DOJ Declines to Prosecute Private Equity Firm after Post-Acquisition Voluntary Self-Disclosure of Sanctions and Export Control Violations

In its first application of the policy on voluntary self-disclosures (“VSDs”) in connection with mergers and acquisitions (“M&A”), on June 16, 2025, the US Department of Justice’s (“DOJ”) National Security Division (“NSD”) announced that it had declined to prosecute a US private equity firm after it voluntarily disclosed criminal violations of US sanctions and export control laws committed by a company it acquired.  

NSD highlighted the private equity firm’s decision to voluntarily self-disclose the matter, full cooperation, and strong remediation efforts as the basis for its decision to decline prosecution. The acquired company also benefited from the self-disclosure pursuant to the M&A policy, entering into a non-prosecution agreement (“NPA”) with the DOJ, agreeing to forfeit the proceeds of the sanctions and export control offenses, and paying civil monetary penalties to the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and the US Department of Commerce’s Bureau of Industry and Security (“BIS”), Office of Export Enforcement (“OEE”) for violating US sanctions and export control laws, with OFAC crediting the full amount of the forfeiture money judgment against its penalty.¹ Furthermore, the acquired company’s former CEO pleaded guilty to conspiring to violate US sanctions laws and engaging in anti-money laundering activities.

These enforcement actions underscore the US government’s expectation that “gatekeepers,” including both traditional banks and private equity firms, must prevent sanctions and export control evasion. Moreover, the DOJ’s decision to decline prosecution confirms that NSD’s VSD program remains fully operational, offering substantial incentives to corporations that might otherwise face prosecution and large financial penalties. The outcomes for both the acquiror and the acquired company highlight the critical importance of post-acquisition due diligence and the significant benefits available to companies that self-disclose misconduct, fully cooperate and remediate.

Background

According to the DOJ, from 2014 through 2021, the former Chief Executive Officer (“CEO”) of Texas-based Unicat Catalyst Technologies LLC (“Unicat”) conspired with others to make sales to customers in Iran, Venezuela, Syria and Cuba, in violation of US sanctions and export controls, generating US$3.33 million in revenue. US private equity firm White Deer Management LLC (“White Deer”) uncovered the scheme in June 2021 after it acquired Unicat. During a visit to integrate operations, Unicat’s new CEO discovered a pending transaction with an Iranian customer and immediately cancelled it. Over the next month, White Deer and Unicat’s new CEO retained counsel to conduct an internal investigation and found that Unicat had engaged in multiple illegal transactions with entities in sanctioned countries. Before the investigation was complete, but after identifying potentially criminal conduct, White Deer and Unicat’s new management submitted a VSD to NSD.

The declination marks the first public application of NSD’s Enforcement Policy for Business Organizations (“Enforcement Policy”) in the context of an M&A deal where an acquiror voluntarily self-disclosed potentially criminal conduct discovered at an acquired entity. As set out in NSD’s Enforcement Policy, there is a presumption that NSD will decline to prosecute an acquiring company that completes a bona fide acquisition of another company, timely and voluntarily self-discloses misconduct by the acquired entity, fully cooperates, and timely and appropriately remediates. NSD’s Enforcement Policy further provides that the acquired company may be eligible for a presumption of an NPA with disgorgement of profits but no fine. The Department’s M&A policy provides that a self-disclosure generally must be made within 180 days of closing for the acquiror to be eligible for a presumptive declination, although NSD has discretion to determine that a self-disclosure made outside that period is timely. Significantly, the DOJ issued the declination here even though White Deer made its disclosure approximately ten (10) months after closing.

In evaluating White Deer and its affiliates’ voluntary self-disclosure, cooperation, and remediation, the DOJ found that the private equity firm satisfied the requirements of the M&A policy.

• White Deer’s acquisition of Unicat was bona fide and lawful, and White Deer had no pre-existing disclosure obligation.
• White Deer made a timely disclosure under the circumstances – within three months after the acquisition of a second company that was being integrated along with Unicat, despite post-acquisition integration delays due to COVID-19, and one month after discovering the misconduct during post-acquisition integration activities.
• White Deer mitigated an imminent threat of a national security harm by canceling a pending transaction with Iran upon learning of the misconduct.
• White Deer provided exceptional and proactive cooperation by disclosing all relevant facts and proactively identifying and producing relevant records located both inside and outside the United States, including on employees’ personal devices and messaging applications.
• White Deer remediated the misconduct within a year of discovery by terminating culpable employees, disciplining others and designing and implementing a comprehensive and robust internal controls and compliance program.

In conjunction with the DOJ’s action, Unicat additionally settled with OFAC and OEE for civil violations of US sanctions and export controls. OFAC’s civil monetary fine of US$3,882,797 was less than the statutory maximum of US$8,035,626, and, as noted, OFAC credited the entirety of Unicat’s forfeiture money judgment (US$3,325.052.10) against this penalty. While OFAC highlighted several aggravating factors – such as the fact that former members of Unicat’s senior management had knowledge of the violations and Unicat employees attempted to conceal their unlawful dealings – OFAC ultimately did not seek the maximum penalty. Instead, OFAC credited Unicat for several key mitigating factors, including:

• cooperation with OFAC;
• company conducted an extensive internal investigation;
• submission of a VSD;
• agreement to toll the statute of limitations during the course of the investigation; and
• significant post-acquisition remedial measures, including: (1) terminating the former CEO, (2) engaging outside counsel to file VSDs and conduct an independent investigation, (3) implementing a sanctions and export control compliance program, which includes regular trainings, and (4) incorporating sanctions compliance language into contracts. 

Key Takeaways

• Sanctions and export control enforcement continue to be key enforcement priorities for this administration, with companies under scrutiny potentially facing investigations from multiple agencies;
• In the first application of NSD’s M&A policy, the DOJ emphasized each of the requirements set forth in the policy for the declination of prosecution of an acquiror: (1) the acquisition is bona fide and lawful; (2) the acquiror makes a voluntary self-disclosure that is timely, closely following the discovery of potential criminal violations of the acquired entity; (3) the acquiror provides full cooperation; and (4) the acquiror takes proactive steps to remediate the misconduct. These factors emphasize the critical importance of prompt and comprehensive post-acquisition due diligence so that companies can quickly identify and remediate issues, and decide whether a VSD is appropriate;
• Acquiring companies looking to take advantage of the DOJ’s M&A Policy need to move quickly to self-disclose. The Enforcement Policy provides that a self-disclosure to NSD within 180-days of closing will generally be considered timely. NSD has discretion, however, to determine that a self-disclosure made outside the 180-day period is timely, if the acquiror establishes that the delay was reasonable under all of the circumstances. In this case, the DOJ found the self-report to be timely even though it was ten (10) months after closing in light of a number of circumstances, including that White Deer came forward one month after discovering the violation and before it had completed an internal investigation;
• Full cooperation to qualify for a presumptive declination requires significant time and resources. Companies must move quickly to disclose all non-privileged facts relevant to the misconduct and provide proactive cooperation. This includes preserving, collecting, and producing documents located overseas;
• Similarly, US enforcement authorities will credit companies that conduct internal investigations to identify root issues and implement robust remedial measures. Companies should focus on remediation immediately after identifying an issue to prevent further violations and strengthen their position with enforcement authorities. Remediation requires a multi-prong approach that may include employee discipline and compliance program enhancements. To put themselves in a position to achieve the best possible result with the DOJ and other enforcement authorities, companies should do a root cause analysis, make appropriate enhancements to their compliance program, and test the program to make sure it is functioning effectively; and
• When an acquiring company satisfies the requirements of DOJ’s M&A policy, significant benefits are available for both the acquiror and the acquired entity, including the potential for a declination for the acquiror and an NPA with disgorgement of profits, but no fine, for the acquired entity.

_{1 The acquired company also paid restitution to the United States Department of Homeland Security, Customs and Border Protection for certain tariff avoidance violations described in the NPA resolution papers.}

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