Dear Anton,
Thank you for the productive conversations over the past several weeks as we worked through the parameters of this engagement. As you know, Pemberton Investors Solutions LLC was formally retained on December 15, 2022, pursuant to the executed engagement letter between Calderwood & Harkness LLP (on behalf of our client, Dunmore Energy Holdings Ltd.) and Marlowe Asset Management. The purpose of this email is to memorialize the scope, workstreams, deliverables, and timeline that we agreed upon for the remediation engagement in connection with the broader matter — specifically, the U.S. Department of Justice, National Security Division inquiry into Dunmore Energy Holdings Ltd. concerning potential violations of U.S. sanctions laws under programs administered by the Office of Foreign Assets Control ("OFAC") and of the Export Administration Regulations ("EAR"). I want to ensure we are fully aligned before the holidays so that we can hit the ground running in January.
**Background**
For the record, and to provide context for members of your team who may be brought into the engagement, I will briefly summarize the relevant background.
Dunmore Energy Holdings Ltd. ("DEH"), a Cayman Islands–domiciled holding company operationally headquartered in Houston, Texas, is the respondent in an inquiry opened by the DOJ National Security Division on April 19, 2022. The inquiry centers on activities conducted at the Dubai-based trading desk of Dunmore Trading International Ltd. ("DTI"), a wholly owned subsidiary of DEH, involving transactions with counterparties tied to Volkhov Industrial Group JSC ("Volkhov"). Volkhov was designated under OFAC Directive 2 pursuant to Executive Order 13662 (sectoral sanctions) on November 15, 2019, and was subsequently added to the OFAC Specially Designated Nationals and blocked Persons List (full blocking) on April 6, 2022, pursuant to Executive Order 14024.
Since April 2022, Calderwood & Harkness has been conducting a comprehensive internal investigation on behalf of DEH. The investigation has included: (i) document collection across six jurisdictions, yielding 2,347,812 documents, of which 438,916 were deemed responsive following technology-assisted review conducted by Nexagen Analytics Inc.; (ii) two rounds of witness interviews, totaling 37 interviews, with a third round planned for early 2023; and (iii) forensic accounting analysis by Ridgeline Advisory Group LLC. The first document production to DOJ was completed on November 1, 2022 (287,412 documents), and a second production is in preparation for late January 2023.
Several key individuals have departed the company. Derek Hargrave, former President of DTI, and Natasha Sorokin, former Senior Trader at the Dubai trading desk, have been separated from the company. Gerald Fisk, former Chief Compliance Officer, departed in June 2022. Priya Nayar, who is copied on this email, was appointed as Chief Compliance Officer in August 2022 and has been a strong partner in driving the remediation effort forward.
As we have discussed, the remediation workstream is critical to demonstrating to DOJ the company's commitment to full cooperation and meaningful corrective action, consistent with the DOJ Corporate Enforcement Policy (as updated in September 2022) and the DOJ's Evaluation of Corporate Compliance Programs guidance. A credible, well-documented remediation program will be central to securing a favorable resolution for Dunmore.
**Scope of Remediation Engagement — Workstreams**
We have agreed on six workstreams, which I set out below in detail.
*Workstream 1: Sanctions Compliance Program Assessment*
Marlowe Asset Management will conduct a comprehensive assessment of Dunmore's pre-existing sanctions compliance program. As you are aware, Calderwood & Harkness's preliminary compliance program assessment, dated November 15, 2022, identified significant deficiencies in the existing program; your work will build on and deepen that analysis. Specifically, Marlowe Asset Management will:
- Perform a gap analysis against OFAC's "Framework for Compliance Commitments," addressing each of the five essential components: (1) management commitment; (2) risk assessment; (3) internal controls; (4) testing and auditing; and (5) training. - Conduct a focused review of OFAC screening protocols, including both initial onboarding screening and ongoing/refresh screening. Of particular interest is the process by which Gerald Fisk's April 11, 2022 screening refresh first identified Dunmore's exposure to Volkhov through Petronova Trading FZE, and the circumstances surrounding the handling (or mishandling) of that alert. - Evaluate the adequacy and configuration of screening tools deployed across all Dunmore entities, including DEH, DTI, Dunmore upstream Americas LLC, Dunmore Renewables GmbH, and Dunmore Exploration West Africa Ltd. - Assess third-party and counterparty due diligence procedures, with particular emphasis on Dubai-based trading counterparties — including Petronova Trading FZE (Jebel Ali Free Zone), Zenith Petroleum DMCC, and other entities operating within opaque ownership structures. - Assess compliance escalation mechanisms and reporting lines, including whether compliance findings were appropriately escalated to senior management and the Board.
*Workstream 2: Export Control Classification Review*
Marlowe Asset Management will review Dunmore's procedures for classifying items subject to the Export Administration Regulations. This workstream will include:
- A focused review of the classification of oilfield drilling equipment and components classified under ECCN 2B350 and ECCN 2B999 — the categories at issue in the approximately $12.4 million in equipment exports facilitated via Caspian Logistik GmbH (Hamburg). - An assessment of end-user screening and end-use verification processes. - A review of end-user certificate procedures and controls designed to prevent false certifications. - An evaluation of compliance with EAR §746.5 (Russia/Belarus sanctions controls). - Recommendations for enhanced export classification and licensing procedures.
*Workstream 3: Enhanced OFAC Screening Program Design*
Marlowe Asset Management will design an enhanced, automated OFAC screening system for deployment across all Dunmore entities globally. This workstream will include:
- Design of real-time and batch screening capabilities against the OFAC SDN List, Sectoral Sanctions Identifications List, the BIS Entity List, the Denied Persons List, and other relevant restricted party lists. - Integration of beneficial ownership screening (including OFAC's 50% Rule analysis) into the screening workflow. - Recommendations for screening tool vendor selection, including configuration parameters such as fuzzy matching thresholds, alias handling, and transliteration protocols. - Screening protocols for both new counterparty onboarding and periodic rescreening of existing relationships. - Specific attention to intermediary and agent screening, incorporating lessons learned from the Petronova Trading FZE and Zenith Petroleum DMCC fact patterns, where those entities acted as intermediaries for Volkhov-connected counterparties.
*Workstream 4: Compliance Training Program Design*
Marlowe Asset Management will design a comprehensive sanctions and export controls training program for all Dunmore employees globally (approximately 3,200 employees). The training program will be tiered as follows:
- **Tier (a) — General Awareness:** Training for all employees on core sanctions and export control obligations. - **Tier (b) — Enhanced Training:** Targeted training for personnel in trading, logistics/shipping, finance, and legal/compliance roles. - **Tier (c) — Specialized Training:** In-depth training for DTI Dubai trading desk personnel, given that the Dubai desk was the locus of the conduct at issue.
Training content will cover: OFAC sanctions programs (including E.O. 14024, Directive 2, and SDN List obligations); EAR requirements (including §746.5 and ECCN classification responsibilities); red flags for sanctions evasion (intermediary structures, payment structuring, false end-user certifications); escalation procedures; and whistleblower protections.
We recommend that the program incorporate in-person training sessions supplemented by e-learning modules, with an annual recertification requirement. Marlowe Asset Management should also design training record-keeping and documentation protocols sufficient to demonstrate compliance to regulators.
*Workstream 5: Policy and Procedure Drafting*
Marlowe Asset Management will draft the following for Dunmore's adoption:
- An Enhanced Sanctions & Export Controls Compliance Policy suitable for adoption by the DEH Board of Directors. - Supporting standard operating procedures ("SOPs") for: counterparty due diligence; OFAC screening; export classification; restricted party screening; transaction monitoring; and escalation and reporting. - All policies and SOPs will be designed for global adoption across all Dunmore entities, with jurisdiction-specific supplements as needed — particularly for the UAE/DIFC, Germany, and Nigeria.
*Workstream 6: Ongoing Monitoring and Testing Framework*
Marlowe Asset Management will design a monitoring, testing, and audit framework to ensure the Enhanced Compliance Program is effective and sustainable over time. This workstream will include:
- Transaction sampling and testing protocols. - Periodic compliance audit procedures (we recommend annual full audits, supplemented by interim spot checks). - Metrics and key performance indicators for regular reporting to the Board and CCO. - An independent testing methodology.
**Timeline and Deliverables**
We have agreed on a four-phase timeline, as follows:
- **Phase 1 — Assessment (January – March 2023):** Completion of Workstreams 1 and 2 (sanctions compliance program gap analysis and export control classification review). Marlowe Asset Management to deliver an interim report to Calderwood & Harkness by the end of March 2023. - **Phase 2 — Design (April – July 2023):** Completion of Workstreams 3, 4, and 5 (enhanced screening design, training program design, and policy/SOP drafting). Draft Enhanced Compliance Policy to be circulated for review by August 1, 2023. - **Phase 3 — Finalization (August – September 2023):** Delivery of the final remediation report and Enhanced Compliance Program framework. Target delivery date: September 15, 2023. - **Phase 4 — Implementation Support (October – December 2023):** Marlowe Asset Management to assist Priya Nayar and the Dunmore compliance team with rollout of the Enhanced Compliance Program, including training delivery. Target Board adoption of the Enhanced Compliance Policy by October 1, 2023; training materials outline by November 1, 2023.
I want to emphasize that these timelines are driven by the need to demonstrate meaningful, concrete remediation to DOJ in a timely manner. We should discuss any potential constraints on your side during our kickoff call.
**Coordination and Reporting**
For the duration of the engagement, Marlowe Asset Management will report to me and to Jasmine Thornton at Calderwood & Harkness on all workstreams. We suggest biweekly coordination calls, which would include Jasmine, Priya Nayar, and myself (and others as appropriate).
Critically, all work product must be directed to and routed through Calderwood & Harkness to preserve attorney-client privilege and work product protections. As you know, this engagement is structured at the direction of counsel in connection with the internal investigation and the defense of the DOJ inquiry, and it is essential that the privilege framework remain intact.
Marlowe Asset Management should coordinate with Ridgeline Advisory Group LLC (Dr. Margaret Liu, Engagement No. RAG-2022-0319) as needed with respect to forensic findings relevant to the compliance program assessment, and with Nexagen Analytics Inc. (Brian Cavanaugh, Project No. NX-DEH-2204) for any document-level analysis required to support your work. In both cases, please route coordination requests through Jasmine or me.
On the client side, the key contacts are Marcus Wellbourne (General Counsel), Priya Nayar (CCO), and Sandra Whitfield (CFO). However, consistent with the privilege framework, all substantive communications with client personnel should be coordinated through Calderwood & Harkness.
**Confidentiality and Privilege**
I want to underscore that all work product generated in connection with this engagement is protected by the attorney-client privilege and the work product doctrine. The engagement is at the direction of Calderwood & Harkness LLP as counsel to Dunmore Energy Holdings Ltd. in connection with the DOJ investigation and the anticipated OFAC voluntary self-disclosure. I would ask that you remind all Marlowe Asset Management personnel assigned to this matter of their confidentiality obligations under the engagement agreement executed on December 15, 2022, and that all materials be treated accordingly.
**Next Steps**
I would appreciate it if you could: (1) confirm your agreement with the scope as outlined above; and (2) identify the members of your proposed team for this engagement, along with their respective workstream assignments.
I suggest we schedule an initial kickoff call during the first week of January 2023 to align on the Phase 1 work plan and logistics. Once the NDA and engagement formalities are fully executed and confirmed on your end, I will arrange to send you the relevant background materials, including the preliminary compliance program assessment memo dated November 15, 2022, and relevant portions of the forensic findings from Ridgeline, so that your team can begin its review promptly.
Anton, I have every confidence that this collaboration will produce the rigorous, well-documented remediation program that Dunmore needs. The quality of the remediation effort will be a significant factor in achieving a favorable resolution for our client, and I know from our prior work together that Marlowe Asset Management will bring the depth of expertise this matter demands. I look forward to working with you and your team.
Please do not hesitate to reach out if you have any questions in the interim. Wishing you and your colleagues a restful holiday season.
Best regards,
**Conrad Reeves** Senior Counsel, Export Controls & Sanctions Calderwood & Harkness LLP 1750 Pennsylvania Avenue NW, Suite 800 Washington, DC 20006 Tel: (202) 555-4318 Email: creeves@calderwoodharkness.com
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