PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT This memorandum and all attachments hereto are protected by the attorney-client privilege, the work-product doctrine, and all other applicable privileges and protections. This memorandum is prepared by counsel in anticipation of litigation and for purposes of rendering legal advice. It is not to be distributed, copied, or disclosed to any person outside the investigation team without the prior written approval of Elaine Forsythe, Responsible Partner.
CALDERWOOD & HARKNESS LLP 555 California Street, 40th Floor San Francisco, California 94104
Telephone: (415) 772-6000 Facsimile: (415) 772-6001
MEMORANDUM
Date: March 5, 2022
To: Elaine Forsythe, Responsible Partner, Antitrust & Competition Practice Group Howard Bellamy, Billing Partner, Antitrust & Competition Practice Group
From: Elaine Forsythe
CC: Aaron Liu, Lead Associate Monica Reyes, Working Associate
Re: Internal Investigation Plan — Torchlight Mining Corp. DOJ Antitrust Division Grand Jury Investigation, Grand Jury No. GJ-22-0194 U.S. District Court, Northern District of California, San Francisco Division
Matter No.: 1039-00001
Classification: Attorney-Client Privileged / Work Product — Do Not Distribute Outside Investigative Team Without Prior Partner Approval
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I. PURPOSE AND BACKGROUND
A. Purpose of Memorandum
This memorandum establishes the scope, methodology, witness interview schedule, document review priorities, staffing plan, budget parameters, and timeline for Calderwood & Harkness LLP's internal investigation on behalf of its client, Torchlight Mining Corp. ("TMC" or "Torchlight"), in connection with the United States Department of Justice Antitrust Division grand jury investigation designated Grand Jury No. GJ-22-0194, pending before the U.S. District Court for the Northern District of California, San Francisco Division.
The investigation plan set forth herein is designed to accomplish three principal objectives:
(1) Determine the nature and extent of any antitrust violations involving TMC personnel. The internal investigation will systematically gather and analyze documentary evidence, electronic communications, financial records, and witness testimony to establish a comprehensive factual record of the conduct alleged by the DOJ, with particular focus on the actions and communications of TMC employees and former employees during the alleged conspiracy period.
(2) Support TMC's response to grand jury subpoenas and cooperation with the DOJ. The document collection, review, and production workflows associated with the internal investigation will be coordinated with TMC's compliance obligations under Grand Jury Subpoena No. GJ-22-0194-SD-003 (duces tecum), ensuring that TMC meets its production obligations on a timely basis while preserving all applicable privileges and protections.
(3) Inform TMC's Board of Directors and senior leadership regarding potential exposure and recommended defense and resolution strategy. The findings of the internal investigation will form the factual predicate for Calderwood & Harkness's assessment of TMC's potential criminal and civil exposure, and will serve as the foundation for the firm's recommendations to the Board regarding cooperation, settlement, remediation, and other strategic considerations.
This memorandum is a living document. It will be updated as the investigation progresses, as new evidence is developed, and as circumstances warrant revisions to the investigation's scope, methodology, or timeline. Any material amendments to the investigation plan will be circulated to the parties identified on the distribution list above and will require approval from the Responsible Partner.
B. Background of the DOJ Investigation
On or about February 10, 2022, the Antitrust Division of the United States Department of Justice formally opened a grand jury investigation into suspected price-fixing, market allocation, and bid-rigging in the North American specialty-minerals sector, with particular focus on the markets for high-purity feldspar, industrial talc, and rare-earth concentrates. The investigation is being conducted before a grand jury empaneled in the Northern District of California, San Francisco Division, and has been designated Grand Jury No. GJ-22-0194.
The investigation is being conducted by the DOJ Antitrust Division's San Francisco Field Office, operating under the supervision of the Division's Criminal Enforcement Section in Washington, D.C. The lead prosecutors assigned to the investigation are Trial Attorney Denise Kowalski and Senior Trial Attorney Marcus Reeves. The supervising Deputy Assistant Attorney General is Julia Stafford-Hayes. The San Francisco Field Office has historically been active in prosecuting criminal antitrust violations in the mining and industrial-supply sectors, and the assignment of a senior-level DAAG to the matter signals that the Division regards this investigation as a high-priority matter.
Based on information obtained to date, including materials accompanying the grand jury subpoena and publicly available filings, the investigation was triggered by the cooperation of Cascade Chemical Supply Co. ("Cascade"), a downstream distributor and processor of specialty minerals headquartered in Spokane, Washington. Cascade entered into a cooperation agreement with the DOJ on or about September 15, 2021. Under that agreement, Cascade has provided documents and testimony to the Division that prompted the broader investigation into upstream suppliers, including TMC. Cascade is represented by Whitfield, Strauss & Tully LLP of Seattle, Washington, with partner Rebecca Ostrander serving as lead counsel. The precise scope and terms of Cascade's cooperation agreement are not yet known to Calderwood & Harkness, although it is reasonable to assume that Cascade received favorable treatment — potentially including a leniency recommendation or a deferred prosecution agreement — in exchange for its cooperation. Calderwood & Harkness will seek to determine the nature and extent of Cascade's cooperation as part of this investigation, as such information will be material to our assessment of TMC's exposure and cooperation strategy.
In addition to TMC, the investigation is understood to encompass the following co-subjects or co-targets:
Ridgecrest Minerals Inc. — A corporation organized under the laws of the State of Delaware, with its principal executive offices in Denver, Colorado. Ridgecrest reported FY 2021 revenue of approximately USD 1.92 billion. Its Chief Executive Officer is Brian Novotny. The key individual identified in connection with the alleged conduct is Carl Edgerton, Vice President of Sales. Ridgecrest is represented by Davenport, Kline & Archer LLP of Washington, D.C., with partner Helen Marchetti serving as lead counsel. Notably, Ridgecrest received a DOJ target letter on or about January 12, 2022, approximately one month before TMC received its grand jury subpoena. The issuance of a target letter to Ridgecrest suggests that the DOJ believes it has substantial evidence implicating Ridgecrest in the alleged conspiracy, and that Ridgecrest may face indictment absent a plea agreement or other resolution.
Pinnacle Earth Resources Ltd. — A corporation organized under the laws of Ontario, Canada, with U.S. operations based in Salt Lake City, Utah. Pinnacle reported FY 2021 revenue of approximately CAD 1.45 billion (approximately USD 1.15 billion at current exchange rates). Its Chief Executive Officer is Douglas Harlowe. The key individual identified in connection with the alleged conduct is Kevin Tsang, former Senior Vice President of Commercial Operations. Pinnacle is represented by Ashford Whitmore LLP of Toronto, Ontario, with partner George Nakamura serving as lead counsel. Pinnacle's current status in the investigation — whether it has been designated as a subject or target — is not yet known.
The relationships among these entities and individuals, and the nature and extent of the communications alleged by the DOJ, are central to the internal investigation and will be developed through the document review and witness interview processes described in Sections III.A and III.B below.
C. TMC Engagement of Calderwood & Harkness
TMC received Grand Jury Subpoena No. GJ-22-0194-SD-003, a subpoena duces tecum, on February 14, 2022. The subpoena was served upon TMC's registered agent for service of process in Nevada and was promptly forwarded to TMC's General Counsel, Priya Anand. The subpoena requires the production of documents and electronically stored information in numerous categories, broadly encompassing pricing data, competitor communications, trade-association records, and corporate organizational documents relating to TMC's U.S. specialty-minerals business. A detailed analysis of the subpoena's specifications and TMC's production obligations is set forth in a separate memorandum dated February 28, 2022.
TMC formally engaged Calderwood & Harkness LLP on February 18, 2022, pursuant to an engagement letter executed on that date by Priya Anand on behalf of TMC and countersigned by Elaine Forsythe on behalf of Calderwood & Harkness. The engagement encompasses the internal investigation, grand jury defense, subpoena compliance, and related advisory services. The engagement team is as follows:
• Elaine Forsythe — Responsible Partner, based in the firm's San Francisco office. Ms. Forsythe will lead the defense, direct the internal investigation, serve as TMC's lead negotiator with the DOJ, and maintain primary responsibility for all strategic decisions relating to the engagement.
• Howard Bellamy — Billing Partner, based in the firm's New York office. Mr. Bellamy will manage the engagement economics, coordinate with TMC's General Counsel on budgeting and billing matters, and provide strategic input as appropriate.
• Aaron Liu — Lead Associate, based in the firm's San Francisco office. Mr. Liu will manage the day-to-day conduct of the internal investigation, including the document review workflow, subpoena compliance and rolling productions, witness interview preparation and execution, and coordination with retained expert consultants and vendors.
• Monica Reyes — Working Associate, based in the firm's San Francisco office. Ms. Reyes will assist with the privilege review, prepare memoranda of law on substantive antitrust issues, coordinate with forensic consultants and e-discovery vendors, and support the witness interview and document review processes.
On March 1, 2022, upon the advice of Calderwood & Harkness, TMC issued a comprehensive litigation hold to all TMC personnel, including all employees of Torchlight Mining (U.S.) Inc. and relevant personnel at TMC's Canadian headquarters. The litigation hold directs all recipients to preserve all documents and electronically stored information potentially relevant to the investigation, including emails, text messages, instant messages (including VaultChat messages), calendar entries, handwritten notes, spreadsheets, presentation materials, and all other records in any format. A copy of the litigation hold notice is maintained in the matter file.
In connection with the e-discovery and forensic data-collection requirements of the investigation, Calderwood & Harkness retained Redstone Digital Forensics Inc. of McLean, Virginia, effective March 15, 2022. Redstone's Project Director for this engagement is Neil Ashworth. Redstone will be responsible for forensic data collection from identified custodians, data processing and de-duplication, hosting of the review platform, and managed review support. The terms of Redstone's engagement are set forth in a separate vendor engagement agreement and are structured to ensure that Redstone's work is conducted at the direction of counsel and is protected by the attorney-client privilege and work-product doctrine.
D. TMC Corporate Overview (Relevant Details)
For purposes of this investigation plan, the following corporate and organizational details regarding TMC are relevant:
Torchlight Mining Corp. is a corporation organized under the Canada Business Corporations Act, CBCA Corporation No. 7841526-1. TMC's registered office is located at 200 Bay Street, Suite 3400, Toronto, Ontario M5J 2J2, Canada. TMC's common shares are listed on the Toronto Stock Exchange under the symbol "TRCL" and are listed on the New York Stock Exchange under the symbol "TMC" through an American Depositary Receipt program.
TMC conducts its U.S. operations through its wholly owned subsidiary, Torchlight Mining (U.S.) Inc., a corporation organized under the laws of the State of Nevada, Nevada Entity No. NV20160438721. Torchlight Mining (U.S.) Inc.'s principal office is located at 8750 West Sahara Avenue, Suite 210, Reno, Nevada 89117, United States. The subsidiary's U.S. Federal Employer Identification Number is 83-2947106.
For fiscal year 2021, TMC reported consolidated revenue of CAD 4.27 billion (approximately USD 3.38 billion at the average exchange rate for the fiscal year). TMC reported FY 2021 EBITDA of CAD 812 million. TMC is a diversified mining company that operates fourteen mines in Canada, the United States, Brazil, and Australia, and six downstream chemical-processing facilities. TMC's operations span a range of mineral products, including specialty minerals, base metals, and industrial chemicals.
The U.S. Specialty Minerals Division — the division at the center of the DOJ investigation — is a business unit of Torchlight Mining (U.S.) Inc. responsible for the extraction, processing, and sale of specialty minerals, including high-purity feldspar, industrial talc, and rare-earth concentrates, to U.S. industrial and chemical-manufacturing customers. In FY 2021, the U.S. Specialty Minerals Division generated revenue of approximately USD 687 million, representing approximately 20.3% of TMC's consolidated revenue. The Division operates from TMC's U.S. offices and manages sales relationships with a customer base comprising approximately 340 industrial and chemical-manufacturing companies across the United States.
The following senior officers and directors of TMC are relevant to the investigation:
• Margaret Caldwell — Chair of the Board of Directors
• Søren Dalmqvist — Chief Executive Officer
• Priya Anand — General Counsel
• Richard Fong — Chief Financial Officer
• Janet Moreau-Shaw — Chair of the Audit Committee of the Board of Directors
Additional organizational details regarding the U.S. Specialty Minerals Division, including reporting relationships, staffing, and operational structure, will be developed through the document review and witness interview processes.
II. SCOPE OF INTERNAL INVESTIGATION
A. Conduct Under Investigation
Based on information obtained from the grand jury subpoena, preliminary discussions with the DOJ, publicly available information, and TMC's own internal records, the DOJ alleges that from approximately January 2017 through at least August 2021 — a period of approximately four years and eight months — senior commercial personnel at TMC, Ridgecrest Minerals Inc., and Pinnacle Earth Resources Ltd. engaged in an unlawful agreement to fix prices, allocate customers, and rig bids for high-purity feldspar, industrial talc, and rare-earth concentrates sold to U.S. industrial and chemical-manufacturing customers. If established, such conduct would constitute per se violations of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, which are prosecuted as felonies carrying maximum penalties of USD 100 million for corporations and USD 1 million and ten years' imprisonment for individuals, or, under the Alternative Fines Act, 18 U.S.C. § 3571(d), twice the gross gain derived from or twice the gross loss caused by the offense.
The DOJ alleges that the coordination among the competitor companies was effected through several channels:
(a) In-person meetings at industry trade association conferences. The North American Specialty Minerals Council ("NASMC") holds quarterly conferences at various venues across the United States, including locations in Arlington, Virginia; Scottsdale, Arizona; and Orlando, Florida. The DOJ alleges that senior commercial personnel from TMC, Ridgecrest, and Pinnacle used these conferences as opportunities for side meetings at which pricing, customer allocation, and bid-rigging agreements were discussed and effectuated. The NASMC conferences provided a regular, recurring mechanism for in-person communication that could be disguised as legitimate industry participation.
(b) Encrypted messaging via the VaultChat application. The DOJ has identified the use of "VaultChat," an encrypted messaging application, as a communication channel through which the alleged conspirators exchanged pricing information, customer allocation instructions, and bid-coordination messages. VaultChat is an end-to-end encrypted messaging platform that allows users to set message auto-deletion timers, which presents significant forensic-recovery challenges. The recovery of VaultChat data from TMC-owned devices is a critical Priority 1 objective for the document review.
(c) Occasional telephone calls. The DOJ also alleges that the conspirators communicated by telephone on an occasional basis, including calls placed from personal and work telephone numbers. Phone records and call logs are among the categories of documents sought by the grand jury subpoena.
The DOJ estimates total affected commerce — that is, the aggregate volume of commerce in the three product categories sold by the alleged conspirators to U.S. customers during the conspiracy period — at approximately USD 1.34 billion. TMC's share of that affected commerce is estimated at approximately USD 478 million, representing approximately 35.7% of the total. These estimates are preliminary and will be refined through the economic and forensic analysis described in Section III.C below.
B. Products in Scope
The internal investigation will encompass the following product categories, which correspond to the products identified in the grand jury subpoena and the DOJ's allegations:
• High-purity feldspar — A mineral used principally in the manufacture of glass, ceramics, and certain specialty chemical applications. High-purity feldspar commands a premium price relative to standard-grade feldspar due to its lower impurity content and is sold to a concentrated group of U.S. industrial manufacturers.
• Industrial talc — A mineral used in the production of paints, coatings, plastics, paper, and certain pharmaceutical and cosmetic applications. Industrial-grade talc is distinguished from consumer-grade talc and is sold in bulk quantities to industrial processors and manufacturers.
• Rare-earth concentrates — Partially processed rare-earth mineral products sold to downstream processors and manufacturers of electronics, magnets, catalysts, and other advanced materials. Rare-earth concentrates represent a high-value, low-volume product category with a relatively limited number of suppliers in the North American market.
All three product categories are sold by or through TMC's U.S. Specialty Minerals Division to U.S. industrial and chemical-manufacturing customers. The investigation will encompass all sales of these products during the investigation period, regardless of the specific mine or processing facility from which the product originated.
C. Time Period
The internal investigation will cover the following time periods:
Primary Investigation Period: January 2017 through August 2021. This period corresponds to the alleged conspiracy period as described by the DOJ. The document review, witness interviews, and economic analysis will focus primarily on conduct, communications, and pricing decisions that occurred during this period.
Extended Review Period: January 2015 through March 2022. The extended review period encompasses approximately two years before the start of the alleged conspiracy (January 2015 through December 2016) and approximately seven months after its conclusion (September 2021 through March 2022). The pre-conspiracy baseline period is necessary to establish baseline pricing patterns, competitive dynamics, and the history of TMC's antitrust compliance program prior to the alleged conspiracy. The post-conspiracy period is necessary to evaluate any changes in pricing or competitive behavior following the departure of Gavin Holt in September 2021, to assess TMC's compliance program over time, and to capture any evidence of continuing or residual conduct.
D. Geographic Scope
The geographic scope of the internal investigation includes the following:
• The U.S. operations of TMC's Specialty Minerals Division, including all sales offices, mining operations, and processing facilities located within the United States, and encompassing all sales to U.S. customers regardless of the point of origin of the product sold.
• The venues of NASMC quarterly conferences at which inter-competitor contacts are alleged to have occurred, including Arlington, Virginia; Scottsdale, Arizona; and Orlando, Florida, as well as any other NASMC conference venues identified through the document review process.
• Any other locations at which inter-competitor contacts involving TMC personnel may have occurred, as identified through the investigation, including but not limited to other industry events, trade shows, customer sites, or social or recreational settings.
• TMC's Canadian headquarters in Toronto, Ontario, to the extent that communications originating from or directed to Canadian headquarters personnel relate to U.S. sales pricing, competitor contacts, or the management and oversight of the U.S. Specialty Minerals Division. While the alleged conduct is centered in the United States, the organizational structure of TMC — with senior management and the General Counsel based in Toronto — necessitates review of Canadian headquarters communications to ensure a complete factual record.
E. Key Individuals — Persons of Interest
The internal investigation has identified the following individuals as persons of interest. This list is preliminary and will be supplemented as the investigation develops additional facts. Each individual's relevance to the investigation, current employment status, and other pertinent details are set forth below.
1. Gavin Holt — Former Vice President, U.S. Specialty Minerals Sales
Gavin Holt served as Vice President of U.S. Specialty Minerals Sales from approximately 2016 through September 30, 2021, at which time he resigned from TMC. In this role, Holt led TMC's commercial pricing function for the U.S. Specialty Minerals Division, with direct responsibility for setting and adjusting prices for all three product categories in scope. Holt reported to the Division President and had pricing authority up to certain dollar thresholds, above which CFO or CEO approval was required (the specific thresholds are to be confirmed through the investigation).
Holt is the individual most directly implicated in the alleged pricing communications with Carl Edgerton of Ridgecrest and Kevin Tsang of Pinnacle. Based on preliminary information, the DOJ's evidence — likely derived in significant part from Cascade's cooperation — appears to identify Holt as a principal participant in the alleged conspiracy, having participated in side meetings at NASMC conferences, exchanged VaultChat messages with Edgerton and Tsang, and issued pricing-adjustment instructions to his subordinates that reflected the alleged coordinated pricing agreements.
Holt is no longer a TMC employee. He resigned effective September 30, 2021, approximately four months before the grand jury investigation formally commenced and approximately six weeks after the end of the alleged conspiracy period. The timing of Holt's resignation is itself a matter of investigative interest. Because Holt is a former employee, TMC cannot compel his cooperation with the internal investigation, and his participation in any witness interview is entirely voluntary. Holt has retained personal counsel, Patrick Dunleavy at Briarcliff Law Group PLLC, 50 California Street, Suite 2800, San Francisco, California 94111. Initial outreach to Holt through Mr. Dunleavy will be required to request a voluntary interview, as discussed further in Section III.B below.
2. Sandra Chu — Director, Pricing Analytics, U.S. Specialty Minerals Division
Sandra Chu serves as Director of Pricing Analytics within the U.S. Specialty Minerals Division and is currently employed by TMC. Ms. Chu reported directly to Gavin Holt during the relevant period and was responsible for implementing pricing adjustments, maintaining pricing databases and price lists, and providing analytical support for pricing decisions. She is a critical fact witness regarding TMC's internal pricing processes, the frequency and nature of pricing-adjustment instructions she received from Holt, and whether she had any knowledge of the basis for Holt's pricing decisions, including whether she was aware of or suspected any coordination with competitors.
3. Thomas Eriksen — Regional Sales Manager (Western Region), U.S. Specialty Minerals Division
Thomas Eriksen serves as Regional Sales Manager for the Western Region of the U.S. Specialty Minerals Division and is currently employed by TMC. Eriksen attended certain NASMC quarterly conferences during the alleged conspiracy period, and the DOJ investigation includes conference attendance as one of the alleged coordination channels. Eriksen's attendance at specific conferences, his interactions with Ridgecrest and Pinnacle personnel at those conferences, and any observations he made of side meetings or unusual interactions will be key subjects of his interview.
4. Priya Anand — General Counsel, TMC
Priya Anand serves as General Counsel of TMC and is based at TMC's Toronto headquarters. Ms. Anand oversaw TMC's initial document preservation efforts and internal review prior to the engagement of Calderwood & Harkness. She is a critical witness regarding the history and adequacy of TMC's antitrust compliance program, any prior reports or concerns regarding competitor contacts by TMC personnel, and the General Counsel's role in overseeing trade-association participation, including membership and attendance at NASMC events.
5. Richard Fong — Chief Financial Officer, TMC
Richard Fong serves as Chief Financial Officer of TMC and is based at TMC's Toronto headquarters. Mr. Fong is relevant to the investigation in several respects: his oversight of the U.S. Specialty Minerals Division's financial performance, the delegation of pricing authority within the Division, the approval process for pricing decisions above certain thresholds, and any financial irregularities, unusual revenue patterns, or margin trends that might indicate coordinated pricing or other anomalous conduct.
6. Søren Dalmqvist — Chief Executive Officer, TMC
Søren Dalmqvist serves as Chief Executive Officer of TMC. Based on information obtained to date, there is no indication that Mr. Dalmqvist had personal involvement in the alleged conduct. However, as the most senior executive of TMC, Mr. Dalmqvist must be interviewed regarding his organizational knowledge, the delegation of pricing and commercial authority within the U.S. Specialty Minerals Division, the reporting relationships and oversight mechanisms relevant to the Division's operations, and his role in decision-making regarding TMC's cooperation and settlement posture.
7. Margaret Caldwell — Chair of the Board of Directors, TMC
Margaret Caldwell serves as Chair of TMC's Board of Directors. She will be interviewed to confirm the Board's awareness (or lack thereof) of the alleged conduct, and to establish the extent of Board-level oversight of TMC's antitrust compliance program and commercial operations.
8. Janet Moreau-Shaw — Chair of the Audit Committee, Board of Directors
Janet Moreau-Shaw serves as Chair of the Audit Committee of TMC's Board of Directors. Ms. Moreau-Shaw is relevant to the investigation with respect to the Audit Committee's oversight of TMC's compliance program, internal controls, and financial reporting practices. Her testimony will also be relevant to any assessment of TMC's corporate governance and remediation efforts.
9. Additional U.S. Specialty Minerals Division Personnel
The investigation anticipates interviewing an additional fifteen to twenty personnel from the U.S. Specialty Minerals Division, including regional and territory sales managers, pricing analysts, marketing personnel, and administrative assistants who may have knowledge of, or access to communications regarding, the alleged conduct. The specific list of additional interviewees will be finalized upon completion of the initial review of the custodian list and organizational chart for the Division, and will be further refined based on findings from the Priority 1 and Priority 2 document review. A supplemental memorandum identifying additional interviewees will be prepared as part of the Phase 3 interview planning process.
F. Matters Outside Scope
The following matters are outside the scope of this internal investigation unless evidence is uncovered that would warrant their inclusion:
• TMC operations outside the U.S. Specialty Minerals Division. TMC's Brazilian mining operations, Australian mining operations, and Canadian mining and processing operations that are not part of the U.S. Specialty Minerals Division are outside the scope of this investigation. If, during the course of the investigation, evidence is uncovered linking those operations or their personnel to the alleged conduct, the scope of the investigation will be expanded accordingly, with appropriate budget and staffing adjustments.
• Individual criminal defense of Gavin Holt. Calderwood & Harkness represents TMC, not any individual employee or former employee. Gavin Holt has retained personal counsel, Patrick Dunleavy at Briarcliff Law Group PLLC, 50 California Street, Suite 2800, San Francisco, California 94111, to advise him regarding his individual criminal exposure and to represent his interests in connection with the grand jury investigation. Any communications between Calderwood & Harkness and Mr. Dunleavy regarding Holt's participation in the internal investigation will be conducted with clear delineation of the interests being represented.
• Civil litigation exposure assessment. The assessment of TMC's potential exposure to private antitrust class action lawsuits, treble damages claims, customer suits, or other civil litigation arising from the alleged conduct is outside the scope of this investigation plan. A separate memorandum addressing TMC's civil litigation exposure will be prepared upon completion of the internal investigation's factual findings, when a more complete record exists to inform that assessment.
III. INVESTIGATION METHODOLOGY
A. Document Collection and Review
1. Electronic Data Collection
Redstone Digital Forensics Inc. ("Redstone"), retained by Calderwood & Harkness on March 15, 2022, will conduct forensic collections of electronically stored information from thirty-four (34) identified custodians. The identities of the custodians, the data sources to be collected from each, and the collection protocols are set forth in detail in the Data Collection Protocol and Custodian List memorandum dated March 18, 2022, which is incorporated by reference herein. The custodian list includes Gavin Holt (to the extent TMC-owned devices or accounts are within TMC's custody or control), Sandra Chu, Thomas Eriksen, and other U.S. Specialty Minerals Division personnel, as well as certain senior management and legal department personnel at TMC's Toronto headquarters.
The following data sources will be collected:
• TMC corporate email — Strathmore Data Systems / Ashbury Software. All emails, calendar entries, contacts, and attachments from the accounts of identified custodians for the collection period. TMC's O365 tenant is hosted on Ashbury Holdings's Azure platform and is administered by TMC's IT department in Toronto. Redstone will coordinate with TMC IT to extract data from the relevant mailboxes using forensically defensible collection tools.
• Shared network drives — TMC's U.S. Specialty Minerals Division maintains several shared network drives accessible to Division personnel, including the "SMD-Pricing" share, the "SMD-Sales" share, and the "SMD-Marketing" share. These drives will be collected in their entirety.
• Personal devices — Laptops and mobile phones issued by TMC to identified custodians. Forensic imaging of laptops and extraction of mobile phone data (including text messages, call logs, and application data) will be performed by Redstone using industry-standard tools (Sundial Services Inc. for mobile devices, Penrose Technologies or Ostrander Solutions for laptops).
• Cloud storage — Any TMC-sanctioned cloud storage accounts (e.g., Cobalt Ridge Systems, Aldermere Systems) associated with identified custodians.
• VaultChat application archives — To the extent recoverable from TMC-owned devices or TMC's cloud infrastructure. VaultChat uses end-to-end encryption and user-configurable auto-deletion, and therefore the recovery of VaultChat data is uncertain. Redstone will employ advanced forensic techniques, including deleted-data recovery and memory analysis, to attempt to recover VaultChat message data, metadata, and artifacts from TMC-owned devices.
• CRM and ERP systems — TMC's U.S. Specialty Minerals Division uses Pinnacle Health IT as its customer relationship management platform and Hollowell & Co. as its enterprise resource planning system. Pricing data, customer records, sales transaction data, and contract records will be extracted from these systems for the collection period.
• NASMC-related files — All documents, files, and communications relating to TMC's membership in and participation at NASMC events, including conference registrations, attendance records, meeting agendas, presentation materials, travel records, expense reports, and related correspondence.
The collection period for all data sources is January 2015 through March 2022, coextensive with the extended review period defined in Section II.C above.
Based on preliminary estimates from TMC's IT department and Redstone's initial scoping assessment, the estimated raw data volume from the thirty-four custodians and identified data sources is approximately four to six terabytes (4–6 TB). Following processing (de-NISTing, de-duplication, file-type filtering, and date filtering), the estimated document universe is expected to be in the range of 500,000 to 700,000 documents. This estimate may be revised as additional data sources are identified or collection parameters are refined.
2. Document Review Priorities
Given the scale of the anticipated document universe and the need to prioritize the development of key evidence for both the internal investigation and subpoena compliance purposes, the document review will be organized into six priority tiers, as follows:
Priority 1 (Immediate): All VaultChat messages and related encrypted messaging data associated with Gavin Holt's TMC-issued devices and any personal devices within TMC's custody or control. This tier also includes all communications between Holt and Carl Edgerton of Ridgecrest, Kevin Tsang of Pinnacle, or any other identified competitor personnel, regardless of the communication platform (email, text message, phone record, or other). The VaultChat data is the single most critical evidence category in the investigation, as it is the channel through which the DOJ alleges direct competitor coordination occurred. Recovery of this data — or confirmation that it is not recoverable — will significantly shape the trajectory of the investigation. Estimated volume: dependent on recovery success; potentially 5,000–20,000 documents or message fragments.
Priority 2 (High): All communications and documents relating to the pricing of high-purity feldspar, industrial talc, and rare-earth concentrates within the U.S. Specialty Minerals Division during the conspiracy period (January 2017 through August 2021). This tier includes price lists, pricing proposals, customer-specific pricing agreements and amendments, pricing-adjustment instructions (whether issued by Holt, Chu, or others), pricing-committee meeting minutes, and all internal communications discussing pricing decisions, pricing strategies, or pricing changes for the three product categories. Estimated volume: 50,000–100,000 documents.
Priority 3 (High): All NASMC-related materials, encompassing conference attendance records, registration lists, attendee lists, conference agendas and programs, meeting notes (both official and informal), travel authorization requests and approvals, travel itineraries, hotel reservations, expense reports, and any communications relating to TMC personnel's attendance at or participation in NASMC events from 2016 through 2021. This tier is critical to establishing which TMC personnel were present at specific NASMC conferences and whether the timing and location of those conferences correlate with the alleged coordination events described by the DOJ. Estimated volume: 5,000–15,000 documents.
Priority 4 (Medium): All documents relating to TMC's antitrust compliance program, including the antitrust compliance policy adopted in approximately 2014, all subsequent revisions or amendments to the policy, training materials and training records, attendance records for compliance training sessions, compliance certifications signed by employees, any compliance audit reports or assessments, any hotline or whistleblower reports relating to antitrust or competitive conduct, and any internal investigations or inquiries conducted by TMC's legal department regarding competitor contacts or antitrust issues. This tier is essential to evaluating the adequacy of TMC's compliance program, a factor that is relevant to both the DOJ's assessment of TMC's culpability and TMC's potential cooperation credit. Estimated volume: 2,000–5,000 documents.
Priority 5 (Medium): Communications between the U.S. Specialty Minerals Division and TMC's senior management (CEO, General Counsel, CFO, and Board of Directors) regarding pricing strategy, competitor intelligence, market conditions, and the commercial performance of the Division during the extended review period (January 2015 through March 2022). This tier is relevant to establishing the extent of senior management's knowledge of and involvement in the pricing practices at issue, as well as the organizational context in which the alleged conduct occurred. Estimated volume: 20,000–40,000 documents.
Priority 6 (Lower): Baseline pricing data from the pre-conspiracy period (January 2015 through December 2016) and the post-conspiracy period (September 2021 through March 2022). This data will be used for comparative analysis to determine whether TMC's pricing patterns during the alleged conspiracy period diverge from pricing patterns in the baseline periods — a key indicator of whether coordinated pricing, as opposed to independent pricing, was occurring. This tier will also encompass underlying sales transaction data, customer contracts, and volume records necessary for the economic expert's analysis. Estimated volume: 30,000–60,000 documents.
The total estimated document universe for review, across all priority tiers, is 500,000–700,000 documents. The review will be conducted using Redstone's Relativity-based review platform, with review workflows tailored to each priority tier. Technology-assisted review (TAR), keyword searching, and concept clustering will be employed to accelerate the review and to identify key documents efficiently. All coding decisions on privilege, responsiveness, and substantive issue tags will be subject to quality-control sampling by Calderwood & Harkness attorneys.
3. Privilege Review
The privilege review will be conducted in accordance with the Privilege Review Protocol memorandum dated March 10, 2022, which establishes the criteria, procedures, and quality-control standards for identifying and logging documents protected by the attorney-client privilege and the work-product doctrine. Key elements of the privilege review protocol include:
• All documents in the review universe will be reviewed for attorney-client privilege and work-product protection before any production to the DOJ or any other party.
• Documents identified as potentially privileged will be escalated to a dedicated privilege review team supervised by Monica Reyes and subject to final determination by Elaine Forsythe or Aaron Liu.
• A detailed privilege log will be prepared for all documents withheld from production on the basis of privilege, in compliance with Fed. R. Civ. P. 26(b)(5)(A) (to the extent applicable by analogy in the grand jury context) and any applicable local rules or DOJ guidelines.
• Calderwood & Harkness will seek an order from the court under Federal Rule of Evidence 502(d) providing that the disclosure of privileged or work-product-protected documents in connection with the grand jury proceedings shall not constitute a waiver of privilege or protection in any other federal or state proceeding. The 502(d) clawback protections are essential to mitigate the risk of inadvertent waiver in the context of a large-volume rolling production.
4. Third-Party Document Requests
In addition to TMC's own document collection and review, the investigation team will consider and pursue the following third-party document sources:
• NASMC records. Calderwood & Harkness will consider whether to seek records from the North American Specialty Minerals Council, including conference registration lists, attendee rosters, conference agendas and programs, and any records of social or networking events held in conjunction with conferences. Such records may be obtained through a voluntary request to NASMC or, if necessary, through a subpoena issued by the court or by the DOJ at Calderwood & Harkness's request in the context of cooperation discussions.
• Cascade production. Calderwood & Harkness will monitor whether the DOJ or cooperating witness Cascade Chemical Supply Co. produces documents in the course of the investigation that implicate TMC or its personnel. To the extent that Cascade's documents are shared with Calderwood & Harkness through the discovery process or cooperation discussions, they will be integrated into the investigation's factual record.
• Co-subject/co-target productions. Depending on the evolution of the investigation and any cooperation or joint defense arrangements (see Section V.D below), documents produced by Ridgecrest or Pinnacle may become available for review.
B. Witness Interviews
1. General Approach
All witness interviews will be conducted by Calderwood & Harkness attorneys, with Aaron Liu and/or Monica Reyes conducting the majority of interviews and Elaine Forsythe attending key interviews with senior TMC leadership and, if available, Gavin Holt. Interviews will be conducted in a professional and thorough manner, with each interview tailored to the witness's role, seniority, and anticipated knowledge of relevant facts.
At the commencement of each interview, the witness will be provided with a clear and complete statement of the Upjohn warnings, consistent with the guidance set forth in Upjohn Co. v. United States, 449 U.S. 383 (1981), and its progeny. Specifically, each witness will be advised of the following:
(a) Calderwood & Harkness LLP represents Torchlight Mining Corp., not the individual witness personally.
(b) The purpose of the interview is to gather facts to enable Calderwood & Harkness to provide legal advice to TMC in connection with the DOJ investigation.
(c) The interview is protected by the attorney-client privilege, but the privilege belongs to TMC, not to the individual witness.
(d) TMC may, in its sole discretion, choose to waive the attorney-client privilege and disclose the contents of the interview, including any statements made by the witness, to the DOJ or to other third parties.
(e) The witness may, but is not required to, retain personal counsel at his or her own expense. The witness is free to consult with personal counsel at any time before, during, or after the interview.
(f) The witness is expected to cooperate with the interview and to answer questions truthfully and completely. However, the witness is not compelled to participate, and if the witness is a former employee, his or her participation is entirely voluntary.
Each witness will be asked to acknowledge that he or she understands the Upjohn warnings before substantive questioning begins. The delivery of the warnings and the witness's acknowledgment will be documented in the interview memorandum.
Detailed memoranda of each interview will be prepared as privileged work product by the conducting attorney, promptly following each interview. The memoranda will be marked "PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT" and will be maintained in the investigation file. Memoranda will capture the witness's statements, demeanor, credibility assessment, and any areas requiring follow-up or corroboration.
Interviews will generally be conducted in person at Calderwood & Harkness's San Francisco office (555 California Street, 40th Floor) or, for witnesses based at TMC's U.S. offices, at TMC's Reno, Nevada office (8750 West Sahara Avenue, Suite 210). Interviews with Toronto-based witnesses (including Priya Anand, Richard Fong, and Søren Dalmqvist) may be conducted at TMC's Toronto headquarters or via secure videoconference, depending on scheduling and logistical considerations. In-person interviews are strongly preferred for all witnesses whose testimony is expected to be substantive or contested.
2. Interview Schedule (Proposed — Subject to Revision)
The witness interview schedule is organized into three phases, reflecting the priority of each witness's anticipated testimony and the logical sequencing of the investigation. The schedule is subject to revision as the investigation develops and as document review findings reveal additional witnesses or alter the priority of existing witnesses.
The total number of anticipated interviewees, across all three phases, is approximately twenty-three to twenty-eight persons.
Note Regarding Gavin Holt. As discussed in Section II.E above, Gavin Holt resigned from TMC effective September 30, 2021. As a former employee, TMC has no contractual or legal mechanism to compel his participation in the internal investigation. Holt has retained personal counsel, Patrick Dunleavy of Briarcliff Law Group PLLC. Calderwood & Harkness will contact Mr. Dunleavy to request a voluntary interview with Holt. The request will emphasize that the interview is for purposes of TMC's internal investigation and that the attorney-client privilege for the interview belongs to TMC; it will also make clear that TMC may disclose the contents of the interview to the DOJ. If Holt declines to participate — which is a reasonable possibility given his retention of personal counsel and his potential exposure to criminal prosecution — Calderwood & Harkness will document the refusal and assess the implications for the internal investigation and for TMC's cooperation posture with the DOJ. If Holt has asserted, or in the future asserts, his Fifth Amendment privilege against self-incrimination before the grand jury, that assertion may be relevant to the internal investigation's ability to obtain his testimony and to the DOJ's expectations regarding TMC's cooperation. In the event of Holt's non-cooperation, the investigation will rely on documentary evidence and the testimony of other witnesses to reconstruct the relevant facts to the greatest extent possible.
3. Key Interview Topics by Witness
The following outlines the principal topics to be covered in interviews with key witnesses. These topic outlines are preliminary and will be refined based on the document review and the development of facts during the course of the investigation. Detailed interview outlines for each witness will be prepared by the interview team in advance of each session.
Gavin Holt (if available):
• The nature and extent of Holt's communications with Carl Edgerton of Ridgecrest Minerals Inc. and Kevin Tsang of Pinnacle Earth Resources Ltd. during the period 2016 through 2021, including the frequency, subject matter, and mode of communication.
• Holt's use of the VaultChat encrypted messaging application for communications with competitor personnel, including when the application was first installed on TMC-issued or personal devices, who was included in the communications, the typical content of the messages, and whether messages were set to auto-delete.
• The subject matter of discussions with competitor personnel at NASMC quarterly conferences, including the identity of all conferences attended, the participants in any side meetings, and the substance of those discussions.
• Whether any TMC supervisor, C-suite executive, or Board member was aware of, authorized, directed, or tacitly approved Holt's contacts with competitor personnel regarding pricing, customer allocation, or bid coordination.
• The specific pricing-adjustment instructions that Holt gave to Sandra Chu and other subordinates, including whether those instructions reflected agreements or understandings reached with competitors.
• The reasons for Holt's resignation from TMC in September 2021, including whether the resignation was related to the alleged conduct, anticipated law enforcement activity, or other factors.
• Any other individuals at TMC or at competitor companies who were involved in or had knowledge of the alleged conduct.
Sandra Chu:
• Chu's role and responsibilities as Director of Pricing Analytics, including her specific duties, the scope of her authority, and her day-to-day interactions with Holt and other Division personnel.
• Chu's reporting relationship to Gavin Holt, including the nature and frequency of their communications, the mode of communication (email, in-person, phone, messaging applications), and any changes in that relationship over time.
• The frequency and nature of pricing-adjustment instructions Chu received from Holt during the conspiracy period, including whether such instructions were oral or written, the level of specificity provided, and the products and customers to which the instructions pertained.
• Whether Chu was aware of the basis or rationale for Holt's pricing decisions or instructions — specifically, whether Holt ever indicated that his pricing decisions were informed by communications with competitor personnel or by competitive information obtained from sources outside TMC.
• Whether Chu had any direct contact with personnel at Ridgecrest, Pinnacle, or other competitors, and if so, the nature and circumstances of those contacts.
• TMC's internal pricing processes during the relevant period, including the approval chains for pricing changes, the documentation maintained for pricing decisions, the role of the CRM and ERP systems in pricing workflows, and any changes to pricing processes that occurred during the conspiracy period or upon Holt's departure.
Thomas Eriksen:
• Identification of all NASMC conferences attended by Eriksen from 2016 through 2021, including dates, locations, and the TMC colleagues who accompanied him.
• Any interactions Eriksen had with Ridgecrest or Pinnacle personnel at NASMC conferences, including the nature, duration, and substance of those interactions.
• Whether Eriksen observed or participated in any side meetings, breakout sessions, or informal gatherings at NASMC events that included competitor personnel and that involved discussions of pricing, customer allocation, bidding, or market conditions.
• Eriksen's role in pricing decisions for the Western Region, including his authority to set or adjust prices, his interactions with Holt and Chu regarding pricing, and any pricing instructions he received.
• Any knowledge, observations, or suspicions Eriksen had regarding competitor coordination or information exchanges involving TMC personnel.
Priya Anand:
• The history and development of TMC's antitrust compliance program, including the circumstances under which the program was adopted in approximately 2014, the individuals involved in designing the program, and the standards or frameworks used as a model.
• The current status of the compliance program, including the date of the last annual antitrust training session (understood to be 2018), the reasons for any lapse in annual training, and the content and format of the training provided.
• The document preservation actions taken by Anand and TMC's legal department upon receipt of the grand jury subpoena and prior to the engagement of Calderwood & Harkness, including the issuance of any internal preservation notices, the identification and collection of potentially relevant documents, and any instructions given to TMC personnel regarding document preservation.
• Whether Anand or any member of TMC's legal department received any prior reports, concerns, or complaints — whether through the compliance hotline, direct communications, or any other channel — regarding competitor contacts, pricing coordination, or antitrust issues involving TMC personnel at any time during the relevant period.
• The General Counsel's role in overseeing trade-association participation by TMC personnel, including whether any policies or guidelines existed regarding TMC employees' participation in NASMC or other industry events, and whether legal department approval was required for trade-association attendance.
Richard Fong:
• The CFO's oversight of the U.S. Specialty Minerals Division's financial performance, including the frequency and content of financial reporting received from the Division, and any financial metrics or KPIs that would have flagged anomalous pricing patterns or margin trends.
• The delegation of pricing authority within the U.S. Specialty Minerals Division, including any dollar thresholds above which CFO or CEO approval was required for pricing decisions, and the documentation maintained for pricing approvals.
• Whether Fong observed or was informed of any financial irregularities, unusual revenue patterns, or margin trends within the U.S. Specialty Minerals Division during the conspiracy period that might, in retrospect, indicate coordinated pricing.
• Fong's knowledge, if any, of competitor contacts or pricing information sharing by TMC personnel.
C. Economic and Forensic Analysis
1. Pricing Pattern Analysis
A rigorous economic and forensic analysis of TMC's pricing data is essential to the internal investigation. Calderwood & Harkness will retain a forensic accounting and economics expert to conduct a comprehensive analysis of TMC's historical pricing for high-purity feldspar, industrial talc, and rare-earth concentrates over the extended review period (2015–2022). The analysis will serve multiple purposes: it will help to determine whether TMC's pricing patterns during the alleged conspiracy period are consistent with coordinated pricing, independent pricing, or some combination thereof; it will provide a factual foundation for the assessment of TMC's exposure; and it will support TMC's defense or cooperation strategy by identifying both inculpatory and exculpatory pricing evidence.
The expert will compare TMC's price movements to known competitor price movements — to the extent such data is available through public filings, industry publications, customer records, or DOJ discovery — to identify statistically significant correlations between TMC's prices and those of Ridgecrest and Pinnacle during the alleged conspiracy period relative to the baseline periods. Standard econometric techniques, including regression analysis, structural-break testing, and variance-ratio analysis, will be employed.
The anticipated expert firm is Hargrove Forensic Advisory LLC, located at 233 South Wacker Drive, Suite 4800, Chicago, Illinois 60606. The engagement partner is Dr. Vanessa Tremblay, an economist with extensive experience in antitrust damages and forensic pricing analysis. The formal engagement of Hargrove is targeted for July 2022, upon completion of the initial document review and the extraction of pricing data from TMC's CRM and ERP systems, which will provide the data set necessary for the expert's analysis.
The engagement of Hargrove Forensic Advisory will be structured as a Kovel arrangement, pursuant to United States v. Kovel, 296 F.2d 918 (2d Cir. 1961), to protect the expert's communications, analyses, and work product under the attorney-client privilege and work-product doctrine. Under this arrangement, Hargrove will be retained by Calderwood & Harkness (not directly by TMC), at counsel's direction, for the purpose of assisting counsel in rendering legal advice to TMC. All work performed by Hargrove will be at counsel's direction, all communications between Hargrove and the investigation team will be treated as privileged, and Hargrove's work product will be treated as attorney work product.
2. Affected Commerce Assessment
The forensic economics expert will also assess TMC's volume of "affected commerce" — that is, the total revenue attributable to TMC's U.S. sales of high-purity feldspar, industrial talc, and rare-earth concentrates during the alleged conspiracy period (January 2017 through August 2021). The affected-commerce figure is the primary input to the DOJ's sentencing and fine calculations under the U.S. Sentencing Guidelines and is therefore of critical importance to TMC's exposure analysis.
Under the DOJ's standard methodology for calculating criminal antitrust fines, the base fine is typically set at twenty percent (20%) of the volume of affected commerce. Based on the DOJ's preliminary estimate that TMC's affected commerce is approximately USD 478 million, the starting-point base fine would be approximately USD 95.6 million, before any adjustments for culpability, cooperation, acceptance of responsibility, remediation, or other aggravating or mitigating factors. The U.S. Sentencing Guidelines' Organizational Sentencing Guidelines (USSG §§ 2R1.1, 8C2.5, 8C2.6) provide for adjustments to the base fine through the application of a culpability multiplier, which takes into account factors such as the involvement of senior management, the existence and adequacy of a compliance program, cooperation with the investigation, and the timeliness of acceptance of responsibility.
Calderwood & Harkness's separate Defense Strategy Memorandum will provide a detailed sentencing-exposure analysis, including potential cooperation and remediation credits that could reduce the ultimate fine. The affected-commerce assessment prepared by Hargrove will serve as the factual foundation for that analysis.
3. Compliance Program Evaluation
Calderwood & Harkness, together with a retained compliance consultant to be identified and engaged later in the investigation, will conduct a thorough evaluation of TMC's existing antitrust compliance program. The compliance program was adopted by TMC in approximately 2014 and, based on preliminary information from Priya Anand, has not been comprehensively updated or audited since its adoption.
The preliminary understanding of the compliance program's current state raises significant concerns:
• No annual antitrust training has been conducted since 2018 — a gap of approximately four years as of the date of this memorandum.