The US Department of Justice (DOJ) has said it won’t bring charges against life-sciences and electronics company Merck KGaA’s North American unit, MillmoreSigma, for proactively disclosing details about a scheme by a company insider and others to export sensitive biochemicals to China.

But two of the men involved in the scheme are certainly being prosecuted and have already pleaded guilty to wire fraud conspiracy charges.

Declination letter

The DOJ’s decision was disclosed in a declination letter issued by the DOJ. The decision to decline to prosecute the business makes Merck KGaA’ the first company to be awarded such a declination under the leniency policy the DOJ’s national security division created in 2019 and revised earlier this year.

In its letter, the DOJ said its investigation found evidence that from approximately 2016 through 2023, a MilliporeSigma salesperson conspired with others to divert fraudulently purchased MilliporeSigma products to the salesperson’s conspirators, who made false statements to agencies of the US government in connection with exporting the products to China.

The MilliporeSigma salesperson processed orders for the conspirators, who had not been approved, by falsely representing that the orders were being placed by individuals affiliated with a US university stockroom, thereby obtaining significant discounts and free overnight shipping that MilliporeSigma provided to the university. These products included chemical compounds that MilliporeSigma had determined were subject to federal export controls.

When the orders arrived at the university stockroom, a conspirator employed by the university diverted them to other conspirators, who repackaged them and shipped them to China. To avoid scrutiny, the conspirators made false statements about the value and contents of the shipments to China in export documents.

NSD’s Enforcement Policy

The DOJ said it decided to decline prosecution of the matter based on an assessment of the factors set forth in the National Security Division’s (NSD’s) Enforcement Policy for Business Organizations.

The policy is designed to help prevent the unlawful export of sensitive commodities, technologies, and services – as well as unlawful transactions with sanctioned countries and designated individuals and entities – and hold those accountable that violate such critical sanctions and export control mandates.

DOJ credited MilliporeSigma for the following timely and fulsome instances of cooperation:

• Timely and voluntary self-disclosure of the misconduct, just a week after retaining outside counsel to conduct an internal investigation and before obtaining a complete understanding of the nature and full extent of the misconduct;
• Exceptional and proactive cooperation, including by disclosing all known relevant facts about the misconduct and the individuals involved and identifying evidence establishing probable cause to search for evidence of the crimes in locations not under MilliporeSigma’s control, along with its agreement to continue to cooperate with any ongoing government investigations and any resulting prosecutions;
• The nature and seriousness of the offense, including that the chemical compounds exported to China through the scheme did not present a significant threat to national security in the quantities and concentrations sold and, in most instances, did not require a license for export;
• The company’s timely and appropriate remediation, including terminating the salesperson who engaged in the scheme and improving its internal controls and compliance program.
• The fact that, although MilliporeSigma obtained some revenue from sales to the conspirators, it was victimized by the conspirators’ scheme to fraudulently obtain significantly discounted products and free overnight shipping. This fraud was, under all of the circumstances, the most serious readily provable offense committed by the conspirators.

It didn’t hurt its case that the Justice Department also determined that MilliporeSigma did not unlawfully obtain any gains from the offenses for which it was potentially liable, which also meant it didn’t have to pay any disgorgement, forfeiture, or restitution under the NSD Enforcement Policy.

Significant case

The actions MilliporeSigma took to enable it to receive a declination letter could serve as a textbook example of what to do to get one: promptly informing the government after becoming aware of the misconduct of all relevant facts, plus a fulsome disclosure of those facts, including misconduct committed by bad actors working with the business. Plus the business must provide timely updates as the investigation progresses and must preserve, collect, and produce relevant documents and other information.

As evidenced by its corporate enforcement polices and the cooperation credit afforded under them, the DOJ has demonstrated clearly how it is focused on companies having compliance-minded leadership.

Beyond just promoting self-disclosure and adding efficiency to its own investigative efforts, the DOJ wants businesses to take an active role in holding themselves to account and bad actors accountable and to make any compliance program adjustments needed to avoid similar problems in the future. When they do all of this early and proactively, regardless of the extra burdens it places on them, the DOJ has show itself willing to pay back the favor.