PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 1200 McKinney Street, Suite 2100 Houston, TX 77010
MEMORANDUM
To: Victoria Chambers, Responsible Partner Jasmine Thornton, Lead Associate
From: Nicholas Ferreira, Associate, White Collar & Investigations (Houston)
Date: August 15, 2022
Re: Gerald Fisk — Compliance Failures & Supervisory Deficiencies
Matter: Dunmore Energy Holdings Ltd. — DOJ Sanctions & Export Controls Inquiry
Matter No.: 1016-00009
I. Executive Summary
The purpose of this memorandum is to analyze the compliance failures and supervisory deficiencies attributable to Gerald Fisk, former Chief Compliance Officer of Dunmore Energy Holdings Ltd. ("Dunmore" or "DEH"), during the period relevant to the Department of Justice inquiry — specifically, from March 2020 through Fisk's departure from the company on June 10, 2022. Fisk served as CCO based at Dunmore's operational headquarters located at 1200 McKinney Street, Suite 3400, Houston, Texas 77010.
This memorandum has been prepared in connection with Calderwood & Harkness LLP's ongoing internal investigation on behalf of Dunmore, undertaken in response to the DOJ National Security Division inquiry opened on April 19, 2022. The inquiry was initiated through the issuance of grand jury subpoena GJ No. 22-418, issued out of the United States District Court for the District of Columbia, Grand Jury 22-2, which directed the production of broad categories of documents relating to Dunmore's trading activities, counterparty relationships, sanctions compliance procedures, and export control practices, among other topics. The subpoena was served on Dunmore's registered agent and promptly transmitted to Calderwood & Harkness on April 19, 2022.
Based on the investigation to date, the core findings with respect to Fisk are as follows:
• Inadequate OFAC Screening Protocols. Fisk failed to design, implement, or maintain adequate sanctions screening protocols consistent with the requirements of the Office of Foreign Assets Control ("OFAC") and applicable executive orders. Dunmore's screening system under Fisk's oversight was limited to a single automated name-matching tool applied only at the point of counterparty onboarding, with no periodic re-screening or refresh process mandated or implemented on any regular cadence.
• Failure to Escalate Known Red Flags Concerning Petronova Trading FZE. Fisk's compliance team received at least three internal inquiries or flagged items between mid-2020 and late 2021 regarding the nature of Dunmore Trading International Ltd.'s ("DTI") counterparty relationships and unusual payment patterns. Fisk failed to escalate any of these items to the General Counsel, the CEO, the Board, or external counsel.
• Insufficient Compliance Oversight of the DTI Trading Desk. Fisk permitted the DTI trading desk in Dubai to operate with inadequate compliance oversight, including the absence of any dedicated compliance headcount in the Dubai office, despite the nature and volume of DTI's trading activity in high-risk jurisdictions.
• Failure to Implement Export Control Compliance Procedures. Fisk did not implement export control compliance procedures commensurate with DTI's oilfield equipment transactions, including the absence of formal export classification procedures under the Export Administration Regulations ("EAR"), no end-user verification, and no export control training for DTI personnel.
Fisk departed Dunmore on June 10, 2022, under internal pressure following the commencement of this investigation. He has retained separate counsel — Catherine Blackthorn of Blackthorn & Associates LLP, located at 700 Louisiana Street, Suite 4300, Houston, Texas 77002. Victoria Chambers acknowledged Ms. Blackthorn's representation and confirmed information-sharing limitations by letter dated June 15, 2022. Priya Nayar was appointed as the new Chief Compliance Officer effective August 1, 2022, while the investigation remains ongoing.
This memorandum draws upon three principal sources: (1) the interview of Gerald Fisk conducted on June 8, 2022, at Calderwood & Harkness's Houston office, with Catherine Blackthorn present as personal counsel; (2) the document review findings from Nexagen Analytics (Project No. NX-DEH-2204), which collected and processed 2,347,812 documents from Dunmore's systems, of which 438,916 were deemed responsive; and (3) the forensic accounting findings of Ridgeline Advisory Group LLC (Engagement No. RAG-2022-0319), whose final forensic accounting report was delivered on April 1, 2023. The memorandum also references other investigation work product and cross-referenced memoranda as identified in the Appendix.
II. Background — Gerald Fisk's Tenure and Responsibilities
A. Role and Reporting Structure
Gerald Fisk served as Chief Compliance Officer of Dunmore Energy Holdings Ltd. from approximately 2017 through June 10, 2022. Throughout his tenure, Fisk was based in Houston, Texas, at Dunmore's operational headquarters located at 1200 McKinney Street, Suite 3400. Fisk reported directly to General Counsel Marcus Wellbourne and, through Wellbourne, to Chief Executive Officer Callum Renshaw. Fisk did not have a direct reporting line to the Board of Directors or to any committee of the Board, such as an Audit Committee or a Compliance Committee; indeed, no dedicated Compliance Committee existed at the Board level during the relevant period.
As CCO, Fisk held supervisory responsibility over Dunmore's global compliance function. This responsibility encompassed the full range of compliance disciplines relevant to a multinational energy company with trading, upstream exploration, and renewables operations, including, but not limited to: (a) sanctions compliance, including compliance with OFAC-administered sanctions programs and non-U.S. sanctions regimes; (b) export controls compliance, including compliance with the Export Administration Regulations and the International Traffic in Arms Regulations; (c) anti-money laundering; (d) anti-corruption and Foreign Corrupt Practices Act compliance; and (e) third-party due diligence.
Fisk's compliance responsibilities extended across all Dunmore subsidiaries and affiliates worldwide. These subsidiaries included:
• Dunmore Trading International Ltd. ("DTI") — Dubai, UAE. DTI operated Dunmore's commodity trading desk and was the principal entity involved in the transactions at issue.
• Dunmore upstream Americas LLC — Houston, Texas. This entity housed Dunmore's domestic upstream exploration and production operations.
• Dunmore Renewables GmbH — Hamburg, Germany. This entity managed Dunmore's European renewables portfolio.
• Dunmore Exploration West Africa Ltd. — Lagos, Nigeria. This entity managed Dunmore's West African upstream exploration activities.
Fisk maintained a small compliance team, consisting of only four full-time compliance professionals (including himself), to serve the entire global organization. No compliance personnel were stationed outside of Houston during the relevant period, meaning that compliance oversight of DTI, the Hamburg operations, and the Lagos operations was conducted entirely on a remote basis from Dunmore's Houston headquarters.
B. Scope of Compliance Program Under Fisk
As CCO, Fisk was responsible for the design, implementation, and ongoing maintenance of Dunmore's sanctions and export controls compliance program. The program was intended to ensure Dunmore's compliance with the full range of applicable U.S. sanctions and export control authorities, including:
• OFAC-Administered Sanctions Programs. These included the programs targeting Russia, administered through Executive Order 13662 (issued March 20, 2014), including the Sectoral Sanctions Identifications List ("SSI List") and the associated Directives (including Directive 2, which imposed restrictions on transactions involving the debt or equity of certain Russian financial services, energy, and defense sector entities). After April 15, 2021, the compliance obligations expanded significantly with the issuance of Executive Order 14024, which blocked the property and interests in property of specified harmful foreign activities of the Government of the Russian Federation, resulting in a substantial expansion of the Specially Designated Nationals and blocked Persons List ("SDN List") as applied to Russian persons and entities.
• Export Administration Regulations ("EAR"). The EAR, codified at 15 C.F.R. Parts 730–774, administered by the Bureau of Industry and Security ("BIS"), impose licensing requirements on the export, reexport, and transfer of certain items — including oilfield equipment and drilling components — to designated destinations, end users, and end uses. The EAR regulations relevant here include § 746.5 (Russian and Belarusian industry sector sanctions), the Commerce Control List, the Entity List (Supplement No. 4 to Part 744), and the Denied Persons List.
• International Emergency Economic Powers Act ("IEEPA"). IEEPA, codified at 50 U.S.C. §§ 1701–1706, provides the statutory authority underlying OFAC's sanctions programs and imposes criminal penalties of up to $1,000,000 in fines and 20 years' imprisonment for willful violations.
Dunmore's compliance program, as designed and implemented by Fisk, was intended to apply across the company's entire global footprint, encompassing approximately 3,200 employees worldwide and approximately $4.87 billion in annual revenue for fiscal year 2021. However, as detailed below, the program as actually implemented was inadequate in design, scope, and execution with respect to the sanctions and export controls risks most relevant to DTI's trading and logistics activities.
C. DTI Trading Desk — The Locus of the Misconduct
Dunmore Trading International Ltd. maintained a Dubai-based commodity trading desk that served as the principal locus of the sanctions and export control violations under investigation. DTI was organized and licensed in the Dubai International Financial Centre ("DIFC") and operated from Level 14, Gate Building 3, Dubai International Financial Centre, P.O. Box 506774, Dubai, UAE, under DIFC License No. CL-4827.
DTI was led by Derek Hargrave, who served as President and bore overall operational responsibility for the trading desk. The day-to-day trading activity was conducted under the direct involvement of Natasha Sorokin, a Senior Trader with principal responsibility for the crude oil swap transactions at issue. Both Hargrave and Sorokin reported to Callum Renshaw for operational purposes and were nominally subject to Fisk's compliance oversight, although, as discussed below, the effective compliance coverage of DTI's activities was minimal.
The investigation has identified the following categories of transactions conducted by DTI during the relevant period (March 2020 through April 2022) that are at the center of the DOJ inquiry:
Crude Oil Swap Transactions. Between March 2020 and April 2022, the DTI trading desk executed 14 crude oil swap transactions totaling approximately $218.7 million in notional value with Petronova Trading FZE and Zenith Petroleum DMCC. Of these 14 transactions, 9 — representing approximately $156.3 million in notional value — involved entities connected to Volkhov Industrial Group JSC, a Russian energy conglomerate that was designated under OFAC Directive 2 (sectoral sanctions under E.O. 13662) on November 15, 2019, and subsequently added to the SDN List (full blocking) on April 6, 2022, pursuant to E.O. 14024.
Oilfield Equipment Exports. In addition to the trading activity, DTI facilitated approximately $12.4 million in oilfield equipment exports to Russian end users. These exports involved equipment and components later classified under Export Control Classification Numbers ("ECCNs") 2B350 and 2B999, and were shipped via Caspian Logistik GmbH, a Hamburg-based logistics intermediary, without any export control classification review, end-user verification, or licensing analysis.
Structured Payment Flows. Approximately $34.2 million in payments associated with the transactions described above were structured through 127 intermediary wire transfer transactions routed through Crescent Commercial Bank PJSC in Dubai. Ridgeline Advisory Group's forensic analysis concluded that the structuring of these payments was designed to obscure the beneficial ownership of the counterparties and to distance the payment flows from the Volkhov Industrial Group JSC connection. These payment flows were never subjected to sanctions compliance review by Fisk's compliance team.
III. Identified Compliance Failures
The investigation has identified five principal categories of compliance failures attributable to Fisk's tenure as CCO: (A) inadequate OFAC screening protocols; (B) failure to conduct adequate counterparty due diligence; (C) failure to escalate known red flags; (D) inadequate export control compliance; and (E) deficient compliance infrastructure and resources. Each is discussed in detail below.
A. Inadequate OFAC Screening Protocols
1. Screening System Deficiencies
The investigation has determined that Dunmore's OFAC screening system under Fisk's oversight was fundamentally inadequate. The system was limited to a single automated name-matching tool that was applied only at the point of counterparty onboarding — that is, at the time a new counterparty was first entered into Dunmore's trading and counterparty management systems. No periodic re-screening or refresh process was mandated or implemented on any regular cadence at any point during Fisk's tenure as CCO.
The practical consequence of this deficiency was significant. Because the screening system operated only as a one-time onboarding check, counterparties that were clean at the time of onboarding but subsequently became associated with designated persons or entities — whether through new OFAC designations, changes in ownership or control, or the emergence of new adverse information — were never identified. The absence of periodic re-screening meant that when Volkhov Industrial Group JSC was first designated under OFAC Directive 2 (sectoral sanctions under E.O. 13662) on November 15, 2019, existing counterparties such as Petronova Trading FZE were never re-screened to identify potential connections to the newly designated entity.
This gap persisted for more than two years. Only upon the full SDN blocking of Volkhov Industrial Group on April 6, 2022, pursuant to E.O. 14024, did Fisk conduct a screening refresh. That refresh was performed on April 11, 2022 — five days after the designation — and it was at that point that the Petronova–Volkhov connection was first identified by the compliance function. The delay of over two years between Volkhov's initial Directive 2 designation and the first re-screening of existing counterparties represents a critical failure of the compliance program's internal controls.
In addition to the absence of periodic re-screening, the screening tool itself was inadequate. The tool employed a basic name-match algorithm that did not incorporate beneficial ownership analysis consistent with OFAC's 50% Rule. Under the 50% Rule, the property and interests in property of an entity that is 50% or more owned, directly or indirectly, individually or in the aggregate, by one or more blocked persons are themselves blocked, regardless of whether the entity itself appears on the SDN List. The screening tool used by Dunmore was not configured to look behind the named counterparty to assess ownership structures, meaning that entities indirectly owned or controlled by designated persons were never flagged.
This deficiency is directly relevant to the Petronova Trading FZE relationship. Petronova was managed by Sergei Volkov, a Russian national with documented personal and business ties to Arkady Volkhov, the principal of Volkhov Industrial Group JSC. The beneficial ownership analysis prepared by Liam Donahue (Memorandum re: Petronova Trading FZE — Beneficial Ownership Analysis, June 15, 2022) concluded that Petronova was, at a minimum, subject to significant influence by Volkhov Industrial Group, and that a reasonable 50% Rule analysis — had one been conducted — would have identified Petronova as a high-risk counterparty warranting enhanced scrutiny. Because Dunmore's screening system did not incorporate any 50% Rule functionality, Petronova was never flagged.
2. Failure to Screen Intermediaries and Sub-Counterparties
The deficiencies in Dunmore's screening protocols extended beyond the screening tool itself to the scope of parties subject to screening. Screening was applied only to direct contractual counterparties — that is, the entities with which DTI entered into trade confirmations or master agreements. No procedures existed for screening intermediaries, end users, or sub-counterparties involved in the trading chain or in the logistics and shipping of oilfield equipment.
As a result, the following entities were not subjected to any meaningful sanctions screening beyond the initial name-match at onboarding:
• Zenith Petroleum DMCC (Unit 2201, Jumeirah Bay Tower X2, Cluster X, Jumeirah Lakes Towers, Dubai, UAE), managed by Farhan Qureshi. Zenith Petroleum was onboarded as a direct counterparty for certain crude oil swap transactions but was not screened for its ownership structure, affiliations, or relationship to Petronova Trading FZE or any Russian-nexus entities.
• Petronova Trading FZE (Office 1407, Al Shafar Tower, Dubai Internet City, Dubai, UAE), managed by Sergei Volkov. While Petronova was subjected to the initial name-match at onboarding, no further inquiry was made into its ownership chain, beneficial ownership, or connections to Volkhov Industrial Group.
• Caspian Logistik GmbH (Mönckebergstraße 22, 20095 Hamburg, Germany), managed by Klaus Weidemann. Caspian Logistik served as the logistics intermediary for oilfield equipment shipments. Despite its critical role in the export chain — including the procurement and presentation of end-user certificates — Caspian Logistik was never screened against any sanctions or restricted party list, nor was any inquiry made into its ownership or affiliations.
• End users identified on end-user certificates. The ultimate end users of the oilfield equipment shipped through Caspian Logistik were identified on end-user certificates that accompanied the shipments. These end users were never screened against the SDN List, the Entity List, the Denied Persons List, the Unverified List, or any other restricted party list.
The failure to screen intermediaries and sub-counterparties is a particularly significant deficiency in light of the nature of DTI's trading activities, which routinely involved multi-party trading chains, intermediary logistics providers, and payment flows routed through multiple banking institutions. A compliance program that screens only the direct contractual counterparty and ignores the intermediaries, end users, and payment counterparties in the transaction chain is fundamentally inadequate for an organization engaged in the type of commodity trading and equipment export activity conducted by DTI.
3. Absence of Transaction-Level Screening
No sanctions screening was conducted on individual transactions, payment flows, or shipping documentation. The compliance function did not review individual trade confirmations, wire transfer instructions, bills of lading, shipping manifests, or end-user certificates for sanctions compliance purposes. This meant that the 127 wire transfers totaling $34.2 million routed through Crescent Commercial Bank PJSC — which, as Ridgeline Advisory Group's forensic analysis determined, were structured to obscure the Volkhov beneficial ownership connection — were never subjected to any compliance review whatsoever.
This deficiency was confirmed by multiple sources. Ridgeline Advisory Group's forensic analysis (final report delivered April 1, 2023, Engagement No. RAG-2022-0319) traced the payment flows and concluded that no compliance review was conducted at any stage of the payment chain. The document review conducted by Nexagen Analytics (Project No. NX-DEH-2204) identified no compliance review memoranda, sign-off forms, or other documentation reflecting any transaction-level sanctions screening for any of the 14 crude oil swap transactions or the oilfield equipment shipments at issue. Fisk himself confirmed during his June 8, 2022 interview that transaction-level screening was not a feature of Dunmore's compliance program.
B. Failure to Conduct Adequate Counterparty Due Diligence
1. Onboarding of Petronova Trading FZE
Petronova Trading FZE (Office 1407, Al Shafar Tower, Dubai Internet City, Dubai, UAE) was onboarded by DTI as a trading counterparty in approximately early 2020. The onboarding process consisted of the collection of basic Know Your Customer ("KYC") documentation — specifically, a copy of Petronova's trade license, a passport copy for managing director Sergei Volkov, and a standard Dunmore counterparty onboarding form completed by the DTI trading desk. No enhanced due diligence ("EDD") was conducted.
The failure to conduct EDD is particularly significant given the presence of multiple red flags that should have triggered heightened scrutiny. Petronova was a newly established Free Zone Establishment registered in the Jebel Ali Free Zone, with a thin operating history and limited publicly available information regarding its business activities, financial condition, or ownership structure. Its managing director, Sergei Volkov, is a Russian national — a factor that, under Dunmore's own internal compliance guidelines (however inadequate those guidelines were), should have triggered enhanced scrutiny given the ongoing and expanding Russia-related sanctions programs.
Fisk's compliance team did not request or review Petronova's corporate registry filings, organizational charts, or beneficial ownership declarations at any point during the onboarding process or thereafter. No inquiry was made into Volkov's personal or business connections. No adverse media search was conducted. The counterparty onboarding form was completed by the DTI trading desk without compliance input, and the form itself did not require the identification of beneficial owners or affiliates.
Had even a modest level of enhanced due diligence been conducted — including, for example, a commercially available adverse media search, a review of corporate registry filings, or a request for a beneficial ownership declaration — the connection between Petronova, Sergei Volkov, Arkady Volkhov, and Volkhov Industrial Group JSC may have been identified prior to the execution of the transactions at issue. The separate Memorandum re: Petronova Trading FZE — Beneficial Ownership Analysis (June 15, 2022, by Liam Donahue) addresses this analysis in detail.
2. Onboarding of Zenith Petroleum DMCC
Zenith Petroleum DMCC (Unit 2201, Jumeirah Bay Tower X2, Cluster X, Jumeirah Lakes Towers, Dubai, UAE) was similarly onboarded with minimal due diligence. The onboarding file for Zenith Petroleum, as produced during the document review, contains only the basic KYC documentation — a trade license, a passport copy for managing director Farhan Qureshi, and a counterparty onboarding form. No enhanced due diligence was conducted.
No inquiry was made into Zenith Petroleum's relationship with Petronova Trading FZE, with Volkhov Industrial Group, or with any other Russian-nexus entities. The document review identified trading records and communications indicating that Zenith Petroleum and Petronova frequently appeared as counterparties in related or back-to-back transactions, a pattern that should have prompted inquiry into the nature of the relationship between the two entities. No such inquiry was undertaken.
3. Onboarding of Caspian Logistik GmbH
Caspian Logistik GmbH (Mönckebergstraße 22, 20095 Hamburg, Germany), managed by Klaus Weidemann, was engaged by DTI as a logistics and shipping intermediary for oilfield drilling equipment and components. Caspian Logistik was onboarded without any export control compliance review whatsoever, despite its role in facilitating shipments of items that were later identified as classified under EAR ECCN 2B350 (chemical manufacturing equipment and related items) and ECCN 2B999 (specific processing equipment not controlled by ECCN 2B350).
End-user certifications provided by Caspian Logistik in connection with these shipments were accepted at face value without independent verification. The investigation has identified at least three end-user certificates that identified end users at addresses in the Russian Federation. These certifications may have contained false end-user information, a possibility that Fisk's compliance team never explored or investigated. The separate Memorandum re: Caspian Logistik GmbH — Export Shipment Analysis & End-User Certificate Review (July 20, 2022, by Liam Donahue) addresses the end-user certificate analysis in detail.
C. Failure to Escalate Red Flags
1. Known Red Flags Not Escalated
The document review conducted by Nexagen Analytics revealed that Fisk's compliance team received at least three internal inquiries or flagged items between mid-2020 and late 2021 regarding the nature of DTI's counterparty relationships and unusual payment patterns associated with the transactions at issue. In each instance, the flagged item was either dismissed, disregarded, or addressed informally without documentation, and none were escalated to General Counsel Marcus Wellbourne, CEO Callum Renshaw, the Board of Directors, or external counsel.
The three identified red flags are as follows:
(a) Rajesh Malhotra Inquiry — Approximately October 2020. Rajesh Malhotra, Controller of DTI in Dubai, sent an email to a member of Fisk's compliance team inquiring about unusual wire routing instructions associated with a payment from Petronova Trading FZE. The email, recovered during the Nexagen document review, described wire transfer instructions that directed payment through an intermediary account at Crescent Commercial Bank PJSC rather than directly from Petronova's primary account. Malhotra's email asked whether the compliance team had any concerns about the routing arrangement and whether additional documentation should be requested. The document review has not identified any written response to Malhotra's inquiry. Fisk acknowledged during his June 8, 2022 interview that he received or was made aware of Malhotra's inquiry but stated he dismissed it as a "routine operational matter" and did not document his analysis or response.
(b) Yves Leclerc Inquiry — Approximately March 2021. Yves Leclerc, Director of Logistics & Shipping for DTI, raised a question — the precise form and recipient of which are still being confirmed through the document review — regarding end-user certifications for oilfield equipment shipments routed through Caspian Logistik GmbH that identified end users at Russian-nexus addresses. Leclerc's inquiry appears to have been directed at the compliance team and asked whether the identified end users required any additional review or clearance in light of the sanctions environment. No responsive action or documentation has been identified.
(c) Automated Screening Alert — Approximately November 2021. Dunmore's automated name-matching screening tool generated an alert on the name "Volkov" in connection with Sergei Volkov, the managing director of Petronova Trading FZE. The alert was generated as a potential match against an entry on an OFAC-related screening list. The document review identified an entry in the screening tool's log reflecting that the alert was reviewed and dismissed — marked as a "false positive" — without any documented analysis supporting that determination. There is no memorandum, email, or other record reflecting the basis for the dismissal, the identity of the individual who dismissed the alert, or any consideration of whether additional inquiry was warranted.
The failure to escalate these red flags is among the most significant of Fisk's compliance failures. Each of the three flagged items, had it been properly investigated and escalated, could have led to the identification of the Petronova–Volkhov connection and the cessation of the transactions at issue well before the DOJ inquiry was initiated.
Furthermore, no escalation procedures or written policies existed under Fisk's compliance program for the handling of compliance alerts or red flags at the trading desk level. There was no defined process for documenting, triaging, investigating, or escalating potential sanctions or export control issues to senior management, the General Counsel, or external counsel. The absence of such procedures meant that the disposition of compliance alerts was left entirely to the informal judgment of the small compliance team, without accountability, documentation, or oversight.
2. Failure to Respond to Regulatory Developments
Fisk's compliance failures extended beyond the failure to act on specific red flags to a broader failure to monitor and respond to regulatory developments relevant to DTI's business. Two examples are particularly significant:
Executive Order 14024 (April 15, 2021). When E.O. 14024 was issued on April 15, 2021, it represented a significant expansion of the U.S. sanctions framework targeting Russia, including the blocking of property and interests in property of persons determined by the Secretary of the Treasury to operate or have operated in specified sectors of the Russian economy. E.O. 14024 led to a substantial expansion of the SDN List and created new compliance obligations for U.S. persons and entities with Russia-nexus business activities. Despite the direct relevance of E.O. 14024 to DTI's trading activities — which involved Russian-origin crude oil and Russian-nexus counterparties — Fisk did not conduct a comprehensive review of DTI's counterparty portfolio for Russia-nexus exposure following the issuance of the order. No gap analysis or impact assessment was performed. No memorandum or report was prepared analyzing the implications of E.O. 14024 for Dunmore's business activities.
Volkhov Industrial Group Directive 2 Designation (November 15, 2019). When Volkhov Industrial Group JSC was designated under OFAC Directive 2 (sectoral sanctions under E.O. 13662) on November 15, 2019, Fisk did not conduct any review of DTI's trading book to assess whether any existing counterparties had connections to the newly designated entity. This failure is particularly notable because Dunmore is an oil and gas company with an active commodity trading desk that dealt in Russian-origin crude oil — precisely the type of business activity for which Directive 2 designations are most relevant. The failure to conduct any counterparty review following the Volkhov Directive 2 designation allowed the transactions at issue to proceed without scrutiny for over two years.
D. Inadequate Export Control Compliance
1. Absence of Export Classification Procedures
Under Fisk's oversight, Dunmore had no formal procedure for classifying goods, technology, or software under the Export Administration Regulations. Oilfield drilling equipment and components exported by DTI through Caspian Logistik GmbH were never classified against the Commerce Control List ("CCL"), as codified in Supplement No. 1 to Part 774 of the EAR. No personnel within Dunmore — whether in the compliance function, the trading desk, or the logistics team — had been assigned responsibility for conducting export classification reviews.
Items later identified during the investigation as falling under ECCN 2B350 (chemical manufacturing equipment, including certain valves, pumps, and heat exchangers) and ECCN 2B999 (specific processing equipment not controlled by ECCN 2B350, including certain drilling components) were shipped by DTI through Caspian Logistik to Russian end users without any export control review. These items, with an aggregate value of approximately $12.4 million, were treated by the DTI trading desk and logistics team as ordinary commercial shipments not subject to regulatory control.
No analysis was conducted under EAR § 746.5, which imposes license requirements on exports, reexports, and transfers (in-country) of specified items to Russia and Belarus. No license applications were submitted to BIS. No license exceptions were analyzed or claimed. The absence of any export classification procedure meant that DTI's oilfield equipment export activity operated entirely outside the export control compliance framework.
2. No End-User Verification
End-user certificates provided by Caspian Logistik GmbH in connection with the oilfield equipment shipments were not independently verified by Dunmore. No procedures existed for confirming the identity or legitimacy of stated end users, for conducting site visits or independent inquiries regarding the end users, or for checking end users against the Entity List (Supplement No. 4 to Part 744), the Denied Persons List, or the Unverified List maintained by the Bureau of Industry and Security.
The end-user certificates were accepted at face value by the DTI logistics team and filed without compliance review. As noted above, at least three end-user certificates identified end users at addresses in the Russian Federation. The failure to verify these end users — or even to screen them against publicly available restricted party lists — represents a fundamental gap in Dunmore's export control compliance program.
3. No Export Control Training
No export control training of any kind was provided to DTI personnel during the relevant period. This includes Yves Leclerc, who served as Director of Logistics & Shipping and oversaw the physical shipment of oilfield equipment, as well as the trading desk staff, including Natasha Sorokin, who authorized the commercial terms of equipment transactions. The absence of training meant that the individuals most directly involved in export-controlled transactions had no awareness of the regulatory framework governing their activities, the classification requirements applicable to the items being shipped, or the restricted party screening obligations attendant to export transactions.
E. Deficient Compliance Infrastructure and Resources
1. Staffing and Budget
Fisk operated Dunmore's global compliance function with a team of only four full-time compliance professionals (including himself) for an organization with approximately 3,200 employees, approximately $4.87 billion in annual revenue (FY 2021), and trading and operational activities spanning multiple high-risk jurisdictions, including the UAE, Nigeria, Germany, and the United States. By any reasonable measure, this staffing level was grossly inadequate for the scope and complexity of Dunmore's compliance obligations.
Critically, no dedicated compliance headcount was assigned to DTI in Dubai. The compliance oversight of DTI — the entity at the center of the transactions under investigation — was conducted entirely on a remote basis from Houston, Texas. Given the nature and volume of DTI's trading activity, the geographic distance between Houston and Dubai, the time zone differential, and the high-risk profile of DTI's counterparties and jurisdictions of operation, the absence of on-the-ground compliance presence in Dubai was a structural deficiency that materially impaired the effectiveness of compliance oversight.
Fisk stated during his June 8, 2022 interview that the compliance budget was "chronically underfunded" and that he had requested additional headcount on "multiple occasions," but that these requests were not approved by management. The investigation has identified limited documentary evidence supporting Fisk's claim — specifically, two budget request memoranda from Fisk to General Counsel Marcus Wellbourne, dated approximately March 2019 and January 2021, requesting the addition of two compliance analysts and one dedicated DTI compliance officer. Neither request was approved. While the failure of management to approve adequate compliance resources is separately relevant to the assessment of management commitment (addressed in the Memorandum re: Assessment of Dunmore's Pre-Existing Sanctions Compliance Program), it does not relieve Fisk of his independent obligation as CCO to escalate the resource constraints and their compliance implications to the Board, or to implement the most effective program possible within the resources available.
2. Written Policies and Procedures
The compliance manual in effect under Fisk's tenure — the "Dunmore Energy Holdings Ltd. Global Compliance Manual" — had not been materially updated since its initial adoption in approximately 2018. As of the commencement of the investigation in April 2022, the manual did not address any of the following topics:
(a) The OFAC 50% Rule and its implications for counterparty screening and due diligence;
(b) Enhanced due diligence procedures for high-risk counterparties or jurisdictions, including criteria for determining when EDD should be triggered;
(c) Export control classification procedures under the EAR, including the process for determining whether items are subject to the EAR and, if so, their applicable ECCN;
(d) Escalation protocols for compliance alerts, red flags, or potential violations, including the chain of escalation and documentation requirements;
(e) Transaction-level sanctions screening procedures, including the screening of payment flows, shipping documentation, and end-user information.
The manual also did not reflect the regulatory developments that occurred between 2018 and 2022, including E.O. 14024, the expanded Entity List designations applicable to Russian end users, or the BIS Russia/Belarus sanctions rule amendments to § 746.5. This assessment is consistent with, and supported by, the findings detailed in the separate Memorandum re: Assessment of Dunmore's Pre-Existing Sanctions Compliance Program (as of April 2022), dated November 15, 2022, prepared by Conrad Reeves and Jasmine Thornton.
3. Compliance Training
Under Fisk's leadership, sanctions compliance training was conducted on an ad hoc basis, approximately once per year, via a pre-recorded online training module. The training module was a generic sanctions awareness presentation that did not address the specific sanctions risks relevant to Dunmore's business, the particular sanctions programs applicable to Russian-nexus transactions, or the practical steps required for compliance in a commodity trading environment.
Training records for DTI personnel were incomplete. The document review identified training completion records for only a portion of the DTI staff, and no records were identified confirming that Derek Hargrave or Natasha Sorokin completed the annual training in 2020 or 2021. No specialized training was provided on Russian sanctions programs, sectoral sanctions (Directive 2), the OFAC 50% Rule, or the Export Administration Regulations. No training was tailored to the specific risks or responsibilities of the trading desk, the logistics function, or the finance and treasury functions.
IV. Fisk's Knowledge and State of Mind
A. Summary of June 8, 2022 Interview
On June 8, 2022, Gerald Fisk was interviewed by Victoria Chambers at Calderwood & Harkness LLP's Houston office. Catherine Blackthorn of Blackthorn & Associates LLP was present as Fisk's personal counsel. The interview was conducted pursuant to an Upjohn warning advising Fisk that Calderwood & Harkness represented Dunmore (not Fisk individually), that the interview was protected by Dunmore's attorney-client privilege, and that Dunmore — not Fisk — held the right to waive that privilege, including by disclosing the substance of the interview to the Department of Justice or other third parties. A separate interview memorandum has been prepared (Interview Memorandum — Gerald Fisk, June 8, 2022, by Victoria Chambers).
The principal statements made by Fisk during the interview, relevant to the compliance failures identified in this memorandum, were as follows:
Regarding Volkhov Industrial Group's Directive 2 Designation. Fisk acknowledged that he was aware of Volkhov Industrial Group's designation under OFAC Directive 2 in November 2019. However, Fisk stated that he did not believe the designation triggered obligations to re-screen existing counterparties because, in his view, DTI's transactions were "booked in Dubai rather than in the U.S." and therefore fell outside the scope of OFAC's jurisdiction. Fisk stated that he understood Directive 2 to apply only to transactions involving U.S. persons or transactions cleared through the U.S. financial system, and that he believed DTI's operations were structured to avoid both nexus points.
Regarding the Petronova–Volkhov Connection. Fisk stated that he was not aware of any connection between Petronova Trading FZE and Volkhov Industrial Group until he conducted the April 11, 2022 screening refresh following Volkhov's full SDN blocking on April 6, 2022. Fisk stated that no information regarding such a connection had come to his attention prior to that date.
Regarding the Malhotra Inquiry. Fisk acknowledged receiving or being made aware of the inquiry from Rajesh Malhotra regarding unusual wire routing instructions associated with Petronova Trading FZE (approximately October 2020). Fisk stated that he reviewed the inquiry at the time and dismissed it as a "routine operational matter" reflecting standard payment routing practices in the Dubai banking system. Fisk stated that he did not document his analysis of the inquiry and did not consider it to be a compliance red flag warranting escalation or further investigation.
Regarding Export Control Compliance. Fisk acknowledged that he was "generally aware" that DTI facilitated oilfield equipment shipments but stated that he did not consider export control compliance to be within his "primary remit" as CCO. Fisk stated that he viewed export control compliance as a "commercial" responsibility of the logistics team under Yves Leclerc's supervision, rather than a compliance function responsibility. Fisk acknowledged that no export classification procedures had been implemented and that no export control training had been provided to DTI personnel.
Regarding End-User Certifications. Fisk denied being aware of any false end-user certifications. Fisk stated that end-user certifications were handled entirely by the DTI logistics team and were not reviewed by the compliance function.
Regarding Compliance Resources. Fisk described the compliance budget as "chronically underfunded" and stated that he had submitted requests for additional headcount on multiple occasions, including requests for a dedicated DTI compliance officer, but that these requests were consistently denied by management. Fisk stated that the resource constraints limited his ability to implement more robust compliance procedures, including periodic re-screening and dedicated DTI compliance oversight.
B. Assessment of Credibility and Culpability
Several of Fisk's statements during the June 8, 2022 interview warrant critical assessment.
Jurisdictional Claim. Fisk's claim that OFAC obligations did not extend to DTI's Dubai-booked transactions is inconsistent with established OFAC enforcement principles and legal authority. It is well established that OFAC's jurisdiction extends to any transaction that involves a "U.S. person" — a term that includes U.S. citizens, permanent residents, entities organized under the laws of the United States, and any person in the United States — as well as to any transaction that involves property within the United States or that passes through the U.S. financial system. As detailed in the separate Memorandum re: Corporate Structure & Jurisdictional Nexus — U.S. Person Analysis (May 10, 2022, by Jasmine Thornton), DTI's transactions involved U.S.-dollar payments that were cleared through the U.S. financial system via correspondent banking relationships maintained by Crescent Commercial Bank PJSC. Additionally, Dunmore's operational headquarters in Houston, the involvement of U.S.-person employees in oversight and approval functions, and the flow of communications and instructions between Houston and Dubai created a clear jurisdictional nexus to the United States. Fisk's stated belief that DTI's Dubai booking insulated the transactions from OFAC jurisdiction reflects, at best, a fundamental misunderstanding of OFAC's jurisdictional reach and, at worst, a conscious effort to rationalize the absence of compliance controls.
Dismissal of Red Flags. Fisk's dismissal of the Malhotra inquiry and the November 2021 "Volkov" screening alert without documented analysis represents, at minimum, negligent supervision and, potentially, willful blindness to sanctions risk. The Malhotra inquiry concerned unusual payment routing — a recognized sanctions evasion red flag — and the screening alert concerned a potential match to the name of the managing director of a trading counterparty. Both items warranted documented analysis and, depending on the outcome of that analysis, escalation. The failure to document the disposition of these items is itself a compliance deficiency, and the failure to investigate or escalate them suggests a pattern of willful disregard for sanctions compliance indicators.
Underfunding Claim. Fisk's claim that the compliance function was chronically underfunded has some documentary support, as noted above. The investigation has identified two budget request memoranda from Fisk requesting additional headcount, and the fact that these requests were denied is relevant to the broader assessment of management commitment to compliance. However, the claim of underfunding does not absolve Fisk of the failures identified in this memorandum. Many of the deficiencies — including the failure to implement periodic re-screening, the failure to escalate identified red flags, the failure to respond to regulatory developments, and the failure to update the compliance manual — do not require significant additional resources. Periodic re-screening, for example, can be implemented through the existing screening tool at minimal incremental cost. Escalation procedures require only the drafting and adoption of a written policy. The failure to take these basic steps, regardless of resource constraints, reflects a fundamental failure of professional diligence.
V. Comparison to Compliance Program Standards
A. DOJ Evaluation of Corporate Compliance Programs
The Department of Justice's "Evaluation of Corporate Compliance Programs" — the guidance document used by DOJ prosecutors to assess the adequacy of a company's compliance program in connection with corporate criminal enforcement actions — identifies a series of topics and inquiries that prosecutors should consider in evaluating whether a compliance program is "well designed," "adequately resourced and empowered," and "works in practice." Although the most recent comprehensive update was issued in September 2022 (and a subsequent update in March 2023 contains similar principles), the core framework has remained substantively consistent since its original publication and is applicable to the evaluation of Dunmore's program as it existed during the relevant period.
Under the DOJ Evaluation framework, a compliant program requires, among other things:
(1) An adequate risk assessment that identifies, assesses, and defines the company's risk profile, including the risk posed by the company's geographic footprint, industry, counterparties, and transaction types;
(2) Policies and procedures that are appropriately designed to address identified risks, that are updated to reflect changes in the regulatory environment, and that are effectively communicated to relevant personnel;
(3) Effective training that is tailored to the specific risks and responsibilities of the relevant business units and personnel;
(4) Testing and monitoring mechanisms — including testing of the compliance program's effectiveness, auditing of transactional activity, and monitoring of compliance-relevant data — that are conducted on a regular basis;
(5) Investigation and remediation of identified issues, including a process for receiving, investigating, and resolving compliance alerts, tips, and concerns; and
(6) Appropriate escalation mechanisms that ensure that compliance issues are elevated to the appropriate level of management and, where warranted, to the Board or external counsel.
Under Fisk's leadership, Dunmore's sanctions and export controls compliance program was deficient in each of these categories. The program lacked an adequate risk assessment specific to sanctions and export controls. Policies and procedures were outdated and did not address the most significant compliance risks facing DTI. Training was generic and ad hoc. No testing or monitoring mechanisms existed for the sanctions or export controls programs. Identified compliance alerts and red flags were dismissed without investigation or documentation. And no escalation protocols existed to ensure that compliance issues were elevated beyond Fisk's small team.
B. OFAC Framework for Compliance Commitments
OFAC's May 2019 publication, "A Framework for OFAC Compliance Commitments," identifies five essential components of a sanctions compliance program: (1) management commitment; (2) risk assessment; (3) internal controls; (4) testing and auditing; and (5) training.
The deficiencies identified in this memorandum — particularly the absence of periodic re-screening, the failure to incorporate the 50% Rule into the screening process, the absence of transaction-level screening, the failure to screen intermediaries and end users, the absence of escalation protocols, the lack of counterparty due diligence, and the deficiency of training — represent failures across multiple components of the OFAC framework. The program as implemented under Fisk's oversight did not satisfy any of the five essential components to a degree consistent with a reasonably effective sanctions compliance program for an organization of Dunmore's size, complexity, and risk profile.
These assessments are relevant both to the DOJ's evaluation of whether Dunmore maintained an effective compliance program at the time of the misconduct and to OFAC's potential enforcement action and penalty calculation, should OFAC pursue a separate civil enforcement proceeding.
VI. Implications for the Investigation and DOJ Engagement
A. Relevance to DOJ Corporate Enforcement Policy
Fisk's compliance failures are directly relevant to the DOJ's assessment under the Corporate Enforcement Policy (formerly the FCPA Corporate Enforcement Policy, now extended to other areas of white collar enforcement) regarding whether Dunmore had an effective compliance program at the time of the misconduct. The clear and pervasive deficiencies in Dunmore's sanctions and export controls compliance program under Fisk's leadership support the conclusion that the program was inadequate during the March 2020 through April 2022 period.
While this conclusion is adverse to Dunmore in the context of the DOJ's assessment, it is partially mitigated by the company's prompt and comprehensive remediation efforts following the identification of the issues, including:
• The appointment of Priya Nayar as the new Chief Compliance Officer, effective August 1, 2022, with a mandate to redesign and strengthen the compliance program;
• The retention of Pemberton Investors Solutions LLC (Dr. Anton Bremer, engagement lead), engaged on December 15, 2022, to assist with the design and implementation of a comprehensive remediation program;
• The adoption of the Enhanced Sanctions & Export Controls Compliance Program on October 1, 2023, incorporating all of the remedial measures discussed in Section VII below; and
• The company's voluntary disgorgement of $8.75 million in connection with the transactions at issue.
Fisk's departure from the company on June 10, 2022, and the subsequent separation of the individuals directly responsible for the trading activity — Derek Hargrave (separated October 1, 2022) and Natasha Sorokin (separated September 15, 2022) — demonstrate Dunmore's willingness to hold responsible parties accountable. This is a factor that weighs in favor of a favorable DOJ disposition, including the possibility of a declination of prosecution, a deferred prosecution agreement, or a reduced penalty.
B. Fisk's Separate Representation
As noted, Fisk has retained Catherine Blackthorn of Blackthorn & Associates LLP as personal counsel. Victoria Chambers acknowledged Ms. Blackthorn's representation and confirmed information-sharing limitations between Calderwood & Harkness (on behalf of Dunmore) and Blackthorn & Associates (on behalf of Fisk individually) by letter dated June 15, 2022. The letter confirmed that Calderwood & Harkness does not represent Fisk in his individual capacity, that Dunmore's attorney-client privilege with respect to the internal investigation (including the substance of Fisk's interview) is held by Dunmore and may be waived at Dunmore's discretion, and that no information obtained during the investigation will be shared with Blackthorn & Associates absent express authorization from Dunmore.
Fisk's interests may diverge from those of Dunmore as the investigation proceeds, particularly regarding his potential individual exposure under IEEPA (50 U.S.C. §§ 1701–1706), which carries criminal penalties of up to $1,000,000 in fines and 20 years' imprisonment for willful violations, and the Export Control Reform Act ("ECRA," 50 U.S.C. §§ 4801–4852), which carries criminal penalties of up to $1,000,000 in fines and 20 years' imprisonment for knowing violations. Fisk's potential willful blindness to the sanctions risk, as discussed in Section IV.B above, is relevant to the assessment of his individual criminal exposure. To the extent that the DOJ seeks individual accountability — a stated priority under the Deputy Attorney General's September 2022 memorandum on corporate criminal enforcement — Fisk is a likely target.
Dunmore is currently advancing Fisk's defense costs (along with those of Sorokin and Hargrave, totaling $3.4 million across all three individuals) pursuant to indemnification obligations analyzed in the separate Memorandum re: Indemnification Obligations — Advancement of Defense Costs (May 5, 2022, by Jasmine Thornton). The advancement obligations and any potential clawback provisions are addressed in that memorandum and should be monitored as the investigation develops.
C. Impact on DOJ Proffer and White Paper Positioning
Fisk's compliance failures will be addressed in two principal submissions to the DOJ:
Comprehensive Internal Investigation Report. The internal investigation report, which was submitted to the DOJ on May 15, 2023 (176 pages), contains a detailed discussion of the compliance deficiencies identified during the investigation, including those attributable to Fisk. The report presents the investigation's findings on a factual basis, consistent with the company's cooperation obligations.
White Paper on Application of the Corporate Enforcement Policy. The White Paper, submitted to the DOJ on March 1, 2023, presents Dunmore's argument for favorable treatment under the Corporate Enforcement Policy. The narrative in the White Paper acknowledges the compliance deficiencies while emphasizing the following mitigating factors:
(1) Prompt Self-Identification. Fisk's April 11, 2022 screening refresh, prompted by the Volkhov SDN designation on April 6, 2022, identified the Petronova–Volkhov connection, and Fisk immediately notified General Counsel Marcus Wellbourne. Wellbourne promptly escalated the matter to CEO Callum Renshaw and, on April 14, 2022, engaged Calderwood & Harkness LLP to commence an internal investigation.
(2) Immediate Retention of Counsel. Calderwood & Harkness was retained on April 14, 2022, and commenced its investigation immediately, including the issuance of a litigation hold notice on April 20, 2022.
(3) Full Cooperation. Dunmore has provided full and proactive cooperation with the DOJ inquiry, including the conduct of 47 witness interviews, the production of 438,916 responsive documents (from a collected universe of 2,347,812 documents), and the engagement of both Nexagen Analytics and Ridgeline Advisory Group LLC to support the investigation.
(4) Extensive Remediation. Dunmore has undertaken comprehensive remediation, including the separation of responsible individuals, the appointment of a new CCO, the retention of Pemberton Investors Solutions LLC, and the adoption of the Enhanced Sanctions & Export Controls Compliance Program.
(5) Voluntary Disgorgement. Dunmore has voluntarily disgorged $8.75 million in connection with the transactions at issue.
The White Paper positioning is intended to support the argument that, while Dunmore's compliance program was inadequate at the time of the misconduct, the company's conduct following the discovery of the violations — including its prompt self-identification, full cooperation, comprehensive remediation, and voluntary disgorgement — warrants a declination of prosecution or, at minimum, a deferred prosecution agreement with a reduced penalty.
VII. Recommendations
Based on the analysis set forth in this memorandum, the following recommendations are made:
1. Include Fisk's failures prominently in the internal investigation report. Fisk's compliance failures and supervisory deficiencies should be presented in detail in the comprehensive internal investigation report submitted to the DOJ. Transparent and candid disclosure of the compliance deficiencies is essential to maintaining credibility with the DOJ investigation team — AUSA Meredith Calloway and Trial Attorneys Samuel Kovacs and Diana Pressman — and to supporting Dunmore's argument that the company has fully cooperated with the inquiry. Any effort to minimize or obscure Fisk's role in the compliance failures would risk undermining the company's cooperation credit and credibility with the prosecutors.
2. Ensure the compliance remediation program directly addresses each identified deficiency. The Enhanced Sanctions & Export Controls Compliance Program adopted on October 1, 2023, should incorporate, at a minimum, the following remedial measures, each of which directly corresponds to a deficiency identified in this memorandum:
(a) Periodic OFAC re-screening with 50% Rule analysis. All existing counterparties, intermediaries, and sub-counterparties should be re-screened against the SDN List, SSI List, Entity List, Denied Persons List, and Unverified List on a regular cadence (no less than quarterly) and upon the occurrence of any new OFAC designation. The screening tool should incorporate beneficial ownership analysis consistent with the OFAC 50% Rule.
(b) Enhanced counterparty due diligence with beneficial ownership inquiry. All new counterparties should be subjected to risk-based enhanced due diligence at onboarding, including beneficial ownership declarations, corporate registry searches, adverse media screening, and, for high-risk counterparties, independent verification of ownership and control structures. Existing counterparties should be subjected to periodic refresh due diligence.
(c) Transaction-level screening protocols. All individual transactions, wire transfers, shipping documents, and end-user certificates should be screened for sanctions and export control compliance prior to execution or shipment.
(d) Formal export control classification procedures. A formal procedure should be established for classifying all items subject to export under the EAR, including assignment of ECCNs, analysis of license requirements under § 746.5 and other applicable provisions, and doc