The Justice Department announced May 22 that two U.S. persons have each pled guilty to one count of wire fraud conspiracy for their roles in a scheme to fraudulently procure deeply discounted products from a U.S. biochemical company and export them to China using falsified export documents.
According to court documents, beginning in at least July 2016 and continuing through at least May 2023 one of the U.S. persons ordered biochemical products from the biochemical company with help from the other U.S. person, by falsely representing that he was affiliated with a biology research lab at a large Florida university. This fictitious affiliation led the biochemical company to provide the U.S. person over $4.9 million worth of discounts and other benefits not available to the public. When the products arrived at the university stockroom, a stockroom employee diverted the products to the U.S. person, who repackaged them and shipped them to China. To avoid scrutiny, the person made false statements about the value and contents of these shipments in export documents.
It is worth highlighting that the DOJ declined to prosecute the biochemical company in question after considering the factors set forth in its Principles of Federal Prosecution of Business Organizations and the National Security Division Enforcement Policy for Business Organizations. The DOJ states that the biochemical company “made the early decision to cooperate with the Justice Department, resulting in the convictions of responsible individuals.” Deputy Attorney General Lisa Monaco indicated in this regard that “when a business uncovers criminal wrongdoing within its ranks, the company is far better off reporting the violation than waiting for the Justice Department to discover it.”
The NSD Enforcement Policy creates a presumption that companies that (1) voluntarily self-disclose to NSD potentially criminal violations arising out of or relating to the enforcement of export control or sanctions laws, (2) fully cooperate, and (3) timely and appropriately remediate will generally receive a non-prosecution agreement, unless aggravating factors are present. The DOJ notes that this is the first time NSD has declined the prosecution of a company under this enforcement policy.
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