[sheet: Cover]
Field | Value
Document Title | Voluntary Disgorgement Calculation Worksheet
Client | Dunmore Energy Holdings Ltd.
Matter No. | 1016-00009
Ridgeline Engagement No. | RAG-2022-0319
Prepared By | Jasmine Thornton, Calderwood & Harkness LLP
With Input From | Dr. Margaret Liu, CPA, CFE — Ridgeline Advisory Group LLC
Date Prepared | November 15, 2023
Confidentiality | ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
Purpose | Calculation of voluntary disgorgement payment to the U.S. Treasury representing estimated net profits from 9 tainted crude oil swap transactions involving Volkhov Industrial Group JSC-connected counterparties
Regulatory Framework | OFAC — E.O. 14024; Directive 2 under E.O. 13662; IEEPA, 50 U.S.C. §§ 1701–1706
Submitted to | U.S. Department of Justice, National Security Division — AUSA Meredith Calloway
Payment Date | November 30, 2023
Disgorgement Amount | $8,750,000
[sheet: Transaction Detail]
Txn No. | Transaction Reference ID | Trade Date | Settlement Date | Counterparty | Counterparty Managing Director | Product Type | Volume (barrels) | Price per Barrel (USD) | Notional Value (USD) | Volkhov Connection Identified | Tainted (Y/N) | Source of Finding | Notes
1 | DTI-SWAP-2020-0614 | 2020-06-15 | 2020-06-22 | Petronova Trading FZE | Sergei Volkov | Crude Oil Swap | 285000 | $42.10 | $11,998,500 | Crude sourced from Volkhov-controlled upstream assets; beneficial ownership traced via Ridgeline forensic analysis | Y | Ridgeline Advisory Group — Final Forensic Report (April 1, 2023) | Executed by Natasha Sorokin; approved by Derek Hargrave
2 | DTI-SWAP-2020-0901 | 2020-09-03 | 2020-09-10 | Petronova Trading FZE | Sergei Volkov | Crude Oil Swap | 310000 | $43.75 | $13,562,500 | End-user identified as Volkhov subsidiary; payment routed through Crescent Commercial Bank PJSC intermediary account | Y | Ridgeline Advisory Group — Final Forensic Report (April 1, 2023) | Structured payment identified
3 | DTI-SWAP-2020-1120 | 2020-11-22 | 2020-11-30 | Zenith Petroleum DMCC | Farhan Qureshi | Crude Oil Swap | 275000 | $45.50 | $12,512,500 | Zenith acting as intermediary for Volkhov-connected refinery; destination analysis confirmed Russian end-user | Y | Ridgeline Advisory Group — Final Forensic Report (April 1, 2023) | One of two Zenith Petroleum transactions
4 | DTI-SWAP-2021-0208 | 2021-02-10 | 2021-02-18 | Petronova Trading FZE | Sergei Volkov | Crude Oil Swap | 420000 | $58.20 | $24,444,000 | Volkhov beneficial ownership confirmed under OFAC 50% Rule analysis | Y | Ridgeline Advisory Group — Final Forensic Report (April 1, 2023) | Largest single tainted transaction
5 | DTI-SWAP-2021-0512 | 2021-05-14 | 2021-05-21 | Petronova Trading FZE | Sergei Volkov | Crude Oil Swap | 350000 | $65.30 | $22,855,000 | Crude destined for Volkhov-controlled storage facility | Y | Ridgeline Advisory Group — Final Forensic Report (April 1, 2023) | Post-E.O. 14024 issuance (April 15, 2021)
6 | DTI-SWAP-2021-0803 | 2021-08-05 | 2021-08-12 | Petronova Trading FZE | Sergei Volkov | Crude Oil Swap | 290000 | $68.90 | $19,981,000 | Supply chain analysis linked to Volkhov downstream entity | Y | Ridgeline Advisory Group — Final Forensic Report (April 1, 2023) | Sorokin direct communications with Volkov re: pricing
7 | DTI-SWAP-2021-1018 | 2021-10-20 | 2021-10-28 | Petronova Trading FZE | Sergei Volkov | Crude Oil Swap | 265000 | $82.15 | $21,769,750 | Funds traced through layered accounts at Crescent Commercial Bank PJSC to Volkhov accounts | Y | Ridgeline Advisory Group — Final Forensic Report (April 1, 2023) | Payment structuring identified by Ridgeline
8 | DTI-SWAP-2022-0110 | 2022-01-12 | 2022-01-20 | Zenith Petroleum DMCC | Farhan Qureshi | Crude Oil Swap | 195000 | $84.50 | $16,477,500 | Second Zenith transaction; end-user certificates falsified per Ridgeline finding | Y | Ridgeline Advisory Group — Final Forensic Report (April 1, 2023) | Second of two Zenith Petroleum transactions
9 | DTI-SWAP-2022-0207 | 2022-02-09 | 2022-02-17 | Petronova Trading FZE | Sergei Volkov | Crude Oil Swap | 180000 | $77.50 | $13,950,000 | Final tainted transaction; pre-SDN designation but post-Directive 2 | Y | Ridgeline Advisory Group — Final Forensic Report (April 1, 2023) | Last transaction before Volkhov SDN listing on April 6, 2022
TOTAL | 2570000 | $157,550,750 | Individual values calibrated; aggregate adjusted to $156,300,000 per Ridgeline detailed reconciliation
[sheet: Excluded Transactions]
Txn No. | Transaction Reference ID | Trade Date | Counterparty | Product Type | Notional Value (USD) | Tainted (Y/N) | Reason for Exclusion
10 | DTI-SWAP-2020-0803 | 2020-08-05 | Petronova Trading FZE | Crude Oil Swap | $12,480,000 | N | No Volkhov beneficial ownership or end-user connection identified; independent third-party end-user confirmed
11 | DTI-SWAP-2021-0315 | 2021-03-17 | Petronova Trading FZE | Crude Oil Swap | $14,320,000 | N | Ridgeline analysis confirmed arm's-length transaction with non-sanctioned end-user
12 | DTI-SWAP-2021-0629 | 2021-06-30 | Petronova Trading FZE | Crude Oil Swap | $11,870,000 | N | Counterparty due diligence showed no Volkhov link for this specific cargo
13 | DTI-SWAP-2021-1203 | 2021-12-05 | Zenith Petroleum DMCC | Crude Oil Swap | $13,240,000 | N | End-user verified as non-sanctioned entity in Turkey
14 | DTI-SWAP-2022-0125 | 2022-01-27 | Petronova Trading FZE | Crude Oil Swap | $10,490,000 | N | Cargo destination confirmed as non-Russian; no payment structuring anomalies
TOTAL — Excluded Transactions | $62,400,000 | Grand Total (9 Tainted + 5 Excluded) = $156,300,000 + $62,400,000 = $218,700,000
[sheet: Net Margin Analysis]
Line Item | Amount / Rate | Source / Basis
Aggregate Notional Value — 9 Tainted Transactions | $156,300,000 | Transaction Detail sheet; Ridgeline Final Forensic Report (April 1, 2023)
Gross Trading Revenue (Spread Income + Fees) | $14,847,000 | Ridgeline forensic analysis of DTI trading P&L; Engagement No. RAG-2022-0319
Gross Margin (%) | 9.50% | Gross Trading Revenue / Notional Value = $14,847,000 / $156,300,000
Less: Direct Transaction Costs (brokerage, freight, insurance) | ($3,441,000) | Ridgeline analysis of DTI cost allocations
Less: Allocated Operating Expenses (Dubai desk overhead, personnel, IT) | ($2,653,000) | Ridgeline allocation methodology per DTI cost center reporting; reviewed by Rajesh Malhotra (Controller)
Net Trading Profit | $8,753,000 | Gross Revenue − Direct Costs − Allocated OpEx = $14,847,000 − $3,441,000 − $2,653,000
Estimated Net Margin (%) | 5.60% | Net Trading Profit / Aggregate Notional Value = $8,753,000 / $156,300,000 = 5.600%
Disgorgement Amount (Rounded) | $8,750,000 | Net Trading Profit rounded to nearest $10,000 per agreement with DOJ
Rounding Adjustment | ($3,000) | $8,753,000 − $8,750,000
[sheet: Disgorgement Summary]
Item | Amount (USD) | Notes
Aggregate Notional Value — 9 Tainted Crude Oil Swap Transactions | $156,300,000 | Transactions between June 2020 and February 2022; counterparties: Petronova Trading FZE (Sergei Volkov) and Zenith Petroleum DMCC (Farhan Qureshi); Volkhov Industrial Group JSC connection confirmed
Estimated Net Margin | 5.60% | Per Ridgeline Advisory Group forensic analysis
Calculated Net Profit (Pre-Rounding) | $8,753,000 | $156.3M × 5.6% = $8,752,800; adjusted to $8,753,000 per Ridgeline detailed calculation
Voluntary Disgorgement Amount (Final) | $8,750,000 | Rounded; agreed with DOJ National Security Division (AUSA Meredith Calloway)
Payment Date | November 30, 2023 | Wire transfer to U.S. Treasury
Payment Method | Wire Transfer | From Meridian National Bank, N.A. (Dunmore operating account) to U.S. Treasury
TOTAL MATTER COST RECONCILIATION
Calderwood & Harkness LLP — Legal Fees | $14,300,000 | April 2022 – June 2024; Matter No. 1016-00009
Ridgeline Advisory Group LLC — Forensic Accounting | $2,100,000 | Engagement No. RAG-2022-0319
Nexagen Analytics Inc. — E-discovery | $1,850,000 | Project No. NX-DEH-2204; 2,347,812 documents collected
Pemberton Investors Solutions LLC — Remediation Consulting | $875,000 | Dr. Anton Bremer, Lead Consultant
Individual Counsel Fees Advanced (Fisk / Sorokin / Hargrave) | $3,400,000 | Per indemnification obligations; Blackthorn & Associates LLP, Wexford Keane LLP, Overstreet & McClain PLLC
Voluntary Disgorgement | $8,750,000 | As calculated herein
TOTAL GROSS MATTER COST | $31,275,000 | Sum of all line items above ($14,300,000 + $2,100,000 + $1,850,000 + $875,000 + $3,400,000 + $8,750,000)
Less: D&O Insurance Recovery (Garrison Mutual Insurance Co.) | ($7,200,000) | Policy GM-DO-2021-08734; $50M aggregate / $10M per claim; $2.5M retention; defense costs only (disgorgement excluded)
NET COST TO DUNMORE ENERGY HOLDINGS LTD. | $24,075,000 | $31,275,000 − $7,200,000
[sheet: Regulatory & Legal References]
Reference Item | Detail
OFAC Program — Executive Order 14024 | Issued April 15, 2021; basis for Volkhov Industrial Group JSC full SDN blocking designation (April 6, 2022)
OFAC Program — Directive 2 under E.O. 13662 | Sectoral sanctions (energy sector, Russian Federation); Volkhov designated November 15, 2019
OFAC Regulations | 31 C.F.R. Part 589
Criminal Statute — IEEPA | 50 U.S.C. §§ 1701–1706; International Emergency Economic Powers Act
Criminal Statute — ECRA | 50 U.S.C. §§ 4801–4852; Export Control Reform Act
Export Administration Regulations | 15 C.F.R. Parts 730–774; §746.5 (Russia/Belarus); ECCNs 2B350, 2B999 (oilfield equipment — separate from disgorgement but related matter)
DOJ Corporate Enforcement Policy | Updated September 2022; basis for declination analysis
Grand Jury Subpoena | GJ No. 22-418; U.S. District Court for the District of Columbia; Grand Jury 22-2
OFAC Voluntary Self-Disclosure | Filed June 1, 2023
OFAC Cautionary Letter | Ref. OCA-2024-11587; issued April 15, 2024
DOJ Declination | Formal declination letter issued June 28, 2024
Suspect Transaction Period | March 2020 – April 2022
Tainted Transaction Period (Crude Oil Swaps) | June 2020 – February 2022
Structured Payments (Crescent Commercial Bank PJSC) | $34.2 million across 127 transactions; March 2020 – March 2022 (separate from but related to the tainted swap profits)