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Enforcement Edge
May 24, 2024

DOJ National Security Division Announces First-Ever Decision Not To Prosecute Under New Enforcement Policy

Enforcement Edge: Shining Light on Government Enforcement

On May 22, 2024, the National Security Division (NSD) of the U.S. Department of Justice (DOJ) issued its first-ever corporate declination under its Enforcement Policy for Business Organizations (NSD Enforcement Policy) to Sigma-Aldrich Inc. (doing business as MilliporeSigma). The declination came after the company disclosed potential export controls violations stemming from an employee’s scheme to export nearly US$14 million worth of controlled substances to Chinese labs. NSD’s decision to decline enforcement action illustrates how prompt disclosure, full cooperation, and timely remediation action may earn lenient treatment from NSD.

According to the declination letter, a MilliporeSigma salesperson conspired with others from 2016 to 2023 to divert fraudulently purchased MilliporeSigma products — including chemical compounds subject to the International Traffic in Arms Regulations and the Export Administration Regulations — to China. In doing so, the MilliporeSigma salesperson falsely represented to the company that the orders were being placed by individuals affiliated with a U.S. university stockroom. Once the orders were delivered to the university stockroom, then a conspirator apparently diverted the items to others for shipment to China. To avoid U.S. government scrutiny, the conspirators made false representations about the value and contents of the China-destined shipments.

The scheme continued until MilliporeSigma compliance personnel identified suspicious orders. The company voluntarily disclosed the purported misconduct to NSD only a week after hiring outside counsel, despite not having completed its internal investigation. This decision earned points with the government, with NSD Assistant Attorney General Matthew G. Olsen noting that MilliporeSigma “did not sweep the misconduct under the rug. Instead, the company made the early decision to cooperate.”

The declination letter also emphasizes MilliporeSigma’s “exceptional and proactive cooperation” in disclosing all known facts about the purported misconduct and providing DOJ with evidence which enabled the government to establish probable cause to search for further evidence of the crimes. MilliporeSigma also “timely and appropriately” remediated, including by terminating the salesperson who engaged in the misconduct and by making improvements to its internal controls and compliance program.

In addition to satisfying the requirements of the NSD Enforcement Policy — (1) voluntary self-disclosure, (2) full cooperation, and (3) timely and appropriate remediation — DOJ also highlighted two other mitigating factors: (1) the scheme did not present a significant threat to national security because the concentrations and quantities were low and most shipments would not have necessitated an export license and (2) MilliporeSigma did not receive a significant benefit from the misconduct, and in fact, was “victimized by the conspirators’ scheme” since the conspirators fraudulently obtained discounted products and free overnight shipping.

The MilliporeSigma declination highlights the value of prompt voluntary self-disclosure. It further shows how DOJ is extending its white-collar enforcement playbook into the national security arena, and sends a signal to other companies that DOJ is willing to be lenient — provided the company earns it.

For questions about export control and sanctions laws and related voluntary disclosure policies, contact the authors or any of their colleagues in Arnold & Porter’s White Collar Defense & Investigations or Export Control & Sanctions practice groups.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.