Contract analysis

From: Victoria Chambers <vchambers@calderwoodharkness.com> To: Marcus Wellbourne <mwellbourne@dunmoreenergy.com> Cc: Callum Renshaw <crenshaw@dunmoreenergy.com> Date: Fri, 28 Jun 2024 05:47:00 -0000 Subject: DOJ Declination Letter Received — Matter Closed

I am very pleased to report that earlier today we received a formal declination of prosecution from the Department of Justice, National Security Division, Counterintelligence and Export Control Section, in the matter of Dunmore Energy Holdings Ltd. The letter was issued by Assistant U.S. Attorney Meredith Calloway and formally closes the DOJ inquiry that originated with the issuance of grand jury subpoena GJ No. 22-4

I want to underscore what this result means. A declination is the most favorable resolution that could have been achieved — it means no criminal charges, no deferred prosecution agreement, and no non-prosecution agreement carrying ongoing obligations or monitorship. This outcome was far from assured. As you know, the investigation concerned 14 crude oil swap transactions totaling approximately $218.7 million in notio

**Factors Contributing to the Declination**

While the declination letter itself is brief, as is typical, the DOJ's decision is consistent with the factors weighed under the Corporate Enforcement Policy (as updated in September 2022). I want to highlight the key elements that, in our assessment, drove this outcome:

- *Voluntary self-disclosure and early cooperation.* Dunmore engaged counsel promptly on April 14, 2022 — before the grand jury subpoena was even served — and began cooperating with the DOJ at the earliest opportunity. Our initial proffer session took place on July 15, 2022.

- *Thorough internal investigation.* We conducted a comprehensive investigation spanning six jurisdictions, which involved the review of 2,347,812 documents (438,916 deemed responsive), 47 witness interviews conducted across three rounds, and the preparation and submission of a 176-page internal investigation report delivered to DOJ on May 15, 2023.

- *Forensic accounting cooperation.* Dunmore fully shared the forensic findings of Ridgeline Advisory Group regarding the tainted transactions and the $34.2 million in structured payments routed through Crescent Commercial Bank PJSC.

- *Voluntary disgorgement.* Dunmore's voluntary payment of $8.75 million to the U.S. Treasury on November 30, 2023, representing estimated net profits attributable to the 9 tainted swap transactions, was a significant factor in demonstrating good faith.

- *Remediation.* The appointment of Priya as Chief Compliance Officer in August 2022, the engagement of Pemberton Investors Solutions LLC, the Board's formal adoption of the Enhanced Sanctions & Export Controls Compliance Program on October 1, 2023, and the supplemental remediation report submitted to DOJ on January 15, 2024 collectively demonstrated a genuine institutional commitment to compliance reform.

- *Personnel accountability.* The separation of Derek Hargrave (October 2022) and Natasha Sorokin (September 2022), as well as the departure of Gerald Fisk (June 2022), showed that Dunmore was prepared to hold individuals accountable.

- *Favorable OFAC resolution.* Dunmore's voluntary self-disclosure filed with OFAC on June 1, 2023, resulted in OFAC issuing a Cautionary Letter (Ref. OCA-2024-11587) on April 15, 2024, rather than a civil monetary penalty. This parallel favorable outcome reinforced DOJ's assessment that Dunmore had acted responsibly and in good faith.

As you will recall, the declination follows my final meeting with AUSA Calloway on May 20, 2024, in Washington, D.C., at which the DOJ indicated it was prepared to close the matter. Today's letter formally confirms that outcome.

With the receipt of OFAC's Cautionary Letter on April 15, 2024, and now today's DOJ declination, both the criminal track and the administrative track arising from this matter are fully resolved.

There are several administrative and notification items that we should address in the near term:

1. *Formal closure letter.* I will send you a formal letter confirming the declination and matter closure, including file retention guidance, within the next several days. For your records, this matter is tracked under Calderwood & Harkness Matter No. 1016-00009.

2. *Investor notifications.* I recommend that Dunmore notify Greystone Capital Partners (through Arthur Pennington III at Harwood & Pennington LLP) and the Thornbury Infrastructure Fund II (Helen Cresswell at Thornbury Asset Management Ltd.) of the resolution, consistent with your obligations under the common interest agreement.

3. *Lender notification.* You should consider informing Meridian National Bank, N.A. (Gregory Stanhope) given any reporting obligations under the $750 million revolving credit facility.

4. *D&O insurance and billing.* Howard Quinn on our team will coordinate final billing matters and the remaining D&O insurance claim with Garrison Mutual Insurance Co. (Patricia Holbrook, policy GM-DO-2021-08734). For your awareness, total D&O recovery to date stands at $7.2 million against defense costs, after the $2.5 million retention.

5. *Outside auditors.* I recommend that you consider whether to notify Ashford & Whitmore LLP (Kenneth Ashford, engagement partner) regarding any financial reporting implications arising from the resolution.

6. *Individual counsel notifications.* As a matter of professional courtesy, individual counsel for the three departed employees — Catherine Blackthorn (Blackthorn & Associates LLP) for Mr. Fisk, Philip Keane (Wexford Keane LLP) for Ms. Sorokin, and James Overstreet (Overstreet & McClain PLLC) for Mr. Hargrave — should be informed of the declination. We are happy to handle those notifications on your behalf if you pr

A detailed final cost summary will be included in the formal closure letter, but for your preliminary awareness: total matter costs were approximately $31.275 million gross, or $24.075 million net after the $7.2 million D&O insurance recovery. This figure is inclusive of Calderwood & Harkness legal fees ($14.3 million), forensic accounting services from Ridgeline Advisory Group ($2.1 million), e-discovery services fr

Marcus, on a personal note, I want to extend my sincere congratulations to you and the entire Dunmore leadership team. This has been a demanding process — more than two years of sustained effort under considerable uncertainty — and the outcome is a testament to the decisions you made early on to confront this matter head-on, cooperate fully, and invest in meaningful remediation. Not every company facing circumstances

I also want to emphasize that the Enhanced Sanctions & Export Controls Compliance Program and the culture of compliance that Dunmore has built during this process are not merely artifacts of the investigation — they position the company well for the future. DOJ and OFAC will expect continued adherence to these commitments, and maintaining the program on an ongoing basis is both a prudent business practice and a safeg

I would welcome the opportunity to arrange a call or meeting early next week to discuss the resolution in greater detail and address any remaining questions you, Callum, Sandra, or Priya may have. Please let me know what works with your schedules.

Again, congratulations to the entire team. It has been a privilege to represent Dunmore through this matter.

Victoria Chambers Partner, White Collar Defense & Investigations Calderwood & Harkness LLP 1750 Pennsylvania Avenue NW, Suite 800 Washington, DC 20006 Tel: (202) 555-4100 Email: vchambers@calderwoodharkness.com

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