The Justice Department’s National Security Division reports that it has declined the prosecution of a private equity firm and its affiliates after the firm discovered and voluntarily self-disclosed criminal violations of U.S. sanctions and export laws committed by a company it acquired. DOJ notes that this marks the first time since the creation of its mergers and acquisitions policy in March 2024 that it has declined the prosecution of an acquiror for self-disclosing criminal conduct discovered at an acquired entity.
According to a DOJ press release, from approximately 2014 through 2021 the former CEO of the acquired company conspired with others to cause the company to submit bids and make sales to customers in Iran, Venezuela, Syria, and Cuba in violation of U.S. economic sanctions. To further the conspiracy, the conspirators made false statements in export documents and financial records about the true identities and locations of the company’s customers and falsely assured some employees that its business with customers subject to U.S. economic sanctions was lawful. Further, during negotiations to sell the company, the owners provided representations and warranties attesting to the company’s compliance with U.S. sanctions and export control laws.
DOJ adds that (1) some of the sales were effected through exports of catalysts from the U.S., further violating U.S. export control laws, and (2) the former CEO and other company employees falsified invoices to avoid approximately $1.7 million in tariffs assessed on catalysts imported from China.
Under a non-prosecution agreement with DOJ, the company has agreed to pay forfeiture totaling $3.3 million, representing the proceeds of its violations. The company also agreed to pay $3.9 million to the Office of Foreign Assets Control and $391,183 to the Bureau of Industry and Security, but those two agencies agreed to credit the company’s payment of forfeiture against those penalty amounts. In a separate administrative resolution with U.S. Customs and Border Protection the company agreed to pay $1.6 million in underpaid duties, taxes, and fees.
DOJ notes that under its M&A policy there is a presumption that it will decline to prosecute an acquiror when it (1) completes a lawful bona fide acquisition of another entity, (2) voluntarily and timely self-discloses potentially criminal violations of laws affecting U.S. national security committed by the acquired entity, (3) fully cooperates with DOJ’s investigation, and (4) timely and appropriately remediates the misconduct. While a presumption of declination is not available to the acquired entity, DOJ will credit the acquiror’s timely voluntary self-disclosure to the acquired entity and will consider whether the acquired entity otherwise satisfies the requirements to obtain the benefits of the above policy.
Copyright © 2025 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.