Texas Firm, Former CEO Fined Millions for Trade Violations; Parent Company Avoids Prosecution

As part of a plea agreement, Unicat Catalyst Technologies agreed to pay more than $3.3 million to DOJ, $3.8 million to the Office of Foreign Assets Control, and $391,183 to the Bureau of Industry and Security for illegal sales and bids involving Iran, Venezuela, Syria and Cuba. The company also was fined $1.6 million by CBP for tariff evasion.

Unicat’s former chief and co-founder, Mani Erfan, pleaded guilty to multiple charges, including conspiring to violate U.S. sanctions, and agreed to pay $1.6 million as part of a separate plea deal.

DOJ said it won’t be prosecuting U.K.-based private equity firm White Deer Management, which bought Unicat in 2021 and reported the violations to DOJ one month after discovering them. DOJ also noted that Unicat employees, including Erfan, hid the illegal transactions from White Deer as the investment firm carried out its “pre-acquisition due diligence” of the Texas company, falsely telling White Deer that it complied with all sanctions and export control laws.

DOJ commended White Deer for disclosing the violations “before obtaining a complete understanding of the nature and full extent of the misconduct,” the agency said in its declination letter. The firm also gave DOJ “exceptional and proactive cooperation,” including by providing information about culpable employees, providing phone messaging records, putting in place a “comprehensive and robust” compliance program, and more.

Although Unicat was penalized by multiple U.S. agencies, OFAC agreed to credit about $3.3 million of its penalty against the fine Unicat owed to DOJ, and BIS agreed to credit its entire penalty against the fine owed to OFAC.

The case marks DOJ’s second declination for trade violations this year following the agency’s April announcement that it wouldn’t be prosecuting a NASA contractor for export control violations after the organization quickly self-reported the breaches and demonstrated “exceptional and proactive” cooperation with the National Security Division (see 2504300038).

John Eisenberg, DOJ’s assistant attorney general for national security, said White Deer “uncovered the misconduct, stopped it, and quickly reported it to the government,” which led to the “successful prosecution” of Erfan.

“Our decision to decline prosecution of the acquirer and extend a non-prosecution agreement to the acquired entity in this case reflects the National Security Division’s strong commitment to rewarding responsible corporate leadership,” Eisenberg said.

DOJ said Erfan worked with at least one other Unicat employee from 2014 through 2021 to make sales and bids involving customers in Iran, Venezuela, Syria and Cuba, including 23 illegal exports of chemical catalysts used in oil refining and steel production to customers in Iran, Venezuela, and Cuba. They made false statements on export documents and financial records about the “true identities and locations” of their customers, “falsely” assuring some company employees that the business was “lawful,” the agency said.

Unicat earned about $3.33 million in revenue from the sales.

DOJ said the illegal sales were orchestrated by Erfan, who knew he needed licenses from either OFAC or BIS to do business with people in Iran, Cuba, Syria and Venezuela, “but chose not to seek such licenses and instead sought to conceal his illegal activity from the U.S. government and others.” Erfan directed about six “subordinate employees” in the sales, logistics, and accounting departments to carry out the illegal deals by arranging shipping logistics, creating false business records, and ordering catalysts from manufacturers in China that were then shipped directly to customers in the sanctioned countries.

In some cases Erfan “hid the illegal nature of the transactions” from his employees, but on other occasions Unicat employees, co-owners, and other board members knew about them. To try to hide the deals from others, employees sometimes used coded language in messages -- including by referring to Iran as “I” -- deleted references to sanctioned countries or parties from Unicat’s business records, created false shipping labels and certificates of origin, transshipped through third-party countries, created false business records and used non-Unicat email and messaging accounts to discuss the illegal transactions. They also falsely reassured other Unicat employees that the transactions were legal, gave certain employees “false customer names,” used multiple bank accounts, both in the U.S. and abroad, to carry out the deals, and more.

DOJ said Erfan and Unicat’s board of directors during a December 2018 board meeting discussed the illegal Iran dealings, which they sometimes carried out with the help of a company based in the United Arab Emirates. After the meeting, Erfan emailed his “conspirators” in Iran and said: “We have to be very clear no mention of any thing except Dubai UAE Plant, UAE destination, UAE client ... no end user mention on any document but UAE.”

Between 2014 and 2021, DOJ said Unicat carried out at least 19 transactions with customers in Iran for $1,917,609, which included sales of Unicat catalyst products. On at least three of these transactions, Unicat exported catalysts from the U.S. to a customer in Iran through the UAE without a U.S. export license, falsely listing the ultimate consignee of export control documents. On at least two occasions, Unicat agents provided “on-site technical consulting services” in Iran, DOJ said.

The agency said many of Unicat’s Iranian customers were petrochemical refineries, petrochemical companies, and steel plants owned by the Iranian government, including the Lavan Refinery, the Esfahan Steel Plant, the Bandar Abbas Refinery, the Morvarid Petrochemical Company, the Persian Gulf Star Refinery, Farnikan Engineering Solutions, and Arya Sasol Polymer Company. Some of the customers were sanctioned by OFAC.

Unicat and Erfan also knowingly sold more than $37,000 worth of catalysts to end-users in Cuba between 2014 and 2018; submitted a bid relating to an end user in Syria in March 2020; and submitted multiple proposals through other sales agents to sell Unicat products to sanctioned customers in Venezuela from at least 2020 through 2021.

Those customers included the Super Octanos petrochemical facility, Petroquimica de Venezuela, the Comsigua facility, Fertilzantes Nitrogenados de Oriente, Venprecar, and Orinoco Iron, many of which had ties to the Venezuelan government and were subject to sanctions. In May 2020, DOJ said Unicat sold more than 100 steel drums of petrochemical catalysts to Venezuelan state-owned Orinoco Iron for more than $1.3 million.

Before Unicat was bought by White Deer, White Deer hired an outside lawyer to carry out due diligence of Unicat’s “international operations.” DOJ said White Deer didn’t discover the company's violations, partly because Unicat gave it “representations and warranties” that it was complying with all export controls and sanctions. But DOJ said at least one of the “historical sales agent agreements” between Unicat and an Iran agent had been provided to White Deer during the pre-closing due diligence process, and it was “overlooked by a junior attorney performing the due diligence review.”

White Deer discovered Unicat’s business with Iran in June 2021 after Unicat’s new CEO traveled to the U.S. to visit Unicat’s Texas headquarters for the first time after travel restrictions were lifted following the height of the COVID-19 pandemic. During the visit, the new CEO was told of a pending transaction with an Iranian customer by a logistics employee. The CEO canceled the transaction “immediately upon learning” about it, DOJ said, and hired a new outside lawyer to investigate.

White Deer and Unicat submitted a voluntary disclosure to DOJ’s National Security Division one month later, the agency said, and it also self-disclosed violations of sanctions and export control laws to OFAC and BIS.

DOJ noted that White Deer submitted the disclosure about 10 months after acquiring Unicat, but the agency said the disclosure was still “timely under all of the circumstances,” including the fact that the Unicat acquisition was the first stage of a two-stage investment strategy to merge Unicat’s operations with those of a later-acquired business. DOJ said the disclosure was made just three months after the acquisition of the second business closed and “efforts to integrate the two businesses had begun.”

The agency also noted that White Deer’s “post-acquisition integration efforts were significantly delayed by the COVID-19 pandemic” and said the firm “acted to mitigate the imminent threat of any further national security harm by immediately canceling a pending transaction with Iran upon learning of the misconduct.” It also disclosed “all known relevant facts about the misconduct and the individuals involved,” “proactively” identified records for DOJ, including messages on personal electronic devices both inside and outside the U.S., and agreed to continue cooperating with any government investigations and prosecutions.

Within one year after finding out about the violations, White Deer also fired the responsible employees, disciplined others, and designed and implemented a “comprehensive and robust internal controls and compliance program that has proven effective in practice at identifying and preventing similar potential misconduct,” DOJ said.

The agency said it decided not to prosecute White Deer “despite the presence of aggravating factors” at Unicat, including the fact that senior management was involved in the violations. DOJ said “the causes of those aggravating factors are no longer present at either Unicat or” White Deer.

OFAC also listed several aggravating factors in its penalty notice, saying Unicat’s “conduct caused significant harm to the foreign policy and national security objectives” of U.S. sanctions programs. The catalysts that Unicat sells are “essential technology in the oil, gas, steel, and petrochemical industries,” which are “key revenue sources” for the Iranian and Venezuelan governments.

“Despite awareness of OFAC sanctions and the implications that its conduct had on U.S. foreign policy and national security objectives,” the agency said, “Unicat continued to engage in the conduct for a prolonged period.”

OFAC added that White Deer hired a global trade compliance manager and U.S. trade compliance manager for Unicat, and they will carry out “periodic internal trade compliance audits to assess compliance with sanctions and export policy and procedures.” The company also agreed to regularly train employees on export controls and sanctions and committed to incorporate sanctions compliance language into agreements with sales representatives, consultants and other parties while renegotiating and replacing past contracts to include that new language. The firm also said it would “promote a company culture that prioritizes sanctions compliance throughout the entire organization," OFAC said.

DOJ said the resolution marks the first time since the creation of the agency’s Mergers and Acquisitions Policy in March 2024 that DOJ has declined the prosecution of an acquirer for self-reporting criminal violations discovered at an acquired entity.