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On April 30, 2025, the U.S. Department of Justice’s (“DOJ”) National Security Division (“NSD”) announced that it had issued a declination letter to the Universities Space Research Association (“USRA”) after it self-disclosed U.S. export control violations committed by a former employee. According to the NSD, this employee wilfully exported flight control and optimization software to a Chinese university without the requisite export licenses.
This declination, which comes approximately one year after the NSD announced its first declination under the its March 2024 Enforcement Policy for Business Organizations (“NSD Enforcement Policy”), demonstrates the new U.S. presidential administration’s continued willingness to encourage voluntary self-disclosure, at least in the export controls context. This may bode well for similar policies issued under the Biden administration, including the DOJ Criminal Division’s Corporate Whistleblower Rewards Pilot Program (discussed here), which still appears to be live.
In May of last year, we discussed the NSD’s first declination to prosecute under the NSD Enforcement Policy. That case involved MilliporeSigma, a subsidiary of multinational science and technology company Merck KGaA. In that case, a MilliporeSigma salesperson allegedly conspired with others to divert products to China using falsified export documents.
The USRA case also involves exports to China. During its investigation, the NSD determined that in April 2016, USRA contracted with NASA to, among other things, license and distribute aeronautics-related flight control software. A USRA program administrator, Jonathan Soong, was responsible for performing due diligence on potential purchasers to ensure that the sale or transfer of licenses complied with applicable laws. Later, USRA discovered that, between April 2017 and September 2020, Soong willfully facilitated the sale and export of the flight control and optimization software to the Beijing University of Aeronautics and Astronautics without obtaining the necessary permits. Soong knew that the recipient was on the Commerce Department’s Entity List based on its involvement in the development of military rocket systems and drones.
Soong used an intermediary to facilitate the software sales to avoid detection and embezzled at least $161,000 in software license sales by directing purchasers to make payments to his personal bank account. Within days of learning of Soong’s conduct, the company self-disclosed the crime to NSD. According to the NSD, “[w]hat the company did [after learning of the crime] made all the difference in the Government’s decision not to prosecute it: the company took swift and proactive measures to disclose the employee’s wrongdoing, provide all known facts, and cooperate – and continue to cooperate – with the government’s investigation.”
Soong was sentenced to 20 months in prison for these violations, along with three years of supervised release, and was required to pay nearly $170,000 in restitution.
The NSD’s decision not to prosecute was based on the following considerations:
As USRA had not unlawfully obtained any gains from the offenses, the NSD did not require USRA to pay any disgorgement, forfeiture, or restitution under the NSD Enforcement Policy.
This case demonstrates that the new presidential administration remains willing to incentivize voluntary self-disclosure. This may suggest that the Biden administration’s many recent policies aimed at encouraging self-disclosure will remain in place, though this is a developing area and it may be some time before we know for sure.
Two of the factors considered by the NSD in declining to prosecute are telling. First, it is important for companies that identify potential misconduct to evaluate as soon as reasonably practicable whether a voluntary disclosure is sensible. Here, the company made its voluntary disclosure before the internal investigation was complete. That is not always feasible; the individual’s admission of wrongdoing likely affected the timing of the self-report. Second, while the merits of self-disclosure will vary on a case-by-case basis, the company’s status as a victim here likely heavily weighed toward self-disclosure. The analysis is not always so simple, though, especially when a company received a substantial benefit from the wrongdoing (and therefore is less likely to be viewed by the DOJ as a victim). Nonetheless, self-disclosure may still be warranted and should be carefully considered with the assistance of experienced outside counsel.
13 May 2025
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