Private equity acquirer avoids “Unicat-astrophe” following voluntary disclosures to the DOJ

The US Department of Justice (DOJ) announced that it has formally declined to prosecute private equity firm White Deer Management LLC (White Deer) and certain of its affiliates in connection with criminal violations of US sanctions and export laws committed by Unicat Catalyst Technologies LLC (Unicat), a company White Deer acquired in 2021. In a related move, the DOJ entered into a non-prosecution agreement with Unicat. The White Deer decision was outlined in a declination letter from the DOJ’s National Security Division (NSD), Counterintelligence and Export Control Section (CES), and the United States Attorney’s Office for the Southern District of Texas, dated December 19, 2024.

The declination represents the first since the DOJ , after announcing in October 2023 its safe harbor policy for voluntary self-disclosures made in connection with mergers and acquisitions (Safe Harbor M&A Policy), incorporated that policy in March 2024 into an updated version of the NSD’s Enforcement Policy for Business Organizations (VSD Policy). The declination provides a strong indication of the DOJ’s commitment to adhering to the Safe Harbor M&A Policy updates to the VSD Policy implemented during the previous presidential administration and further clarifies that the DOJ will reward satisfactory voluntary self-disclosures and remediations of potential criminal violations discovered as part of an acquisition. White Deer’s swift action and substantial cooperation, touted by the DOJ in its declination letter, provide an example of one way to deal with significant regulatory and enforcement problems that can arise in an acquisition, in this case resulting in substantial benefits to White Deer.

Unicat’s unlawful conduct and former CEO’s plea deal

According to the DOJ, from May 2014 through August 2021, Unicat’s then-CEO and co-founder conspired with others, including at least one other Unicat employee, to cause Unicat to make at least 23 unlawful sales of chemical catalyst products and related services. These sales were used in oil refining and steel production by customers in Iran, Venezuela, Syria, and Cuba as part of a scheme to unlawfully export chemical catalysts to those sanctioned jurisdictions – generating more than $3.3 million in revenue. The scheme involved:

• False export documentation


• Misrepresentation of customer identities and destinations, and


• Falsified invoices to evade $1.66 million in tariffs on Chinese imports.

Unicat’s former CEO pleaded guilty in August 2024 to conspiracy to violate US sanctions, concealment offenses, and international money laundering, also agreeing to forfeit $1.6 million. The plea underscores the DOJ’s focus on individual accountability in corporate crime cases and highlights the increased risks to corporate executives and gatekeepers who engage in or facilitate violations, such as export control and sanctions evasion schemes.

Why the DOJ declined to prosecute White Deer

The successful prosecution of Unicat’s former CEO was made possible mainly because of the voluntary disclosure and cooperation provided by White Deer following its acquisition of Unicat. Significantly, the DOJ acknowledged in the declination letter that White Deer had no actual knowledge of Unicat’s misconduct prior to the acquisition and that, as part of the transaction, the sellers of Unicat provided representations and warranties to White Deer about Unicat’s compliance with US sanctions and export control laws. White Deer’s lack of pre-acquisition knowledge apparently resulted (in part) because a junior member of its due diligence team overlooked “at least one of the historical sales agent agreements between [] Unicat and the Iran Agent” that Unicat had made available to it. Nonetheless, it was White Deer’s actions after learning about the misconduct that the DOJ emphasized as underpinning the declination. In particular, the DOJ cited several key reasons for declining prosecution of White Deer and certain of its affiliates:

• Voluntary self-disclosure. The nature of White Deer’s voluntary disclosure of the acquired company’s misconduct was a critical factor. The VSD Policy explicitly states that companies that voluntarily self-report potential criminal conduct before an imminent threat of disclosure or government investigation are eligible for a presumption of declination, provided other requirements are met. The firm’s immediate action upon discovering the violations demonstrated a proactive approach and a commitment to transparency. Even so, White Deer disclosed the misconduct ten months after the completion of its acquisition – well beyond the 180-day post-acquisition period during which the VSD Policy generally determines self-disclosures to be timely. Still, the declination letter found White Deer’s self-disclosure to be sufficient in light of other factors, including White Deer’s immediate cancellation of a pending contract with Iran upon learning of the misconduct and White Deer’s disclosure to the NSD within one month of initiating a self-investigation – “before obtaining a complete understanding of the nature and full extent of the misconduct.”


• Full and proactive cooperation. White Deer’s extensive cooperation with the DOJ’s investigation further aligned with the DOJ's Corporate Enforcement and Voluntary Self-Disclosure Policy requirements. This included providing timely access to relevant documents, making employees available for interviews, and facilitating the government’s understanding of the facts. The VSD Policy emphasizes that full cooperation is necessary to receive the benefits of the policy, and the firm’s actions met or exceeded these expectations.


• Timely and appropriate remediation. White Deer undertook significant remedial measures, such as terminating individuals involved in the misconduct, enhancing internal controls, and strengthening its compliance program. The VSD Policy requires companies to remediate the root causes of misconduct, and the firm’s efforts to improve its compliance infrastructure were viewed favorably by the DOJ.


• Restitution and disgorgement. White Deer agreed to pay restitution and disgorge profits derived from the misconduct, ensuring that it did not retain any benefit from the wrongdoing. The VSD Policy requires companies to pay all disgorgement, forfeiture, and restitution resulting from the misconduct as a condition for declination.


• Declination and non-prosecution despite aggravating factors. The DOJ considered the presence of aggravating factors, such as executive management’s involvement in the misconduct. Nevertheless, the misconduct’s occurrence prior to the acquisition and White Deer’s lack of actual knowledge of such conduct during the acquisition further supported the declination. Indeed, in the separate non-prosecution agreement with Unicat, the DOJ determined that the company was not entitled to a presumption under the VSD Policy that it would receive a non-prosecution deal but determined that one was “appropriate after assessing the severity and prevalence of the aggravating circumstances and the level and degree of the [c]ompany’s cooperation.”

Implications for private equity and corporate acquirers

This case serves as a powerful reminder of the importance of prompt post-acquisition due diligence and compliance integration. The DOJ’s decision reinforces that firms (and their acquisitions) can minimize exposure to criminal liability – even in cases involving serious misconduct affecting US national security – if they:

• Conduct thorough compliance reviews post-acquisition


• Promptly disclose any discovered misconduct


• Cooperate fully with enforcement authorities, and


• Take swift remedial action.

Key takeaways and practical considerations

Corporate acquirers should review and, if necessary, enhance their M&A compliance protocols to ensure alignment with DOJ expectations. Key considerations include:

• Companies engaging in M&A should have robust due diligence processes to identify potential misconduct. Deal teams should be trained on red flags and disclosure obligations.


• The DOJ declined prosecution of White Deer despite the presence of aggravating factors at Unicat, which include the involvement of certain members of Unicat’s previous upper management in the misconduct, because the causes of the aggravating factors were no longer present when the DOJ made the decision to decline prosecution.


• Legal and compliance teams should act decisively and quickly if misconduct is discovered to ensure timely disclosure and remediation. This can be accomplished both by strong leadership and the establishment of well-functioning, rapid-response investigations and escalations protocols, as well as a strong culture of compliance throughout the organization.


• The positive outcome for White Deer was made possible both by its reaction upon learning about the criminal conduct and because its existing compliance mechanisms were well-equipped to manage a challenging situation. Companies should focus on thoughtful, proactive compliance efforts.


• Companies are encouraged to focus on high-risk areas related to their business risks and profile, especially where those risks overlap with specific national priorities, in this case, shipping catalysts and other precursor materials for steel and oil to Venezuela and Iran, including through China. This is consistent with recent remarks delivered by US Deputy Treasury Secretary Michael Faulkender in connection with the modernization of the Bank Secrecy Act (applicable to financial institutions), which he described at a recent meeting of the Bank Secrecy Act Advisory Group: “Treasury is working to change the [Anti-Money Laundering / Countering the Financing of Terrorism] status quo so that the framework focuses on our national security priorities and highest risk areas and explicitly permits financial institutions to de-prioritize lower risks….[F]inancial institutions must be permitted to direct more attention and resources toward higher-risk customers and activities, consistent with an institution’s risk profile, rather than toward lower-risk customers and activities.”


• Post-acquisition, firms should prioritize the integration of compliance policies, procedures, and controls across newly acquired entities. Training and communication about compliance expectations should be provided to all employees, especially those from the acquired company.

For further guidance or assistance in evaluating your compliance program or disclosure strategy, please contact the authors.