Acquirors Beware: PE Firm Escapes DOJ Prosecution, but Acquired Entity Hit With $2 million+ in Penalties

Executive Summary

• On June 16, 2025, the Department of Justice’s (DOJ) National Security Division (NSD) and the U.S. Attorney’s Office for the Southern District of Texas (SDTX) announced the first declination of prosecution of an acquiror – in this case a private equity (PE) firm – under the March 2024 NSD Enforcement Policy that applies to Voluntary Self-Disclosures in Connection with Acquisitions (M&A Policy).
• Specifically, pursuant to the M&A Policy, NSD and SDTX declined to prosecute the private equity firm White Deer Management LLC and three of its affiliates (collectively, White Deer) for U.S. sanctions and export control violations by Unicat Catalyst Technologies, LLC(Unicat), a petrochemical company based in Texas acquired by White Deer in September 2020, that occurred under Unicat’s prior management before the acquisition.
• The acquired entity, Unicat, however, was subject to multiple enforcement actions for the violations, resulting in, among other things, the payment of administrative penalties and restitution to the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC), the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement (OEE) and the U.S. Department of Homeland Security, Customs and Border Protection (CBP) in connection with the underlying sanctions and export control violations, and related customs violations.
• The announcement of the declination echoes previous regulatory guidance and enforcement actions with respect to U.S. sanctions and export controls in the context of M&A transactions. This development also comes at a time when the Trump administration and U.S. Congress are seeking to increase agency budget allocations and resources for sanctions and export control enforcement.
• The specific facts related to this declination by NSD and SDTX, and enforcement actions by OFAC, OEE and CBP, reinforce the importance of pre-acquisition due diligence, negotiation of robust contractual protections including indemnification clauses, as well as prompt, post-closing compliance integration measures by acquirors.

Background: NSD’s M&A Policy

In March 2024, NSD issued an updated Enforcement Policy for Business Organizations (NSD Enforcement Policy) that includes the M&A Policy.  Under the M&A Policy, where an acquiring company makes a qualifying voluntary self-disclosure (VSD) to NSD that meets the following requirements, there is a presumption that NSD will decline to prosecute the acquiror, and the acquiror will not be required to pay a criminal fine or forfeit assets:

• Complete a lawful, bona fide acquisition of another company, as assessed by DOJ against an enumerated list of potential factors included in the M&A Policy;
• Voluntarily and timely (generally, within 180 days after the date the transaction is completed) self-disclose to NSD potential criminal violations of U.S. export controls, sanctions or other laws affecting U.S. national security committed by the acquired entity;
• Fully cooperate with NSD’s investigation; and
• Timely (generally, within one year after the date the transaction is completed) and appropriately remediate the misconduct.

Additionally, if the acquired entity continues to exist as a distinct legal entity following the transaction, NSD will credit the acquiror’s timely VSD to the acquired entity and will consider whether the acquired entity otherwise satisfies the NSD Enforcement Policy’s requirements to receive credit for VSD, full cooperation, and timely and appropriate remediation, such that the acquired entity may obtain the benefits of the NSD Enforcement Policy.

For additional information about the NSD Enforcement Policy and the M&A Policy, please see our prior alert.

Summary of NSD and SDTX Declination and Related Enforcement Actions by OFAC, OEE and CBP

On June 16, 2025, NSD and SDTX announced the declination of prosecution of White Deer, publishing the White Deer declination letter (Declination), Unicat non-prosecution agreement (NPA), and plea agreement of the former chief executive officer and co-founder of Unicat (Former CEO). On the same day, OFAC also published the Enforcement Release regarding its settlement agreement with Unicat.

Here, the underlying pre-acquisition violations by the acquired entity Unicat were, among other things, submitting commercial proposals, bids, and/or selling chemical catalysts used in oil refining and steel production to customers in Iran, Venezuela, Syria, and Cuba in violation of U.S. economic sanctions and, with respect to some of the sales, in violation of U.S. export control laws. Prior to the closing of the acquisition of Unicat, White Deer hired outside legal counsel to perform pre-acquisition due diligence of Unicat’s international operations but did not learn of Unicat’s sanctions violations. Additionally, Unicat’s prior owners provided representations and warranties to White Deer attesting to Unicat’s compliance with U.S. sanctions and export control laws. The former CEO also sought to conceal the misconduct by creating false records. It was only after the closing of the acquisition that White Deer discovered Unicat’s business with Iranian customers, which led to White Deer and Unicat conducting an internal investigation and submitting a VSD to NSD approximately ten months after closing and one month after learning of the sanctions violations. Additionally, White Deer and Unicat self-disclosed the apparent violations of U.S. sanctions and export control laws to OFAC and OEE. Unicat also disclosed to CBP a tariff avoidance scheme to provide invoices that falsely understated the value of certain imported items and thus the tariff duties owed to CBP.

Against this background, NSD and SDTX determined that White Deer’s VSD satisfied the requirements of the M&A Policy, as summarized below, and accordingly, decided to decline prosecution of White Deer with respect to the sanctions and export control violations by Unicat. In doing so, among other things, NSD and SDTX highlighted the following facts with respect to the requirements under the M&A Policy:

• With respect to the timeliness of the VSD, although White Deer made their disclosure to NSD approximately 10 months after the Unicat acquisition, NSD and SDTX determined that the VSD was timely “under all of the relevant circumstances” including, for example, White Deer’s two-stage investment strategy to merge Unicat’s operations with those of a later-acquired business, and the COVID-19 pandemic that significantly delayed post-acquisition integration efforts.
• With respect to cooperation with NSD’s investigation, NSD and SDTX determined that White Deer provided and caused Unicat to provide “exceptional and proactive” cooperation, for example, by proactively identifying, collecting, and disclosing relevant evidence to investigators regarding the misconduct and the individuals involved, including records retained by Unicat employees and agents on personal electronic devices and messaging accounts, foreign language evidence and evidence located overseas (which DOJ noted had been disclosed “in accordance with disclosure restrictions imposed by foreign data privacy laws”). In this regard, NSD and SDTX noted that White Deer’s and Unicat’s cooperation “materially assisted” the government’s investigation, leading to the successful prosecution of the former CEO in connection with the company’s violations.
• With respect to the timely and appropriate remediation of the misconduct, NSD and SDTX determined that White Deer remediated the misconduct in less than one year from the date of its discovery, including by terminating culpable employees, which included Unicat’s previous upper management, disciplining other employees involved in the misconduct, and designing and implementing a comprehensive and robust internal controls and compliance program.

With respect to the acquired entity, Unicat, NSD and SDTX similarly determined that Unicat satisfied the NSD Enforcement Policy’s requirements to receive credit for VSD, full cooperation, and timely and appropriate remediation, and accordingly, determined that the appropriate resolution of this case is a NPA with Unicat, no criminal monetary penalty, and approximately $3.3 million in forfeiture representing the proceeds of the sanctions and export control offenses. 

Separately, Unicat has agreed to pay or has paid in net total approximately $2.2 million in administrative penalties and restitution to (i) OFAC (approximately $3.9 million of which OFAC has agreed to deem approximately $3.3 million satisfied by Unicat’s payment of the forfeiture money judgment pursuant to the NPA), (ii) OEE (approximately $0.4 million, which OFAC has credited towards Unicat’s resolution) and (iii) CBP (approximately $1.7 million) in connection with the underlying sanctions and export control violations, and related customs violations (which concerned a tariff avoidance scheme that the former CEO had devised, which Unicat disclosed to CBP).

Current Regulatory and Enforcement Environment

For PE firms and other acquirors, this case may provide a timely frame of reference in reassessing pre-acquisition diligence processes, as well as post-acquisition compliance policies and procedures, and compliance training, and having other discussions with investment professionals.

The announcement of the Declination echoes previous regulatory guidance and enforcement actions with respect to U.S. sanctions and export controls in the context of M&A transactions (see, e.g., OFAC Enforcement Release dated April 1, 2022 that emphasized “the importance of U.S. companies conducting sanctions-related due diligence” upon acquisition of a new business; see also, A Framework for OFAC Compliance Commitments issued by OFAC in 2019, indicating that acquirors should engage in “appropriate due diligence to ensure that sanctions-related issues are identified, escalated to the relevant senior levels, addressed prior to the conclusion of any transaction, and incorporated into the organization’s risk assessment process”). In this regard, PE firms and other acquirors should note that notwithstanding the declination of prosecution of White Deer, and the timely and appropriate remediation of the misconduct that occurred under prior management of Unicat, the violations resulted in Unicat paying millions of dollars in forfeiture, penalties, and restitution to the relevant agencies.

This development also comes at a time when the Trump administration and U.S. Congress are seeking to increase agency budget allocations and resources for sanctions and export control enforcement.  Notably, this declination was signed in December 2024 under the Biden administration but announced in June 2025 under the Trump administration, which suggests the continued implementation of the M&A Policy regardless of turnover of key personnel in the administration.

This case also demonstrates DOJ’s expectations regarding the robustness of an entity’s data collection efforts when conducting an internal investigation and responding to DOJ requests for information in connection with a potential enforcement action. PE firms and other acquirors should note that when undertaking an internal investigation, it is important to consider whether employees involved in alleged misconduct may have used their personal devices in connection with those activities, the specific applications used (e.g., ephemeral messaging applications like WhatsApp and iMessage), and, outside the United States, whether and to what extent local data protection and data privacy laws permit (i) preserving and collecting information from both company-issued and personal devices, and (ii) disclosing such information to a U.S. government agency.

Key Considerations for PE Firms and Other Acquirors

The specific facts related to this Declination and enforcement actions by OFAC, OEE and CBP reinforce the importance of conducting robust sanctions, export control, customs and other international trade due diligence and negotiating appropriate contractual protections prior to the acquisition of a new entity. Limiting due diligence inquiries, as well as contractual protections, to an acquired entity’s representations regarding its compliance with sanctions, export controls, customs and other international trade laws may not go far enough to detect compliance issues and risks.

• Due Diligence—Acquirors should seek to validate the acquired entity’s diligence responses and/or representations and warranties, for example, through review of public source information, as well as a fulsome review of the data room and relevant documentation. Detentions by and requests for information by CBP and evaluation of HTS classifications of imported items should be included in pre-acquisition due diligence. Notably, the NPA with Unicat indicates that at least one of the historical sales agent agreements between Unicat and its sales representative for Iran had been provided to White Deer during the pre-closing due diligence process but was overlooked during the due diligence review. Acquirors should also assess whether the acquired entity has appropriate, risk-based compliance measures in place to effectively identify and mitigate the international trade risks associated with the acquired entity’s business activities. Evidence of such measures may be in the form of policies and procedures that have been maintained and periodically updated during the statute of limitations period, training materials, and risk assessments or audit reports covering sanctions, export control, customs and/or other international trade areas.
• Contractual Protections—Depending on diligence findings and sanctions, export control, customs and other international trade risks associated with the target, acquirors should consider – in addition to standard representations and warranties regarding historical compliance, business involving sanctioned countries and restricted parties, and implementation and maintenance of policies and procedures – a broad indemnity which covers post-closing investigation and monetary penalties. Careful consideration should be given to the acquiror having control of the conduct of any investigation, defense and settlement, coverage over potential violations (including breaches between signing and closing), and survival period for such claims.

The Declination also underscores the importance of timeliness of post-acquisition compliance integration measures. As soon as possible after closing, acquirors should take active steps to extend their compliance programs, including allocation of sufficient resources and implementation of policies and procedures, training, and monitoring, to the newly acquired business and its management and employees.  Interim measures can mitigate risk given the time-consuming nature of such integration. If violations are identified post-acquisition, acquirors should remediate them appropriately and timely, as well as consider making a timely VSD to NSD (in the case of apparent willful violations) and/or other relevant agencies.  DOJ specifically noted that White Deer and Unicat made the VSD “just one month” after the initial discovery of the misconduct and “before obtaining a complete understanding of the nature and full extent of the misconduct.”