Aluminium Bahrain (Alba) paid exorbitant prices for alumina, amounting to hundreds of millions of dollars, to Alcoa, according to court documents.

In a case filed before a US court, Alba is seeking more than $1 billion in damages from Alcoa.

The court papers, obtained by Gulf Daily News, our sister newspaper, state that the 'outrageous' 15-year fraud was not discovered until last year because it was concealed by Alcoa Corporation.

The documents also say terms in one contract the US firm entered into with Alba were so unfavourable that it could have threatened the company's existence.

They allege that Alcoa tried to acquire a controlling stake of Alba at a depressed price and extort excessive fees from Alba by threatening to stop selling the company alumina, a vital ingredient in manufacturing aluminium, thereby 'threatening Alba's very existence'.

The documents state that in September 2003, the Bahrain government signed a Memorandum of Understanding (MoU) with Alcoa for the sale of up to 26 per cent of the country's shares in Alba to Alcoa or 'a controlled affiliate'.

The offer was rejected after it was concluded the government's shares had been undervalued.

But court papers say one of the defendants William Rice, co-chairman of the US-Bahrain Free Trade Agreement (FTA), pressured a Bahrain government official to accept the deal - suggesting if it were not approved he would not be able to support the FTA.

The documents also allege that Alcoa threatened to stop selling the company alumina, a vital ingredient in manufacturing aluminium, thereby 'threatening Alba's very existence'.

It is also alleged the defendants threatened to redirect Alba's alumina supply to other countries.

Court papers state through a contract signed in 2005 and which runs until 2009, Alba is now paying 16.35 per cent of the three-month aluminium price traded at the London Metal Exchange, which traditionally goes for 11 per cent to 13 per cent.

Alba alleged that its 2005 contract was inflated by around 10 per cent, which works out to some $65 million a year.

The company has already made 80 payments to the offshore firms, most for more than $15 million.

Another claim says Alcoa, Alcoa World Alumina, Rice and a Canadian businessman of Jordanian origin at the centre of the controversy - Victor Dahdaleh - knowingly conspired to facilitate a scheme, which included the operation of a Rico enterprise through a pattern of 'racketeering' activities.

Alcoa began operating in Bahrain in 1992 when it set up Gulf Closures, a joint venture between Alcoa Closure Systems International and Al Zayani Investments.

Eight years later, the then Labour and Social Affairs Ministry awarded it a certificate of merit in appreciation of its contribution and 'unique role' in the employment of the country's workforce.

The Alba suit, filed in a federal court in Pittsburgh, alleges that Alcoa steered payments for an aluminium precursor ingredient to a group of tiny companies abroad, in order to pay kickbacks to at least one Bahraini senior official.

It alleges that Alcoa overcharged it for the precursor material, alumina, and that some of the money found its way back to officials involved in granting the contracts.

Bank records and invoices show that more than $2 billion in Alba's payments for alumina passed from Bahrain to tiny companies in Singapore, Switzerland and the Isle of Guernsey, according to a report in the Wall Street Journal.

Alcoa's contracts with Bahrain are reportedly negotiated by Dahdaleh, who receives the payments from Bahrain and passes them to Alcoa.

The 68-year-old, whose holdings are known as the Dadco Group, is a long-time partner of Alcoa in its Australian mining operations.

He is also a part-owner with Alcoa of the national bauxite company of Guinea, a poor African nation that consistently