1016-00009 · Dunmore Energy Holdings · Subpoena Response & DOJ Correspondence

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CALDERWOOD & HARKNESS LLP Attorneys at Law

1750 Pennsylvania Avenue NW, Suite 800 Washington, DC 20006

Telephone: (202) 555-7100 Facsimile: (202) 555-7199 www.calderwoodharkness.com

Victoria Chambers Partner, White Collar & Investigations Direct Dial: (202) 555-7142 Direct Fax: (202) 555-7143

Email: vchambers@calderwoodharkness.com

January 15, 2024

VIA HAND DELIVERY AND ELECTRONIC MAIL

Meredith Calloway Assistant United States Attorney National Security Division Counterintelligence and Export Control Section U.S. Department of Justice 950 Pennsylvania Avenue NW Washington, D.C. 20530

Re: United States v. Dunmore Energy Holdings Ltd. — Grand Jury Subpoena GJ No. 22-418; Transmittal of Supplemental Remediation Report

Calderwood & Harkness Matter No.: 1016-00009

Dear Ms. Calloway:

I. Purpose of This Letter

We write on behalf of our client, Dunmore Energy Holdings Ltd. ("Dunmore" or "DEH"), an exempted company incorporated with limited liability under the laws of the Cayman Islands, with operational headquarters located at 1200 McKinney Street, Suite 3400, Houston, Texas 77010. As you are aware, this firm has represented Dunmore in connection with the ongoing inquiry by the U.S. Department of Justice ("DOJ"), National Security Division, Counterintelligence and Export Control Section ("CES"), since the inception of that inquiry on April 19, 2022, and the grand jury subpoena designated GJ No. 22-418, issued by the U.S. District Court for the District of Columbia (Grand Jury 22-2).

The purpose of this letter is to transmit the enclosed Supplemental Remediation Report (the "Report"), dated January 15, 2024, which documents Dunmore's full design, adoption, and implementation of the Enhanced Sanctions & Export Controls Compliance Program (the "Enhanced Program"). The Report was prepared by the undersigned, Victoria Chambers, and Conrad Reeves, Senior Counsel in Calderwood & Harkness's Export Controls & Sanctions practice group, with contributions from other members of the engagement team. We respectfully request that you and your colleagues review the Report in connection with the DOJ's ongoing evaluation of the appropriate resolution of this matter.

II. Background — Cooperation and Investigation Context

Since the inception of the DOJ's inquiry, Dunmore has cooperated fully and in good faith with CES, and has endeavored at every stage to provide the government with timely, transparent, and comprehensive information regarding the conduct under investigation. We take this opportunity to summarize the principal milestones of Dunmore's cooperation to date, as reflected in the extensive record of submissions to your office.

Proffer and Cooperation Submissions. On July 15, 2022, Dunmore, through this firm, submitted an initial proffer of cooperation to your office, setting forth the preliminary findings of Dunmore's internal investigation and Dunmore's commitment to full cooperation with the DOJ. On November 20, 2022, we submitted a supplemental proffer that incorporated early forensic accounting findings and additional witness interview summaries, providing the government with a more complete picture of the transactions and conduct at issue.

Document Productions. Dunmore has made two substantial document productions in response to the grand jury subpoena and in furtherance of its voluntary cooperation:

• First Production (November 1, 2022): 287,412 documents, bearing Bates numbers DEH-DOJ-000001 through DEH-DOJ-287412, encompassing transactional records, internal correspondence, trading documentation, compliance files, and corporate governance materials collected from custodians and data sources across multiple jurisdictions.

• Second Production (January 30, 2023): 151,504 documents, bearing Bates numbers DEH-DOJ-287413 through DEH-DOJ-438916, including additional financial records, communications, and materials identified through supplemental collection and review efforts.

In total, Dunmore has produced 438,916 responsive documents to the DOJ in connection with this matter.

White Paper on Corporate Enforcement Policy. On March 1, 2023, we submitted a detailed white paper analyzing the application of the DOJ Corporate Enforcement Policy to the facts and circumstances of Dunmore's case, setting forth our legal position with respect to the criteria for a declination or reduced enforcement outcome.

Internal Investigation Report. On May 15, 2023, we submitted a comprehensive 176-page internal investigation report to your office. That report detailed the findings of Dunmore's extensive internal investigation, including the identification of relevant transactions, the roles and responsibilities of involved personnel, the root causes of the compliance failures, and the remedial measures undertaken and planned by the company.

OFAC Voluntary Self-Disclosure. On June 1, 2023, Dunmore filed a voluntary self-disclosure with the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury, disclosing the apparent violations identified through its internal investigation and demonstrating its commitment to transparency with all relevant government authorities.

Witness Cooperation. Throughout the investigation, Dunmore has made its personnel available for interviews and has facilitated the government's access to witnesses with knowledge of the relevant conduct. Notably, on July 12, 2023, the DOJ conducted a follow-up interview of Omar Al-Rashidi, Head of Middle East Operations for Dunmore Trading International Ltd. ("DTI"), a cooperating witness, at Calderwood & Harkness's Washington, D.C. office. That interview was attended by you, Ms. Calloway, and Trial Attorney Samuel Kovacs, as well as members of the Calderwood & Harkness engagement team. Mr. Al-Rashidi provided fulsome and candid responses to all of the government's questions during that session, and Dunmore remains prepared to make Mr. Al-Rashidi and other company personnel available for any additional interviews or testimony the government may request.

Scope of the Internal Investigation. The scope of Dunmore's internal investigation has been comprehensive and far-reaching. In total, the investigation involved the collection and review of over 2.3 million documents — specifically, 2,347,812 documents collected from custodians and data sources across six jurisdictions: the Cayman Islands, the United Arab Emirates, the United States, Germany, Nigeria, and the United Kingdom. Of the documents collected, 438,916 were determined to be responsive to the grand jury subpoena and to the scope of the internal investigation and were produced to the DOJ as described above. In addition, the investigation team conducted 47 witness interviews across three rounds of interviews (22 interviews in the first round, 15 in the second round, and 10 in the third round), covering current and former employees of Dunmore and its subsidiaries in a range of functions, including trading, operations, finance, legal, compliance, and senior management.

Forensic Accounting. Dunmore retained Ridgeline Advisory Group LLC ("Ridgeline") to perform forensic accounting and transaction tracing work in support of the internal investigation. The Ridgeline engagement was led by Dr. Margaret Liu, CPA, CFE (Engagement No. RAG-2022-0319). Ridgeline's forensic analysis identified the following key findings, which were reported to your office in the internal investigation report and supplemental proffer:

• Nine (9) of fourteen (14) crude oil swap transactions, with an aggregate notional value of approximately $156.3 million, involving entities connected to Volkhov Industrial Group JSC ("Volkhov"), a Russian-incorporated joint stock company whose beneficial ownership and control structures raised significant sanctions compliance concerns;

• Approximately $12.4 million in oilfield equipment exports routed through Caspian Logistik GmbH ("Caspian Logistik"), a German-registered logistics intermediary, implicating potential violations of the Export Administration Regulations; and

• Approximately $34.2 million in structured payments, encompassing 127 individual transactions, processed through Crescent Commercial Bank PJSC ("Crescent Commercial Bank"), a UAE-licensed financial institution, which Ridgeline determined were structured in a manner designed to obscure the ultimate beneficiaries and the connection to Volkhov-affiliated counterparties.

These findings formed the factual basis for Dunmore's voluntary self-disclosure to OFAC and for the remedial measures documented in the enclosed Report.

III. Voluntary Disgorgement

We further note that, on November 30, 2023, Dunmore made a voluntary disgorgement payment in the amount of $8,750,000 (eight million seven hundred fifty thousand dollars) to the United States Treasury. The disgorgement amount represents the estimated net profits derived by Dunmore from the nine tainted crude oil swap transactions identified in the Ridgeline forensic analysis. The calculation of the disgorgement amount was based on the aggregate notional value of those transactions ($156.3 million) multiplied by an estimated net profit margin of 5.6%, yielding an estimated net profit of approximately $8.75 million, rounded to the nearest fifty thousand dollars.

This payment was made voluntarily and in good faith as a further demonstration of Dunmore's commitment to full cooperation and accountability. Dunmore did not contest the calculation methodology or the appropriateness of disgorgement, and the payment was remitted promptly following the completion of the company's internal financial analysis and the approval of the Dunmore Board of Directors. We respectfully submit that this voluntary disgorgement reflects the seriousness with which Dunmore's leadership has approached its obligations in connection with this matter and should be considered as a significant mitigating factor in the government's resolution analysis.

IV. Summary of the Enhanced Program and Report Contents

The enclosed Supplemental Remediation Report documents, in detail, the design, adoption, and full implementation of the Enhanced Sanctions & Export Controls Compliance Program. As set forth more fully in the Report, the Enhanced Program represents a comprehensive overhaul and strengthening of Dunmore's compliance infrastructure, tailored to address the specific risks and deficiencies identified through the internal investigation and the forensic accounting analysis.

The Enhanced Program was developed in coordination with Pemberton Investors Solutions LLC ("Marlowe Asset Management"), a nationally recognized compliance consulting firm specializing in sanctions, export controls, and anti-money laundering compliance. Marlowe Asset Management was retained by Dunmore on December 15, 2022, and the engagement was led by Dr. Anton Bremer, Lead Consultant. Marlowe Asset Management delivered its remediation report and recommendations to Dunmore on September 15, 2023, following an extensive assessment of Dunmore's existing compliance framework, risk profile, organizational structure, and operational footprint.

The Dunmore Board of Directors formally adopted the Enhanced Program by board resolution on October 1, 2023. That resolution authorized Priya Nayar, Chief Compliance Officer of Dunmore, who was appointed to that position effective August 1, 2022, to oversee the full implementation of the Enhanced Program across all Dunmore entities and business lines globally. A copy of the Board Resolution is included as an appendix to the enclosed Report.

The key elements of the Enhanced Program, each of which is documented in detail in the Report, are summarized below.

A. Governance and Organizational Changes

Dunmore has implemented significant governance and organizational changes designed to ensure that compliance is embedded at the highest levels of the organization and that the individuals and structures responsible for the conduct under investigation have been replaced.

Chief Compliance Officer. Priya Nayar was appointed as Chief Compliance Officer of Dunmore effective August 1, 2022, replacing Gerald Fisk, the former CCO, who departed the company on June 10, 2022. Ms. Nayar brings extensive experience in sanctions and export controls compliance and reports directly to the Board of Directors, ensuring the independence and authority of the compliance function.

Separation of Responsible Individuals. Dunmore has separated the individuals most directly responsible for the conduct under investigation. Derek Hargrave, former President of Dunmore Trading International Ltd., was placed on administrative leave effective July 1, 2022, and was formally separated from the company on October 1, 2022. Natasha Sorokin, former Senior Trader at DTI, was placed on administrative leave effective May 16, 2022, and was formally separated from the company on September 15, 2022. These personnel actions were taken promptly upon the identification of their respective roles in the transactions at issue.

Direct Reporting Line. The Enhanced Program establishes a direct reporting line from the Chief Compliance Officer to the Board of Directors, bypassing operational management. This structural change is designed to ensure that compliance concerns are elevated to the highest level of governance without the risk of interference or suppression by business-side management.

Enhanced Subsidiary Compliance Oversight. The Enhanced Program extends comprehensive compliance oversight to all of Dunmore's principal operating subsidiaries, including Dunmore Trading International Ltd. (DIFC License No. CL-4827, Dubai, UAE), Dunmore upstream Americas LLC (EIN 84-2937561, Houston, Texas), Dunmore Renewables GmbH (Frankfurt, Germany), and Dunmore Exploration West Africa Ltd. (Lagos, Nigeria). Each subsidiary is now subject to the centralized compliance policies and procedures adopted under the Enhanced Program, with dedicated compliance liaisons reporting to the CCO.

B. Enhanced OFAC Screening Protocols

The Enhanced Program includes the implementation of comprehensive, real-time, automated screening protocols to ensure that all of Dunmore's counterparties, beneficial owners, and transaction parties are screened against applicable OFAC sanctions lists prior to the initiation of any transaction or business relationship.

The screening system is integrated with the OFAC Specially Designated Nationals and blocked Persons List (SDN List), the Sectoral Sanctions Identifications List (SSI List), and all other lists administered by OFAC, including the Non-SDN Menu-Based Sanctions List and the Foreign Sanctions Evaders List. Screening is conducted automatically at the point of counterparty onboarding, at the time of each transaction, and on an ongoing basis through continuous monitoring of changes to OFAC lists.

In addition, the Enhanced Program requires the application of the OFAC 50 Percent Rule analysis — whereby entities owned 50 percent or more, directly or indirectly, by one or more blocked persons are themselves treated as blocked — to all counterparties with identified ownership complexity, including multi-layered holding structures, nominee arrangements, and counterparties organized in jurisdictions with limited beneficial ownership transparency.

The screening and blocking procedures are designed to ensure compliance with the applicable OFAC sanctions programs, including, without limitation, Executive Order 14024 (issued April 15, 2021, "Blocking Property With Respect To Specified Harmful Foreign Activities of the Government of the Russian Federation"), Directive 2 under Executive Order 13662, and the regulations codified at 31 C.F.R. Part 589 (Ukraine-/Russia-Related Sanctions Regulations).

C. Export Control Classification and Compliance

The Enhanced Program establishes rigorous export classification review procedures for all items exported, re-exported, or transferred by Dunmore and its subsidiaries, to ensure compliance with the Export Administration Regulations ("EAR"), 15 C.F.R. Parts 730–774, administered by the Bureau of Industry and Security ("BIS") of the U.S. Department of Commerce.

Of particular relevance to the conduct at issue, the Enhanced Program includes specific compliance protocols for items classified under Export Control Classification Numbers ("ECCNs") 2B350 (chemical manufacturing equipment and related technology) and 2B999 (specific processing equipment not controlled by Wassenaar Arrangement Category 2B), as well as for items that, while designated as EAR99, may nonetheless be subject to license requirements based on end-use, end-user, or destination controls.

The Enhanced Program also incorporates compliance procedures to ensure adherence to EAR §746.5, which imposes comprehensive sanctions and export controls on Russia and Belarus, including license requirements for a broad range of items, restrictions on certain end-uses and end-users, and the application of expanded license review policies.

In addition, the Enhanced Program includes end-user verification and due diligence procedures designed to prevent the diversion of controlled and uncontrolled items to unauthorized end-users, end-uses, or destinations. These procedures require the completion of end-user certificates, the verification of stated end-uses through independent sources, and the identification and escalation of diversion risk indicators.

D. Third-Party and Counterparty Due Diligence

The Enhanced Program establishes a comprehensive framework for know-your-customer ("KYC") and counterparty due diligence, designed to identify and mitigate the risks associated with Dunmore's global trading operations, including the specific risks presented by complex counterparty structures and high-risk jurisdictions.

The due diligence framework requires the verification of beneficial ownership for all trading counterparties, including the identification of all natural persons who directly or indirectly own or control 25 percent or more of the equity interests in the counterparty, as well as any natural person who exercises substantial control over the counterparty. Enhanced due diligence is required for counterparties organized as Free Zone Establishments ("FZEs"), DMCC companies, and other entity types prevalent in the UAE and other jurisdictions where beneficial ownership transparency may be limited.

The Enhanced Program also establishes formal red-flag identification and escalation procedures, requiring all trading, operations, logistics, and finance personnel to identify and report specified red flags — including unusual payment routing, the use of intermediary entities without a clear commercial purpose, and requests to structure transactions to avoid reporting thresholds — to the compliance function for review and disposition. Red flags that cannot be resolved through additional due diligence are escalated to the Chief Compliance Officer and, where warranted, to outside counsel.

E. Training Program

The Enhanced Program includes a comprehensive, company-wide sanctions and export controls training program, which was developed by Pemberton Investors Solutions LLC in coordination with Calderwood & Harkness, and reviewed by Conrad Reeves.

The training program covers OFAC sanctions compliance, EAR requirements, red-flag identification and reporting, escalation procedures, and the consequences of non-compliance. The program is tailored to the specific roles and responsibilities of Dunmore personnel, with specialized modules for employees in trading, logistics, finance, and compliance functions, as well as general awareness training for all other employees.

The training program has been completed by all relevant Dunmore personnel globally. Training completion records are included as an appendix to the enclosed Report. Dunmore has committed to providing annual refresher training and to updating training materials as necessary to reflect changes in applicable law, regulation, and guidance.

F. Ongoing Monitoring and Testing Framework

The Enhanced Program establishes a robust ongoing monitoring and testing framework, designed to ensure the continued effectiveness of the compliance program over time and to identify and address any gaps or deficiencies that may arise.

The framework includes annual compliance program assessments, to be conducted by the CCO with the support of outside compliance consultants as appropriate. The assessments will evaluate the design and operating effectiveness of all key compliance controls, including OFAC screening, export classification review, counterparty due diligence, and training.

The framework also includes transaction sampling and audit protocols, under which a statistically significant sample of transactions will be reviewed on a quarterly basis to test compliance with applicable policies and procedures. Periodic testing of the automated screening systems will be conducted to ensure that the systems are functioning properly and that all relevant lists are up to date.

Finally, the Enhanced Program establishes internal reporting mechanisms and whistleblower protections, including a confidential reporting hotline and a non-retaliation policy, to encourage the reporting of potential compliance concerns by all Dunmore employees without fear of reprisal.

V. Benchmarking Against DOJ Guidance

The Enhanced Program and the enclosed Report were developed and benchmarked against the DOJ's Evaluation of Corporate Compliance Programs (as updated in March 2023) and the DOJ Corporate Enforcement Policy (as updated in September 2022). In developing the Enhanced Program, Dunmore and its advisors carefully considered the criteria set forth in those guidance documents for evaluating the adequacy and effectiveness of corporate compliance programs, including the fundamental questions identified by the DOJ regarding whether a company's compliance program is well designed, whether it is adequately resourced and empowered, and whether it works in practice.

As set forth in the Calderwood & Harkness compliance program benchmarking analysis previously provided to your office, Dunmore's remediation efforts are designed to satisfy each of the principal criteria identified by the DOJ, including: (i) commitment by senior management to a culture of compliance and ethical conduct; (ii) the allocation of adequate resources and authority to the compliance function; (iii) a risk-based approach to compliance, informed by a thorough assessment of the company's specific risk profile; (iv) the adoption of clear, comprehensive policies and procedures that are accessible to all employees; (v) a training program tailored to the company's business and the roles of its personnel; (vi) a robust monitoring and testing framework to evaluate the effectiveness of the program on an ongoing basis; and (vii) the investigation of identified issues and the implementation of appropriate remediation measures in response.

We respectfully submit that the Enhanced Program, as documented in the Report, reflects a genuine, substantial, and sustained commitment by Dunmore to building and maintaining a compliance program that is commensurate with the company's risk profile and that meets the standards articulated by the DOJ.

VI. Request for Consideration Toward Declination

In light of the foregoing, we respectfully request that the DOJ consider the full scope of Dunmore's extraordinary cooperation, thorough remediation, and voluntary disgorgement in its evaluation of the appropriate resolution of this matter. We submit that the totality of Dunmore's conduct since the inception of the DOJ's inquiry warrants a declination of prosecution under the DOJ Corporate Enforcement Policy. In particular, we draw your attention to the following factors:

1. Timely Retention of Counsel and Prompt Investigation. Dunmore retained Calderwood & Harkness on April 14, 2022, just five days before the formal inception of the DOJ inquiry, and promptly commenced a comprehensive internal investigation that ultimately encompassed the review of over 2.3 million documents and 47 witness interviews across six jurisdictions.

2. Comprehensive and Timely Document Productions. Dunmore produced a total of 438,916 responsive documents to the DOJ in two productions, bearing Bates numbers DEH-DOJ-000001 through DEH-DOJ-438916. These productions were made on a rolling basis and were completed within approximately nine months of the issuance of the grand jury subpoena.

3. Full Witness Cooperation. Dunmore made its personnel, including cooperating witness Omar Al-Rashidi, available for government interviews and provided full and candid responses to all of the government's questions. Dunmore remains prepared to make its personnel available for any further interviews or testimony the government may request.

4. Voluntary Self-Disclosure to OFAC. Dunmore filed a voluntary self-disclosure with OFAC on June 1, 2023, disclosing the apparent violations identified through the internal investigation and demonstrating its commitment to transparency with all relevant regulatory authorities.

5. Voluntary Disgorgement. Dunmore made a voluntary disgorgement payment of $8.75 million to the U.S. Treasury on November 30, 2023, representing estimated net profits from the tainted crude oil swap transactions, made in good faith and without contest.

6. Thorough Remediation. Dunmore has implemented comprehensive remedial measures, including the separation of responsible individuals (Derek Hargrave and Natasha Sorokin), the appointment of a new Chief Compliance Officer (Priya Nayar) with a direct reporting line to the Board of Directors, and the design and full implementation of the Enhanced Sanctions & Export Controls Compliance Program, as documented in the enclosed Report.

7. No Prior Violations. Dunmore has no prior history of sanctions or export control violations, enforcement actions, or criminal charges. The conduct at issue, while serious, represents a departure from Dunmore's otherwise clean compliance record.

We believe that these factors, considered in their totality, satisfy the criteria for a declination under the DOJ Corporate Enforcement Policy and demonstrate that Dunmore has taken all reasonable steps to address the compliance failures that gave rise to the DOJ's inquiry.

Dunmore remains willing to cooperate fully with any further requests from the DOJ, including from your office, from FBI Special Agent Paul Reinhardt, or from OFAC Compliance Analyst Erin Matsuda. We stand ready to provide any additional information, documentation, or access to witnesses that may be required.

VII. Description of Enclosed Materials

Enclosed with this letter, please find the following materials:

1. Supplemental Remediation Report to DOJ — Implementation Summary, prepared by Victoria Chambers and Conrad Reeves, Calderwood & Harkness LLP, dated January 15, 2024.

2. Appendices to the Supplemental Remediation Report, including:

(a) Copy of the Board Resolution of Dunmore Energy Holdings Ltd., dated October 1, 2023, adopting the Enhanced Sanctions & Export Controls Compliance Program;

(b) Summary of the Enhanced Sanctions & Export Controls Compliance Policy;

(d) Monitoring and testing framework documentation.

Should the DOJ require any additional documentation, information, or materials in connection with its review of the Report or its evaluation of this matter, we would be pleased to provide them promptly.

VIII. Closing

Trial Attorney Samuel Kovacs and Trial Attorney Diana Pressman of the Counterintelligence and Export Control Section are copied on this letter, as indicated below. We trust that any communications regarding this letter or the enclosed Report may be directed to any of the recipients copied herein, as appropriate.

This letter and the enclosed Report are submitted on a confidential basis. This letter constitutes a privileged and confidential communication and is protected by the attorney-client privilege and the work product doctrine. The submission of this letter and the Report is made subject to and in accordance with the selective waiver protocols previously agreed upon between Calderwood & Harkness, on behalf of Dunmore, and the DOJ, and does not constitute a waiver of any applicable privilege or protection as to any third party.

For any questions or follow-up regarding this letter or the enclosed Report, please do not hesitate to contact the undersigned at (202) 555-7142 or vchambers@calderwoodharkness.com, or Conrad Reeves, Senior Counsel, at (202) 555-7156 or creeves@calderwoodharkness.com. We are available at your convenience.

We are grateful for the DOJ's thoughtful consideration of Dunmore's cooperation and remediation efforts throughout the course of this inquiry. Dunmore is committed to maintaining the highest standards of compliance and looks forward to a fair and just resolution of this matter.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Victoria Chambers Partner, White Collar & Investigations 1750 Pennsylvania Avenue NW, Suite 800 Washington, DC 20006 Telephone: (202) 555-7142

Email: vchambers@calderwoodharkness.com

cc: (via electronic mail)

Samuel Kovacs, Trial Attorney, Counterintelligence and Export Control Section, National Security Division, U.S. Department of Justice

Diana Pressman, Trial Attorney, Counterintelligence and Export Control Section, National Security Division, U.S. Department of Justice

Marcus Wellbourne, Esq., General Counsel, Dunmore Energy Holdings Ltd.

Priya Nayar, Chief Compliance Officer, Dunmore Energy Holdings Ltd.

Howard Quinn, Billing Partner, Calderwood & Harkness LLP

Conrad Reeves, Senior Counsel, Calderwood & Harkness LLP

Jasmine Thornton, Associate, Calderwood & Harkness LLP

Enclosures: As described above

CALDERWOOD & HARKNESS LLP Attorneys at Law
1750 Pennsylvania Avenue NW, Suite 800 Washington, DC 20006
Telephone: (202) 555-7100 Facsimile: (202) 555-7199 www.calderwoodharkness.com
Victoria Chambers Partner, White Collar & Investigations Direct Dial: (202) 555-7142 Direct Fax: (202) 555-7143
Email: vchambers@calderwoodharkness.com
January 15, 2024
VIA HAND DELIVERY AND ELECTRONIC MAIL
Meredith Calloway Assistant United States Attorney National Security Division Counterintelligence and Export Control Section U.S. Department of Justice 950 Pennsylvania Avenue NW Washington, D.C. 20530
Re: United States v. Dunmore Energy Holdings Ltd. — Grand Jury Subpoena GJ No. 22-418; Transmittal of Supplemental Remediation Report
Calderwood & Harkness Matter No.: 1016-00009
Dear Ms. Calloway:
I. Purpose of This Letter
We write on behalf of our client, Dunmore Energy Holdings Ltd. ("Dunmore" or "DEH"), an exempted company incorporated with limited liability under the laws of the Cayman Islands, with operational headquarters located at 1200 McKinney Street, Suite 3400, Houston, Texas 77010. As you are aware, this firm has represented Dunmore in connection with the ongoing inquiry by the U.S. Department of Justice ("DOJ"), National Security Division, Counterintelligence and Export Control Section ("CES"), since the inception of that inquiry on April 19, 2022, and the grand jury subpoena designated GJ No. 22-418, issued by the U.S. District Court for the District of Columbia (Grand Jury 22-2).
The purpose of this letter is to transmit the enclosed Supplemental Remediation Report (the "Report"), dated January 15, 2024, which documents Dunmore's full design, adoption, and implementation of the Enhanced Sanctions & Export Controls Compliance Program (the "Enhanced Program"). The Report was prepared by the undersigned, Victoria Chambers, and Conrad Reeves, Senior Counsel in Calderwood & Harkness's Export Controls & Sanctions practice group, with contributions from other members of the engagement team. We respectfully request that you and your colleagues review the Report in connection with the DOJ's ongoing evaluation of the appropriate resolution of this matter.
II. Background — Cooperation and Investigation Context
Since the inception of the DOJ's inquiry, Dunmore has cooperated fully and in good faith with CES, and has endeavored at every stage to provide the government with timely, transparent, and comprehensive information regarding the conduct under investigation. We take this opportunity to summarize the principal milestones of Dunmore's cooperation to date, as reflected in the extensive record of submissions to your office.
Proffer and Cooperation Submissions. On July 15, 2022, Dunmore, through this firm, submitted an initial proffer of cooperation to your office, setting forth the preliminary findings of Dunmore's internal investigation and Dunmore's commitment to full cooperation with the DOJ. On November 20, 2022, we submitted a supplemental proffer that incorporated early forensic accounting findings and additional witness interview summaries, providing the government with a more complete picture of the transactions and conduct at issue.
Document Productions. Dunmore has made two substantial document productions in response to the grand jury subpoena and in furtherance of its voluntary cooperation:
• First Production (November 1, 2022): 287,412 documents, bearing Bates numbers DEH-DOJ-000001 through DEH-DOJ-287412, encompassing transactional records, internal correspondence, trading documentation, compliance files, and corporate governance materials collected from custodians and data sources across multiple jurisdictions.
• Second Production (January 30, 2023): 151,504 documents, bearing Bates numbers DEH-DOJ-287413 through DEH-DOJ-438916, including additional financial records, communications, and materials identified through supplemental collection and review efforts.
In total, Dunmore has produced 438,916 responsive documents to the DOJ in connection with this matter.
White Paper on Corporate Enforcement Policy. On March 1, 2023, we submitted a detailed white paper analyzing the application of the DOJ Corporate Enforcement Policy to the facts and circumstances of Dunmore's case, setting forth our legal position with respect to the criteria for a declination or reduced enforcement outcome.
Internal Investigation Report. On May 15, 2023, we submitted a comprehensive 176-page internal investigation report to your office. That report detailed the findings of Dunmore's extensive internal investigation, including the identification of relevant transactions, the roles and responsibilities of involved personnel, the root causes of the compliance failures, and the remedial measures undertaken and planned by the company.
OFAC Voluntary Self-Disclosure. On June 1, 2023, Dunmore filed a voluntary self-disclosure with the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury, disclosing the apparent violations identified through its internal investigation and demonstrating its commitment to transparency with all relevant government authorities.
Witness Cooperation. Throughout the investigation, Dunmore has made its personnel available for interviews and has facilitated the government's access to witnesses with knowledge of the relevant conduct. Notably, on July 12, 2023, the DOJ conducted a follow-up interview of Omar Al-Rashidi, Head of Middle East Operations for Dunmore Trading International Ltd. ("DTI"), a cooperating witness, at Calderwood & Harkness's Washington, D.C. office. That interview was attended by you, Ms. Calloway, and Trial Attorney Samuel Kovacs, as well as members of the Calderwood & Harkness engagement team. Mr. Al-Rashidi provided fulsome and candid responses to all of the government's questions during that session, and Dunmore remains prepared to make Mr. Al-Rashidi and other company personnel available for any additional interviews or testimony the government may request.
Scope of the Internal Investigation. The scope of Dunmore's internal investigation has been comprehensive and far-reaching. In total, the investigation involved the collection and review of over 2.3 million documents — specifically, 2,347,812 documents collected from custodians and data sources across six jurisdictions: the Cayman Islands, the United Arab Emirates, the United States, Germany, Nigeria, and the United Kingdom. Of the documents collected, 438,916 were determined to be responsive to the grand jury subpoena and to the scope of the internal investigation and were produced to the DOJ as described above. In addition, the investigation team conducted 47 witness interviews across three rounds of interviews (22 interviews in the first round, 15 in the second round, and 10 in the third round), covering current and former employees of Dunmore and its subsidiaries in a range of functions, including trading, operations, finance, legal, compliance, and senior management.
Forensic Accounting. Dunmore retained Ridgeline Advisory Group LLC ("Ridgeline") to perform forensic accounting and transaction tracing work in support of the internal investigation. The Ridgeline engagement was led by Dr. Margaret Liu, CPA, CFE (Engagement No. RAG-2022-0319). Ridgeline's forensic analysis identified the following key findings, which were reported to your office in the internal investigation report and supplemental proffer:
• Nine (9) of fourteen (14) crude oil swap transactions, with an aggregate notional value of approximately $156.3 million, involving entities connected to Volkhov Industrial Group JSC ("Volkhov"), a Russian-incorporated joint stock company whose beneficial ownership and control structures raised significant sanctions compliance concerns;
• Approximately $12.4 million in oilfield equipment exports routed through Caspian Logistik GmbH ("Caspian Logistik"), a German-registered logistics intermediary, implicating potential violations of the Export Administration Regulations; and
• Approximately $34.2 million in structured payments, encompassing 127 individual transactions, processed through Crescent Commercial Bank PJSC ("Crescent Commercial Bank"), a UAE-licensed financial institution, which Ridgeline determined were structured in a manner designed to obscure the ultimate beneficiaries and the connection to Volkhov-affiliated counterparties.
These findings formed the factual basis for Dunmore's voluntary self-disclosure to OFAC and for the remedial measures documented in the enclosed Report.
III. Voluntary Disgorgement
We further note that, on November 30, 2023, Dunmore made a voluntary disgorgement payment in the amount of $8,750,000 (eight million seven hundred fifty thousand dollars) to the United States Treasury. The disgorgement amount represents the estimated net profits derived by Dunmore from the nine tainted crude oil swap transactions identified in the Ridgeline forensic analysis. The calculation of the disgorgement amount was based on the aggregate notional value of those transactions ($156.3 million) multiplied by an estimated net profit margin of 5.6%, yielding an estimated net profit of approximately $8.75 million, rounded to the nearest fifty thousand dollars.
This payment was made voluntarily and in good faith as a further demonstration of Dunmore's commitment to full cooperation and accountability. Dunmore did not contest the calculation methodology or the appropriateness of disgorgement, and the payment was remitted promptly following the completion of the company's internal financial analysis and the approval of the Dunmore Board of Directors. We respectfully submit that this voluntary disgorgement reflects the seriousness with which Dunmore's leadership has approached its obligations in connection with this matter and should be considered as a significant mitigating factor in the government's resolution analysis.
IV. Summary of the Enhanced Program and Report Contents
The enclosed Supplemental Remediation Report documents, in detail, the design, adoption, and full implementation of the Enhanced Sanctions & Export Controls Compliance Program. As set forth more fully in the Report, the Enhanced Program represents a comprehensive overhaul and strengthening of Dunmore's compliance infrastructure, tailored to address the specific risks and deficiencies identified through the internal investigation and the forensic accounting analysis.
The Enhanced Program was developed in coordination with Pemberton Investors Solutions LLC ("Marlowe Asset Management"), a nationally recognized compliance consulting firm specializing in sanctions, export controls, and anti-money laundering compliance. Marlowe Asset Management was retained by Dunmore on December 15, 2022, and the engagement was led by Dr. Anton Bremer, Lead Consultant. Marlowe Asset Management delivered its remediation report and recommendations to Dunmore on September 15, 2023, following an extensive assessment of Dunmore's existing compliance framework, risk profile, organizational structure, and operational footprint.
The Dunmore Board of Directors formally adopted the Enhanced Program by board resolution on October 1, 2023. That resolution authorized Priya Nayar, Chief Compliance Officer of Dunmore, who was appointed to that position effective August 1, 2022, to oversee the full implementation of the Enhanced Program across all Dunmore entities and business lines globally. A copy of the Board Resolution is included as an appendix to the enclosed Report.
The key elements of the Enhanced Program, each of which is documented in detail in the Report, are summarized below.
A. Governance and Organizational Changes
Dunmore has implemented significant governance and organizational changes designed to ensure that compliance is embedded at the highest levels of the organization and that the individuals and structures responsible for the conduct under investigation have been replaced.
Chief Compliance Officer. Priya Nayar was appointed as Chief Compliance Officer of Dunmore effective August 1, 2022, replacing Gerald Fisk, the former CCO, who departed the company on June 10, 2022. Ms. Nayar brings extensive experience in sanctions and export controls compliance and reports directly to the Board of Directors, ensuring the independence and authority of the compliance function.
Separation of Responsible Individuals. Dunmore has separated the individuals most directly responsible for the conduct under investigation. Derek Hargrave, former President of Dunmore Trading International Ltd., was placed on administrative leave effective July 1, 2022, and was formally separated from the company on October 1, 2022. Natasha Sorokin, former Senior Trader at DTI, was placed on administrative leave effective May 16, 2022, and was formally separated from the company on September 15, 2022. These personnel actions were taken promptly upon the identification of their respective roles in the transactions at issue.
Direct Reporting Line. The Enhanced Program establishes a direct reporting line from the Chief Compliance Officer to the Board of Directors, bypassing operational management. This structural change is designed to ensure that compliance concerns are elevated to the highest level of governance without the risk of interference or suppression by business-side management.
Enhanced Subsidiary Compliance Oversight. The Enhanced Program extends comprehensive compliance oversight to all of Dunmore's principal operating subsidiaries, including Dunmore Trading International Ltd. (DIFC License No. CL-4827, Dubai, UAE), Dunmore upstream Americas LLC (EIN 84-2937561, Houston, Texas), Dunmore Renewables GmbH (Frankfurt, Germany), and Dunmore Exploration West Africa Ltd. (Lagos, Nigeria). Each subsidiary is now subject to the centralized compliance policies and procedures adopted under the Enhanced Program, with dedicated compliance liaisons reporting to the CCO.
B. Enhanced OFAC Screening Protocols
The Enhanced Program includes the implementation of comprehensive, real-time, automated screening protocols to ensure that all of Dunmore's counterparties, beneficial owners, and transaction parties are screened against applicable OFAC sanctions lists prior to the initiation of any transaction or business relationship.
The screening system is integrated with the OFAC Specially Designated Nationals and blocked Persons List (SDN List), the Sectoral Sanctions Identifications List (SSI List), and all other lists administered by OFAC, including the Non-SDN Menu-Based Sanctions List and the Foreign Sanctions Evaders List. Screening is conducted automatically at the point of counterparty onboarding, at the time of each transaction, and on an ongoing basis through continuous monitoring of changes to OFAC lists.
In addition, the Enhanced Program requires the application of the OFAC 50 Percent Rule analysis — whereby entities owned 50 percent or more, directly or indirectly, by one or more blocked persons are themselves treated as blocked — to all counterparties with identified ownership complexity, including multi-layered holding structures, nominee arrangements, and counterparties organized in jurisdictions with limited beneficial ownership transparency.
The screening and blocking procedures are designed to ensure compliance with the applicable OFAC sanctions programs, including, without limitation, Executive Order 14024 (issued April 15, 2021, "Blocking Property With Respect To Specified Harmful Foreign Activities of the Government of the Russian Federation"), Directive 2 under Executive Order 13662, and the regulations codified at 31 C.F.R. Part 589 (Ukraine-/Russia-Related Sanctions Regulations).
C. Export Control Classification and Compliance
The Enhanced Program establishes rigorous export classification review procedures for all items exported, re-exported, or transferred by Dunmore and its subsidiaries, to ensure compliance with the Export Administration Regulations ("EAR"), 15 C.F.R. Parts 730–774, administered by the Bureau of Industry and Security ("BIS") of the U.S. Department of Commerce.
Of particular relevance to the conduct at issue, the Enhanced Program includes specific compliance protocols for items classified under Export Control Classification Numbers ("ECCNs") 2B350 (chemical manufacturing equipment and related technology) and 2B999 (specific processing equipment not controlled by Wassenaar Arrangement Category 2B), as well as for items that, while designated as EAR99, may nonetheless be subject to license requirements based on end-use, end-user, or destination controls.
The Enhanced Program also incorporates compliance procedures to ensure adherence to EAR §746.5, which imposes comprehensive sanctions and export controls on Russia and Belarus, including license requirements for a broad range of items, restrictions on certain end-uses and end-users, and the application of expanded license review policies.
In addition, the Enhanced Program includes end-user verification and due diligence procedures designed to prevent the diversion of controlled and uncontrolled items to unauthorized end-users, end-uses, or destinations. These procedures require the completion of end-user certificates, the verification of stated end-uses through independent sources, and the identification and escalation of diversion risk indicators.
D. Third-Party and Counterparty Due Diligence
The Enhanced Program establishes a comprehensive framework for know-your-customer ("KYC") and counterparty due diligence, designed to identify and mitigate the risks associated with Dunmore's global trading operations, including the specific risks presented by complex counterparty structures and high-risk jurisdictions.
The due diligence framework requires the verification of beneficial ownership for all trading counterparties, including the identification of all natural persons who directly or indirectly own or control 25 percent or more of the equity interests in the counterparty, as well as any natural person who exercises substantial control over the counterparty. Enhanced due diligence is required for counterparties organized as Free Zone Establishments ("FZEs"), DMCC companies, and other entity types prevalent in the UAE and other jurisdictions where beneficial ownership transparency may be limited.
The Enhanced Program also establishes formal red-flag identification and escalation procedures, requiring all trading, operations, logistics, and finance personnel to identify and report specified red flags — including unusual payment routing, the use of intermediary entities without a clear commercial purpose, and requests to structure transactions to avoid reporting thresholds — to the compliance function for review and disposition. Red flags that cannot be resolved through additional due diligence are escalated to the Chief Compliance Officer and, where warranted, to outside counsel.
E. Training Program
The Enhanced Program includes a comprehensive, company-wide sanctions and export controls training program, which was developed by Pemberton Investors Solutions LLC in coordination with Calderwood & Harkness, and reviewed by Conrad Reeves.
The training program covers OFAC sanctions compliance, EAR requirements, red-flag identification and reporting, escalation procedures, and the consequences of non-compliance. The program is tailored to the specific roles and responsibilities of Dunmore personnel, with specialized modules for employees in trading, logistics, finance, and compliance functions, as well as general awareness training for all other employees.
The training program has been completed by all relevant Dunmore personnel globally. Training completion records are included as an appendix to the enclosed Report. Dunmore has committed to providing annual refresher training and to updating training materials as necessary to reflect changes in applicable law, regulation, and guidance.
F. Ongoing Monitoring and Testing Framework
The Enhanced Program establishes a robust ongoing monitoring and testing framework, designed to ensure the continued effectiveness of the compliance program over time and to identify and address any gaps or deficiencies that may arise.
The framework includes annual compliance program assessments, to be conducted by the CCO with the support of outside compliance consultants as appropriate. The assessments will evaluate the design and operating effectiveness of all key compliance controls, including OFAC screening, export classification review, counterparty due diligence, and training.
The framework also includes transaction sampling and audit protocols, under which a statistically significant sample of transactions will be reviewed on a quarterly basis to test compliance with applicable policies and procedures. Periodic testing of the automated screening systems will be conducted to ensure that the systems are functioning properly and that all relevant lists are up to date.
Finally, the Enhanced Program establishes internal reporting mechanisms and whistleblower protections, including a confidential reporting hotline and a non-retaliation policy, to encourage the reporting of potential compliance concerns by all Dunmore employees without fear of reprisal.
V. Benchmarking Against DOJ Guidance
The Enhanced Program and the enclosed Report were developed and benchmarked against the DOJ's Evaluation of Corporate Compliance Programs (as updated in March 2023) and the DOJ Corporate Enforcement Policy (as updated in September 2022). In developing the Enhanced Program, Dunmore and its advisors carefully considered the criteria set forth in those guidance documents for evaluating the adequacy and effectiveness of corporate compliance programs, including the fundamental questions identified by the DOJ regarding whether a company's compliance program is well designed, whether it is adequately resourced and empowered, and whether it works in practice.
As set forth in the Calderwood & Harkness compliance program benchmarking analysis previously provided to your office, Dunmore's remediation efforts are designed to satisfy each of the principal criteria identified by the DOJ, including: (i) commitment by senior management to a culture of compliance and ethical conduct; (ii) the allocation of adequate resources and authority to the compliance function; (iii) a risk-based approach to compliance, informed by a thorough assessment of the company's specific risk profile; (iv) the adoption of clear, comprehensive policies and procedures that are accessible to all employees; (v) a training program tailored to the company's business and the roles of its personnel; (vi) a robust monitoring and testing framework to evaluate the effectiveness of the program on an ongoing basis; and (vii) the investigation of identified issues and the implementation of appropriate remediation measures in response.
We respectfully submit that the Enhanced Program, as documented in the Report, reflects a genuine, substantial, and sustained commitment by Dunmore to building and maintaining a compliance program that is commensurate with the company's risk profile and that meets the standards articulated by the DOJ.
VI. Request for Consideration Toward Declination
In light of the foregoing, we respectfully request that the DOJ consider the full scope of Dunmore's extraordinary cooperation, thorough remediation, and voluntary disgorgement in its evaluation of the appropriate resolution of this matter. We submit that the totality of Dunmore's conduct since the inception of the DOJ's inquiry warrants a declination of prosecution under the DOJ Corporate Enforcement Policy. In particular, we draw your attention to the following factors:
1. Timely Retention of Counsel and Prompt Investigation. Dunmore retained Calderwood & Harkness on April 14, 2022, just five days before the formal inception of the DOJ inquiry, and promptly commenced a comprehensive internal investigation that ultimately encompassed the review of over 2.3 million documents and 47 witness interviews across six jurisdictions.
2. Comprehensive and Timely Document Productions. Dunmore produced a total of 438,916 responsive documents to the DOJ in two productions, bearing Bates numbers DEH-DOJ-000001 through DEH-DOJ-438916. These productions were made on a rolling basis and were completed within approximately nine months of the issuance of the grand jury subpoena.
3. Full Witness Cooperation. Dunmore made its personnel, including cooperating witness Omar Al-Rashidi, available for government interviews and provided full and candid responses to all of the government's questions. Dunmore remains prepared to make its personnel available for any further interviews or testimony the government may request.
4. Voluntary Self-Disclosure to OFAC. Dunmore filed a voluntary self-disclosure with OFAC on June 1, 2023, disclosing the apparent violations identified through the internal investigation and demonstrating its commitment to transparency with all relevant regulatory authorities.
5. Voluntary Disgorgement. Dunmore made a voluntary disgorgement payment of $8.75 million to the U.S. Treasury on November 30, 2023, representing estimated net profits from the tainted crude oil swap transactions, made in good faith and without contest.
6. Thorough Remediation. Dunmore has implemented comprehensive remedial measures, including the separation of responsible individuals (Derek Hargrave and Natasha Sorokin), the appointment of a new Chief Compliance Officer (Priya Nayar) with a direct reporting line to the Board of Directors, and the design and full implementation of the Enhanced Sanctions & Export Controls Compliance Program, as documented in the enclosed Report.
7. No Prior Violations. Dunmore has no prior history of sanctions or export control violations, enforcement actions, or criminal charges. The conduct at issue, while serious, represents a departure from Dunmore's otherwise clean compliance record.
We believe that these factors, considered in their totality, satisfy the criteria for a declination under the DOJ Corporate Enforcement Policy and demonstrate that Dunmore has taken all reasonable steps to address the compliance failures that gave rise to the DOJ's inquiry.
Dunmore remains willing to cooperate fully with any further requests from the DOJ, including from your office, from FBI Special Agent Paul Reinhardt, or from OFAC Compliance Analyst Erin Matsuda. We stand ready to provide any additional information, documentation, or access to witnesses that may be required.
VII. Description of Enclosed Materials
Enclosed with this letter, please find the following materials:
1. Supplemental Remediation Report to DOJ — Implementation Summary, prepared by Victoria Chambers and Conrad Reeves, Calderwood & Harkness LLP, dated January 15, 2024.
2. Appendices to the Supplemental Remediation Report, including:
(a) Copy of the Board Resolution of Dunmore Energy Holdings Ltd., dated October 1, 2023, adopting the Enhanced Sanctions & Export Controls Compliance Program;
(b) Summary of the Enhanced Sanctions & Export Controls Compliance Policy;
(c) Training completion records for all relevant Dunmore personnel globally; and
(d) Monitoring and testing framework documentation.
Should the DOJ require any additional documentation, information, or materials in connection with its review of the Report or its evaluation of this matter, we would be pleased to provide them promptly.
VIII. Closing
Trial Attorney Samuel Kovacs and Trial Attorney Diana Pressman of the Counterintelligence and Export Control Section are copied on this letter, as indicated below. We trust that any communications regarding this letter or the enclosed Report may be directed to any of the recipients copied herein, as appropriate.
This letter and the enclosed Report are submitted on a confidential basis. This letter constitutes a privileged and confidential communication and is protected by the attorney-client privilege and the work product doctrine. The submission of this letter and the Report is made subject to and in accordance with the selective waiver protocols previously agreed upon between Calderwood & Harkness, on behalf of Dunmore, and the DOJ, and does not constitute a waiver of any applicable privilege or protection as to any third party.
For any questions or follow-up regarding this letter or the enclosed Report, please do not hesitate to contact the undersigned at (202) 555-7142 or vchambers@calderwoodharkness.com, or Conrad Reeves, Senior Counsel, at (202) 555-7156 or creeves@calderwoodharkness.com. We are available at your convenience.
We are grateful for the DOJ's thoughtful consideration of Dunmore's cooperation and remediation efforts throughout the course of this inquiry. Dunmore is committed to maintaining the highest standards of compliance and looks forward to a fair and just resolution of this matter.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Victoria Chambers Partner, White Collar & Investigations 1750 Pennsylvania Avenue NW, Suite 800 Washington, DC 20006 Telephone: (202) 555-7142
Email: vchambers@calderwoodharkness.com
cc: (via electronic mail)
Samuel Kovacs, Trial Attorney, Counterintelligence and Export Control Section, National Security Division, U.S. Department of Justice
Diana Pressman, Trial Attorney, Counterintelligence and Export Control Section, National Security Division, U.S. Department of Justice
Marcus Wellbourne, Esq., General Counsel, Dunmore Energy Holdings Ltd.
Priya Nayar, Chief Compliance Officer, Dunmore Energy Holdings Ltd.
Howard Quinn, Billing Partner, Calderwood & Harkness LLP
Conrad Reeves, Senior Counsel, Calderwood & Harkness LLP
Jasmine Thornton, Associate, Calderwood & Harkness LLP
Enclosures: As described above

CALDERWOOD & HARKNESS LLP Attorneys at Law

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