On June 16, 2025, the U.S. Department of Justice (DOJ) announced that it had declined to prosecute a private equity firm for its acquired portfolio company’s sanctions and export violations between 2014 and 2021. The declination marks the first application by the DOJ’s National Security Division (NSD) of its Mergers & Acquisitions Policy, issued in March 2024 as part of its Enforcement Policy for Business Organizations.
Background
From 2014 to 2021, the portfolio company engaged in at least 23 sales of chemical catalysts to customers in Iran, Venezuela, Syria, and Cuba – transactions that violated multiple U.S. sanctions regimes under the International Emergency Economic Powers Act and the Trading with the Enemy Act. The company’s exportation of catalysts from the United States also violated the Export Control Reform Act.
In addition, the DOJ alleged the company had falsified export documents, sales invoices, and internal financial records to conceal these transactions and that it had undervalued Chinese imports on customs documents, avoiding $1.66 million in tariffs and duties.
The private equity (PE) firm acquired the subject portfolio company in June 2021 along with a separate UK-based entity. Shortly thereafter, the company’s new CEO discovered a pending transaction with an Iranian customer during post-closing integration. The new CEO immediately canceled the deal, and the PE firm promptly retained outside counsel and initiated an internal investigation.
Although the PE firm did not make its disclosure to the DOJ until 10 months after closing – falling outside the safe harbor’s default six-month window – the DOJ deemed the disclosure timely because: (1) the violations were not uncovered during pre-acquisition due diligence, despite review by counsel; (2) the COVID-19 pandemic delayed integration efforts; (3) the PE firm disclosed the conduct just one month after discovery and before knowing all the facts; and (4) the company took immediate steps to prevent further harm, including terminating the suspect transaction.
The DOJ’s declination letter emphasized the PE firm’s cooperation, full disclosure, and timely remediation, which included termination and discipline of culpable employees and the implementation of enhanced internal controls and compliance procedures.
The DOJ also entered into a nonprosecution agreement with the portfolio company, which accepted responsibility for the violations and agreed to nearly $10 million in penalties and forfeiture. And the company’s former CEO pleaded guilty to conspiracy to violate U.S. sanctions and related offenses in August 2024.
Key Takeaways
As the first application of the NSD’s M&A Policy, this matter informs how the government will approach corporate criminal enforcement, including acquiring entities, in a high-profile space.
Sanctions and Export Controls Are Top DOJ Enforcement Priorities. This enforcement action reflects the DOJ’s sharpened focus on sanctions enforcement – an area within its national security enforcement priorities and one that has recently been declared a focus of the DOJ’s Criminal Division as well (as discussed in a prior Alston & Bird advisory). This focus implicates companies in a wide range of industries and is yet another reminder of the significant degree to which companies in industries involving exports, international supply chains, and cross-border sales should expect and prepare for scrutiny.
Heightened Risk for Private Equity. This DOJ action highlights the significant enforcement risk for PE firms, given the nature and frequency of their acquisition activity. It sends an unmistakable message to PE firms that they are by no means off the DOJ’s radar and that their actions and decisions in acquiring and integrating target companies carry significant risk and must be undertaken with an eye toward subsequent enforcement scrutiny.
Safe Harbor Enforcement and Flexibility. The NSD showed willingness to deem disclosures outside the six-month window prescribed by its M&A Policy “timely” when supported by strong factual justification, including, as here, when late disclosures are made “before obtaining a complete understanding of the nature and full extent of the misconduct.”
A Pragmatic DOJ Approach to Pre-acquisition Due Diligence. Despite a lengthy period of violations, the NSD does not appear to have taken the view that the PE firm’s pre-acquisition due diligence was inadequate. This suggests a realistic view of the pre-acquisition due diligence process by the DOJ, consistent with the purposes of the M&A Policy.
Prompt and Robust Integration Essential. Prompt and thorough post-acquisition due diligence and integration were significant drivers of the DOJ’s decision-making, underlining the importance of that approach by acquirers.
The Importance of Cooperation and Remediation. The DOJ cited the PE firm’s “exceptional and proactive cooperation,” which included identifying culpable individuals, proactively identifying foreign-located data and personal device content, and agreeing to ongoing cooperation with the DOJ. It also credited the firm’s remedial actions, which included appropriate employee discipline and compliance improvements, as well as the fact that these actions were taken less than a year from the date of the discovery of the misconduct.
If you have any questions, or would like additional information, please contact one of the attorneys on our White Collar, Government & Internal Investigations team or one of the attorneys on our Investment Funds team.
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