Private equity firm dodges charges by quickly disclosing information

In June 2025, the United States Department of Justice (DOJ) made a significant announcement regarding a private equity firm and its affiliates. The firm avoided prosecution by voluntarily disclosing criminal violations of US sanctions and export laws committed by a company it had acquired. This decision marked a pivotal moment as it was the first time the DOJ chose not to prosecute an acquiring company under the M&A Safe Harbor Policy, established in October 2023. The case served as a notable example of the advantages of swift voluntary self-disclosure for private equity firms and other acquirors who uncover criminal violations post-merger or acquisition.

The background of the case reveals that White Deer Management LLC, a private equity firm, and its affiliates were in the spotlight. After White Deer acquired Unicat Catalyst Technologies LLC in Texas, it came to light that Unicat had a troubling history of sanctions and export control violations. Additionally, Unicat had engaged in fraudulent activities such as falsifying invoices to reduce tariff payments. Upon discovering these illicit activities, White Deer took immediate action by halting the unlawful practices, seeking legal counsel, and voluntarily disclosing the potential violations to the DOJ’s National Security Division (NSD) before concluding its internal investigation.

The wrongdoing uncovered at Unicat was severe and extensive. Unicat’s former CEO, who was also a seller of the business, was involved in a conspiracy to violate US sanctions and export control laws by illegally selling specialized chemical catalysts to Iran, Venezuela, Syria, and Cuba. To conceal these illegal transactions, the perpetrators falsified export documentation and financial records, misrepresenting customer identities and deceiving employees into believing that the sanctioned sales were legitimate. Unicat profited approximately $3.33 million from these illicit sales.

Furthermore, beyond the violations related to sanctions and export controls, Unicat had also engaged in other trade infractions. The company’s executives were found to have falsified invoices to lower tariffs on imports of Chinese-origin catalysts. By undervaluing Chinese imports, Unicat evaded roughly $1.66 million in customs duties, taxes, and fees. During the sale process, Unicat deliberately concealed these issues from the buyer by providing false contractual assurances of compliance with US sanctions and export laws.

Following the acquisition, White Deer took significant steps to address the misconduct. When a newly appointed CEO gained access to the premises (delayed by COVID-19 restrictions) and discovered a dubious transaction with an Iranian customer, White Deer promptly canceled the deal, engaged legal counsel, initiated an internal investigation, and made a voluntary self-disclosure to the DOJ/NSD within about a month of confirming potential criminal violations. Over $4 million was spent on investigation and remediation efforts, which included conducting a thorough internal investigation, disclosing foreign records, terminating involved employees, implementing a risk-based compliance policy, appointing a trade compliance manager, conducting audits and risk assessments, and enhancing compliance requirements in third-party agreements.

The regulatory outcomes of this case were noteworthy. The DOJ decided to forego prosecuting White Deer as the acquiror, attributing this leniency to the firm’s rapid disclosure and full cooperation. This marked the first known instance of the M&A Safe Harbor Policy being applied to spare an acquiring entity from prosecution. DOJ officials emphasized their commitment to rewarding responsible corporate behavior when companies discover misconduct, intervene, and promptly report it post-acquisition. The key factors that led to this outcome included White Deer completing a legitimate acquisition, no previous obligation to disclose the misconduct, exceptional cooperation, and timely and effective remediation of the violations.

In conclusion, the case of White Deer Management LLC and Unicat Catalyst Technologies LLC serves as a compelling example of the benefits of voluntary self-disclosure in the realm of M&A transactions. By swiftly addressing and disclosing criminal violations, companies can potentially avoid prosecution and demonstrate a commitment to ethical business practices. This instance highlights the importance of post-acquisition due diligence, compliance efforts, and cooperation with regulatory authorities in safeguarding the integrity of business transactions.