In March 2024, the National Security Division (NSD) of the Department of Justice (DOJ) issued a new Mergers and Acquisitions (M&A) Policy as part of its Enforcement Policy for Business Organizations. The NSD M&A Policy provides that when a company (1) completes a lawful bona fide acquisition of another entity, (2) voluntarily and timely self-discloses1 to NSD potentially criminal violations of laws affecting U.S. national security committed by the acquired entity (such as violations of sanctions and export control laws), (3) fully cooperates with NSD's investigation, and (4) timely and appropriately remediates2 the misconduct, NSD generally will not seek a guilty plea from the acquiror, and there is a presumption that NSD will decline to prosecute the acquiror. The M&A Policy further provides that, although a presumption of declination is not available for the acquired entity, NSD will credit the acquiror's timely voluntary self-disclosure (VSD) to the acquired entity when determining whether to prosecute.
Pursuant to the new Policy, NSD just announced its first decision not to prosecute an acquiror that self-disclosed criminal conduct of an acquired entity. In 2021, White Deer Management LLC (White Deer), a private equity firm, acquired Unicat Catalyst Technologies LLC (Unicat), a Texas-based company that sells and consults on catalyst products used in petrochemical refinery and steel mill operations. In connection with the acquisition, White Deer learned of — and ultimately disclosed to NSD — potentially criminal violations of U.S. sanctions and export control laws committed by Unicat. On June 16, 2025, NSD announced that it would decline to prosecute White Deer or its affiliates. NSD also announced that it would enter into a non-prosecution agreement with Unicat, crediting Unicat's cooperation (which ultimately had led to the prosecution of and a guilty plea from Unicat's former CEO).
The Facts
At the time of White Deer's acquisition of Unicat in 2021, Unicat represented that it was in compliance with U.S. sanctions and export control laws. However, from approximately 2014 through 2021, Unicat's former CEO (1) violated U.S. sanctions by conspiring with others, including at least one other Unicat employee, to make sales to customers in Cuba, Iran, Syria, and Venezuela; and (2) violated U.S. export control laws, because the sales were of export-controlled chemical catalysts. The conspirators made false statements in export documents and financial records about the true identities and locations of customers, falsely assured other Unicat employees that the transactions were lawful, and falsified invoices to reduce the tariffs assessed on the catalysts imported from China before shipping them to customers.
After White Deer acquired Unicat, and as the two entities were integrating operations, White Deer learned of the prohibited transactions. Specifically, Unicat's new CEO discovered a pending transaction involving Iran, ordered the deal's cancellation immediately, and retained counsel to investigate. Before the investigation was complete, but after they learned of the potentially criminal violations, White Deer and Unicat's new management submitted a VSD to NSD , as well as to the Department of the Treasury's Office of Foreign Assets Control (OFAC) and the Department of Commerce's Bureau of Industry and Security (BIS). White Deer and Unicat made these disclosures in order to receive credit and a presumption of non-prosecution at NSD under the M&A Policy, which requires that a VSD is filed with NSD in addition to any VSD filed with regulators; it is not sufficient to file a VSD solely with OFAC or BIS.
NSD's decision not to prosecute either White Deer or Unicat provides a good indication of how NSD analyzes and factors in disclosures under its new Policy. In addition to being a lawful bona fide acquisition (this was), the M&A Policy requires that the VSD be timely, that the disclosing parties fully cooperate with NSD's investigation, and that the parties timely and appropriately remediate. NSD addressed each of these factors in its announcement.
First, White Deer and Unicat made their disclosure 10 months after White Deer's acquisition of Unicat, beyond the 180-day-following-closing NSD deadline and the six-month-following-closing deadline specified under DOJ's M&A Safe Harbor Policy, discussed here. Nonetheless, NSD considered the VSD timely "under all of the circumstances" of this case. White Deer only learned of the potential violations after it began integrating Unicat into its operations, but White Deer had put off integrating Unicat until after it had finished acquiring a second business. Two months after the integration started, White Deer discovered the pending transaction involving Iran, after which the transaction was immediately canceled; the VSD — which the parties had made even before having finished their investigation — followed less than a month later. In addition, NSD recognized that integration efforts were delayed by the COVID-19 pandemic.3
Second, NSD found that the disclosing parties provided "exceptional and proactive cooperation" by "(a) disclosing all known relevant facts about the misconduct and the individuals involved in the misconduct; (b) proactively identifying relevant records retained by Unicat employees and agents on personal electronic devices and messaging accounts both inside and outside the United States; (c) proactively and lawfully disclosing relevant foreign-located records in accordance with disclosure restrictions imposed by foreign data privacy laws; and (d) agreeing to continue to cooperate with any ongoing government investigations and any resulting prosecutions." Cooperation led to the successful prosecution of Unicat's former CEO.
Finally, NSD credited the disclosing parties with remediating the misconduct "in less than one year." The parties' remediation steps included terminating culpable employees, disciplining other employees involved in the misconduct, seeking reimbursement from Unicat's sellers, and designing and implementing a comprehensive and robust internal controls and compliance program to prevent similar potential misconduct in the future.
Outcome and Takeaways
Ultimately, Unicat will face only civil monetary penalties. The OFAC statutory maximum civil monetary penalty applicable in this matter was $8,035,626 plus BIS and Homeland Security fines. NSD granted a significant mitigation of these monetary penalties due to Unicat's voluntary disclosure and cooperation. Unicat agreed to forfeit $3,325,052.10 to NSD (representing the proceeds of its violations), and pay $3,882,797 to OFAC, $391,183 to BIS, and $1,655,189.57 in underpaid duties, taxes, and fees to the Department of Homeland Security as a result of its falsified invoices. Importantly, OFAC agreed to credit Unicat's payment of forfeiture to DOJ against the OFAC penalty, and BIS agreed to credit Unicat's payment to OFAC against the BIS penalty, so Unicat's OFAC and BIS penalties will be substantially satisfied by the forfeiture to DOJ.
This outcome highlights the importance of conducting a thorough post-acquisition compliance integration review. While acquirors should certainly conduct compliance diligence before signing and closing, pre-acquisition diligence is often limited and acquirors frequently face difficulties obtaining full information about compliance.
In addition, this outcome shows the benefits of submitting a prompt VSD relating to historic violations of recently acquired entities. NSD emphasizes that disclosure should be made as soon as possible after discovery of a potential violation, including before a company has a full understanding of the extent of the misconduct (although NSD recognizes that certain situations might pose obstacles to prompt disclosure). NSD also values proactive involvement when cooperating after a disclosure and expects remediation to be completed within one year, although the NSD Policy does allow for exceptions where the delay is "reasonable" under the relevant circumstances.
Footnotes
1 An acquiring company's voluntary self-disclosure of misconduct is generally considered timely under the Policy if the acquiror makes the disclosure to NSD within 180 days after the date the transaction is completed.
2 Remediation of misconduct by an acquired entity is generally considered timely under the Policy if it is completed within one year after the date the transaction is completed, except if (1) the misconduct constitutes a current and ongoing threat to national security, or a current and ongoing threat of harm to persons or property, in which case remediation must be made immediately (i.e., at the earliest reasonable opportunity) to be considered timely; or (2) the acquiror carries a burden of establishing to NSD that its delay in either disclosure or remediation was reasonable given the circumstances.
3 Factors NSD will consider when determining whether a VSD may still be considered timely despite being filed after 180 days include: whether the acquiring company exhibited its best efforts to complete reasonably scoped and resourced diligence and integration of the acquired company within the relevant time period, any lack of opportunity for pre-acquisition diligence, the complexity of the transaction, the size and complexity of the businesses to be integrated, and any efforts by culpable individuals to obstruct the acquiring company's diligence and integration efforts.
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