context, Nottingham says,
considering the urgency of Dahdaleh’s call.

Dahdaleh finally turned to business, Nottingham says —
pressing him for details about plant activity, purchasing plans
and strategic goals at the company.

Nottingham says that even though Dahdaleh didn’t have a job
with Alba, he had considerable influence with the company.
Nottingham says when he complained of being the company’s
perpetual CEO designate, never the boss, Dahdaleh told him not
to worry, that he’d be promoted soon.

‘Really Close’

“I knew he was really close to the chairman and the prime
minister,” Nottingham says. “I was first introduced to him by
the oil minister. The reason that I would go and see him at all
hours was that he said he would be instrumental in making me
CEO. It’s probably for the best that I never got that
position.”

At that late-night meeting in 2000, Dahdaleh asked
Nottingham what was needed to turn Alba into a world-class
company, the former executive says. Nottingham’s answer: Stop
the system in which Alba’s suppliers and contractors were
decided based on payoffs and kickbacks.

After that, Nottingham says, Dahdaleh no longer called him.
Soon he learned Dahdaleh was pushing Bruce Hall, an Australian,
as the next Alba CEO. Hall got the job in 2001. After that, the
new CEO began meeting with Dahdaleh in his hotel suite in
Bahrain, Hall testified in a London courtroom in November.

Share Commissions

Nottingham, who’s now back in South Africa as a mining
consultant, has never been charged with or implicated in any
wrongdoing.

When Hall became CEO, Dahdaleh let him know he had
agreements with several European companies looking to do
business with Alba and that he was prepared to share commissions
when those companies received work from Alba, Hall testified at
Dahdaleh’s trial in Britain.

The U.K.’s Serious Fraud Office, or SFO, charged Hall in
2012 with conspiracy in accepting about $4.9 million in bribes
for contracts. Hall pleaded guilty last year. He was sentenced
in July to 16 months in prison. Hall declined to comment for
this story.

Dahdaleh’s role at Alba came under pressure beginning in
2005. That’s when Sheikh Salman bin Hamad Isa al-Khalifa,
Bahrain’s U.S.- and U.K.-educated crown prince, vowed to end
payments for contracts and reform government-owned businesses.
Hall was replaced, and a year later, Sheikh Isa bin Ali Al
Khalifa was replaced as chairman.

Kroll Inquiry

In 2006, the Bahraini government hired investigative firm
Kroll Inc. to conduct an inquiry of Alba. The company is vital
to Bahrain, responsible for 10 percent of its gross domestic
product and 70 percent of all nonoil exports. It’s among the
largest employers, with almost 3,000 workers.

Kroll’s report, which the government received in parts as
the probe progressed over two years, cited rampant corruption.
Alba’s new managers hired Washington-based law firm Akin Gump
Strauss Hauer Feld LLP to pursue individuals and companies
suspected of wrongdoing.

Alba sued Alcoa Inc. and Dahdaleh in 2008 in the U.S.,
alleging that Alcoa used Dahdaleh as an agent to make illicit
payments for contracts with Alba. Alcoa settled that suit in
2012 by paying Alba $85 million. Alcoa didn’t admit or deny
wrongdoing.

A U.S. federal judge dismissed Alba’s lawsuit against
Dahdaleh in April, ruling the case should instead be heard by a
panel of arbitrators in the U.K. Alba filed an appeal of that
decision in May.

‘Favorable Outcome’

Salman Al Jalahma, a spokesman for the government of
Bahrain, says it’s satisfied with the Alcoa settlement.

“We are pleased with the favorable outcome of the
lawsuit,” he says. “We hope this serves as a catalyst towards
ending corruption.”

The Alcoa plea agreement with the Justice Department
alleges that Consultant A gave Sheikh Isa some of the payments
for alumina. Sheikh Isa, who’s a brother-in-law of Bahraini
Prime Minister Khalifa bin Salman Al-Khalifa, became chairman of
Alba in 1998.

Dahdaleh developed a close relationship with the sheikh,
says Tofte, the former Alba CEO.

“He was getting his will with Sheikh Isa,” Tofte says. He
says Dahdaleh knew how to win the trust of people in power. “He
was absolutely clever at getting people to believe what he was
doing,” Tofte says. “He was a talker.”

‘Going Downtown’

Sheikh Isa personally decided which suppliers would win
contracts with Alba, and major awards almost always involved
payoffs, Hall and Nottingham testified in the U.K. case against
Dahdaleh. Any contract in excess of 100,000 dinars — or about
$265,000 — had to be approved by the sheikh, they testified.

The process was called “going downtown,” which is where
the sheikh’s office was located, Nottingham testified during the
U.K. trial.

Sheikh Isa, who was also the oil minister in Bahrain,
referred to Dahdaleh as “my friend in London” when discussing
business involving him, Hall testified in the U.K. case against
Dahdaleh. No one has brought charges against Sheikh Isa.

“Sheikh Isa denies categorically all allegations of
corruption, bribery, impropriety and unlawful acts reported
against him personally,” Ardavan Amir-Aslani, his Paris-based
lawyer, wrote in a statement following the U.S. plea agreement.
Amir-Aslani declined to comment further.

From 1989 to 2009, Alba was one of the largest customers of
Alcoa’s global alumina and refining business, the SEC said in
January when it brought its civil case against Alcoa Inc.

‘Corrupt Payments’

The SEC said corrupt payments of more than $110 million
were made to Bahraini officials with influence over contract
negotiations between Alcoa’s units and Alba. Alcoa’s Australian
subsidiary first retained the person to arrange the deals, the
SEC wrote.

Alcoa spokeswoman Monica Orbe says that it was just the
company’s subsidiary that admitted to wrongdoing.

“There is no allegation in the filings by the DOJ and
there is no finding by the SEC that anyone at Alcoa Inc.
knowingly engaged in the conduct at issue,” she says. She
declined to comment on Dahdaleh or on the use of middlemen in
contracts.

While the SEC didn’t accuse named individuals at Alcoa Inc.
of wrongdoing, it alleged in its January civil case against
Alcoa Inc. that the company failed to do its due diligence to
stop its subsidiary from paying bribes for contracts.

‘Lacked Controls’

“Alcoa lacked sufficient internal controls to prevent and
detect the bribes, which were improperly recorded in Alcoa’s
books and records as legitimate commissions or sales to a
distributor,” the SEC wrote. Orbe declined to comment on any
U.S. documents in this case.

Dahdaleh faces another probe. Swiss authorities are
investigating him on suspicion of money laundering and bribing
foreign officials, according to Jeannette Balmer, spokeswoman
for Switzerland’s Attorney General’s Office.

Dahdaleh’s website reported good news in December. On the
day he was acquitted in London, Britain’s SFO said there was no
realistic chance of convicting him on any charges without its
key witnesses.

On Dahdaleh’s homepage, a streaming Breaking News headline,
which was still there as of yesterday, declares, “Victor
Dahdaleh clears his name.”

To contact the reporters on this story:
David Armstrong in Boston at
darmstrong16@bloomberg.net;
Alan Katz in Washington at
akatz5@bloomberg.net

To contact the editor responsible for this story:
Jonathan Neumann at jneumann2@bloomerg.net