Biochem Company Avoids Prosecution After Disclosing Role in China Export Scheme
The U.S. declined to prosecute a Massachusetts biochemical company that was part of an illegal export scheme involving China, the first time DOJ’s National Security Division has offered a corporate declination under its recently updated voluntary self-disclosure program.
The agency said Sigma-Aldrich, doing business as MilliporeSigma, sold biochemical products to Florida residents Pen Yu of Gibsonton and Gregory Munoz of Minneola from 2016 to 2023, who then sold the products to China using falsified export documents. Both Yu and Munoz pleaded guilty this week to one count of wire fraud conspiracy, but DOJ said MilliporeSigma avoided prosecution because compliance officials with the company discovered the scheme and almost immediately notified the government.
Matthew Olsen, chief of DOJ’s National Security Division, said the agency declined to prosecute the company because it didn’t “sweep the misconduct under the rug. Instead, the company made the early decision to cooperate with the Justice Department, resulting in the convictions of responsible individuals.” Olsen said the announcement “reflects the value for companies like MilliporeSigma to quickly self-disclose potential criminal activity.”
DOJ said the Bureau of Industry and Security, the Pentagon’s Defense Criminal Investigative Service, and Homeland Security Investigations are still investigating the case.
Munoz, a MilliporeSigma salesperson, worked with Yu to buy the products at a “deeply discounted” rate before illegally shipping them to China, DOJ said. Munoz “falsely” told his company that Yu was affiliated with a biology research lab at a Florida university, which led MilliporeSigma to give Yu “over $4.9 million worth of discounts and other benefits,” including free overnight shipping. In exchange, Yu gave Munoz thousands of dollars in gift cards.
When the products got to the university stockroom, a stockroom employee “diverted” the goods to Yu, who repackaged them and shipped them to China, DOJ said. Yu made false statements about the goods’ value and contents on export documents to “avoid scrutiny.”
DOJ said MilliporeSigma’s compliance officials eventually flagged the orders as suspicious, and the company hired an outside lawyer who voluntarily disclosed the issue to DOJ’s National Security Division “only a week later.” The company made the disclosure “well before its counsel had completed their investigation and understood the full nature and extent of the scheme,” DOJ said.
The agency also said the company “offered exceptional cooperation” to DOJ prosecutors, “including by proactively identifying and producing documents to the Department that established probable cause to search residences and electronic devices of culpable individuals.” This allowed DOJ to “quickly identify” Yu and Munoz and secure their guilty pleas.
Deputy Attorney General Lisa Monaco said companies are “far better off reporting the violation than waiting for the Justice Department to discover it.”
In its declination letter, DOJ also said it decided against prosecuting MilliporeSigma because the chemical compounds exported to China didn’t “present a significant threat" to national security and mostly didn’t need an export license. The agency also said the company fired the salesperson behind the scheme, improved its internal controls and compliance program, and was “victimized” by the scheme.
DOJ additionally said the company didn’t “unlawfully obtain any gains from the offenses for which it is potentially liable,” and so MilliporeSigma wasn’t required to pay any disgorgement, forfeiture or restitution.
Matthew Axelrod, head of export enforcement at BIS, said universities in particular should review the case for compliance purposes. "Today’s announcement provides yet another fact pattern for universities to beware of -- the misuse of academic institutions by outsiders who seek to obscure the actual customer of controlled items," he said.