First-Ever DOJ Application of M&A Voluntary Self Disclosures Policy Leads to Declination for Private Equity Firm
Client Alert | June 26, 2025
A recent declination of prosecution for a private equity firm provides a first look at how timely voluntary self-disclosure, extensive cooperation, and proactive remediation can mitigate the risk of criminal and civil penalties for acquirors when discovering violations of national security-related laws by acquirees, including those related to economic sanctions and export controls.
Executive Summary
On June 16, 2025, the Department of Justice’s (DOJ) National Security Division (NSD) Counterintelligence and Export Control Section and the U.S. Attorney’s Office for the Southern District of Texas (SDTX) announced the first-ever declination against an acquirer and its affiliates under NSD’s Voluntary Self Disclosures in Connection with Acquisitions Policy (the “M&A Policy”). The current version of the M&A Policy, promulgated in March 2024 as part of revisions to NSD’s Enforcement Policy for Business Organizations (the “NSD Enforcement Policy”), is aimed at incentivizing acquiring companies to make timely disclosures of misconduct uncovered during the M&A process, cooperate with subsequent investigations, and quickly remediate the behavior at issue.
The declination was part of a broader set of resolutions, including a non-prosecution agreement (NPA) with the acquired company and a plea agreement with the acquired company’s former chief executive officer (CEO), that was coordinated between DOJ and other agencies, including the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Commerce Department’s Bureau of Industry and Security (BIS).
These resolutions follow the DOJ Criminal Division’s May 12, 2025 announcement of its new approach to white collar and corporate enforcement, as discussed in our prior client alert. The Criminal Division’s announced priorities highlight national security-related offenses, including sanctions evasion, as a key area of focus. These resolutions, reached during the Biden Administration but announced during the Trump Administration, offer an example of how DOJ, in coordination with other federal agencies, enforces such priorities in the M&A context. The resolutions also demonstrate the substantial benefits that can be obtained by acquirors, and potentially acquirees, if they promptly discover potential wrongdoing, make timely voluntary self-disclosures, carry out swift remedial action, and cooperate with subsequent action by authorities.
Background
According to the resolution documents, after acquiring Texas-based Unicat Catalyst Technologies LLC (Unicat), private equity firm White Deer Management LLC (White Deer) discovered that Unicat’s co-founder and former CEO Mani Efran had conspired to violate U.S. economic sanctions by directing the company to offer bids and conduct sales to customers in Iran, Syria, Venezuela, and Cuba over the course of roughly seven years. This directive resulted in 23 illegal sales of chemical catalysts used in oil refining and steel production.
In addition to the illicit sales, some of which also violated export control laws, Efran and others made false statements in export documents and financial records regarding the locations and identities of customers, deceived some Unicat employees regarding the legality of conducting business with customers subject to sanctions, and falsified invoices to reduce tariffs on catalysts imported from China. In total, Unicat generated about $3.33 million in revenue from unlawful sales and caused a loss to the United States of nearly $1.66 million in taxes, duties, and fees. Under Efran’s leadership, Unicat made representations and warranties that the company was following U.S. sanctions and export control laws during acquisition negotiations. In June 2021, after Unicat had been acquired by White Deer, Unicat’s new leadership discovered dealings with a customer based in Iran, a comprehensively sanctioned jurisdiction. The company immediately cancelled the pending transaction, and, over the next month, directed outside counsel to launch an investigation. After determining there were possible criminal violations by Unicat employees related to multiple transactions, both companies made multiple voluntary self-disclosures to the U.S. government, including DOJ, OFAC, and BIS. A total of approximately ten months had passed between Unicat’s September 2020 acquisition and the voluntary self-disclosures of the misconduct.
Declination of Prosecution Pursuant to the M&A Policy
DOJ’s declination was made pursuant to NSD’s M&A Policy, a part of its NSD Enforcement Policy. The policy, most recently updated in March 2024, offers protections for acquiring companies against criminal prosecution for misconduct they uncover during, or shortly after, an acquisition. Specifically, these protections apply when an acquiror 1) concludes a “lawful, bona fide acquisition of another company;” 2) makes a timely and voluntary self-disclosure to NSD of potential violations of criminal laws by the acquired entity that bear on the national security of the United States; 3) unreservedly cooperates with any NSD investigation; and 4) “timely and appropriately remediates the misconduct.” When an acquiror qualifies for protections, NSD “generally” will not seek a guilty plea while there will be a presumption that it will decline to prosecute. Furthermore, the M&A Policy indicates that while NSD will not automatically extend a similar presumption to the acquired company, it will ascribe credit for self-disclosure by the acquiror, and it will separately examine whether the acquiree meets any of the requirements to be given benefits under the NSD Enforcement Policy.
According to the declination letter, several factors in this case influenced DOJ’s determination that White Deer’s voluntary self-disclosure warranted a declination. Specifically, DOJ highlighted that:
- the acquisition of Unicat was lawful and bona fide;
- there was no legal requirement for the acquirors to divulge any discovered misconduct;
- the disclosure was still timely despite occurring ten months after the Unicat acquisition due to a number of factors, including an investment strategy where White Deer sought to merge Unicat with another company it didn’t purchase until months later, delays to post-acquisition integration efforts stemming from the COVID-19 pandemic, the immediate cancellation of a deal with an Iranian customer by new leadership after learning of it (thereby reducing the potential for additional national security harm), and the rapid disclosure to NSD, which occurred only one month after White Deer became aware of potential violations and before their full extent was understood;
- the provision of “exceptional and proactive” cooperation to the government, characterized by quickly finding and disclosing all relevant facts, identifying relevant electronic records on employee and agent personal devices and messaging accounts, providing foreign records in accordance with applicable law, and agreeing to ongoing assistance with government investigations and prosecutions; and
- the redress of the misconduct within a year of becoming aware of it, including by firing and disciplining employees involved in it and creating and deploying a compliance and internal controls regime effective at preempting analogous future issues.
The declination letter also noted that prosecution was declined in spite of “aggravating factors at the acquired entity,” such as the involvement of senior management in the wrongdoing, since the source of those aggravating factors had since been removed.
In DOJ’s announcement of the resolution, Assistant Attorney General for National Security John A. Eisenberg highlighted that the decision to “decline prosecution of the acquiror and extend a non-prosecution agreement to the acquired entity…reflects the National Security Division’s strong commitment to rewarding responsible corporate leadership.”
Multiple Resolutions Involving Coordination Among Agencies
While DOJ declined to prosecute acquiror White Deer, DOJ did require that acquiree Unicat enter a Non-Prosecution Agreement (NPA) and forfeit $3,325,052.10, the value of the company’s revenue earned in connection with the violations of sanctions and export control laws. In the NPA, DOJ emphasized certain facts that made the agreement appropriate despite the existence of aggravating factors, including Unicat receiving credit for White Deer’s timely voluntary self-disclosure under the M&A Policy, Unicat’s extensive and proactive cooperation with DOJ’s investigation, including a thorough internal investigation, and its wide-ranging remediation efforts, including creation of a new compliance program.
Notably, DOJ coordinated this resolution with OFAC and BIS, with Unicat agreeing to pay $3,882,797 in administrative penalties to OFAC as part of a corresponding settlement for violations of sanctions laws, and $391,183 in administrative penalties to BIS as part of a similar settlement for violations of export control laws. OFAC allowed for the entire NPA forfeiture payment to count towards its penalty, requiring payment of a residual sum of $557,745, while BIS allowed for the payment to OFAC to be put towards the balance owed to it. OFAC noted that while the maximum statutory civil penalty for the matter was $8,035,626, the settlement amount reflected credit for actions including, but not limited to, voluntary self-disclosure, cooperation with investigations, and remedial measures after discovery of the misconduct, and was the appropriate penalty despite “egregious” violations by former Unicat leadership, employees, and representatives.
Unicat also agreed to pay $1,655,189.57 in restitution to the Department of Homeland Security, Customs and Border Protection (CBP) for tariff avoidance violations, while the former CEO, Mani Erfan, consented to a money judgement of $1,600,000 as part of a guilty plea to charges of conspiring to violate sanctions and conspiring to commit money laundering.
Key Takeaways
Acquirors Have New Guidance to Help Mitigate Criminal Risks
This first-ever declination under the M&A Policy provides important guidance to businesses that frequently acquire other entities on steps to take to mitigate the risk of government enforcement associated with criminal violations of national security laws by acquirees. By uncovering and making a timely voluntary self-disclosure of any misconduct, offering proactive and extensive cooperation to the government, and undertaking prompt effective remediation, acquirors may be able to secure favorable outcomes, such as the declination of prosecution, even where aggravating factors are present. In addition, credit for meeting the requirements of the M&A Policy by the acquiror can extend to the company it acquired, another potentially significant benefit of taking advantage of the policy.
Coordinated Multi-Agency Resolutions
The varied resolutions reached in this case provide an illustrative example of how various government agencies are coordinating their efforts to enforce national security-related laws. DOJ reached distinct resolutions, including a declination, an NPA, and a plea agreement, not only with the companies involved, but also with at least one culpable employee. In addition, DOJ coordinated with OFAC and BIS to reach parallel administrative settlements, with OFAC citing similar factors as DOJ when justifying the penalties it imposed. This case demonstrates that companies can expect violations of national security laws, especially those related to economic sanctions and exports controls, to prompt enforcement action by multiple government stakeholders.
Navigating the Administration’s Enforcement Priorities
Enforcement of national security laws has been announced as a key area of focus for the DOJ. In the context of this enforcement environment, these resolutions provide a roadmap for steps acquiring companies can take to mitigate enforcement risk during the M&A process, including maintaining robust diligence throughout the process, and, in cases where wrongdoing is discovered, being prepared to respond swiftly and transparently.
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