PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 555 California Street, 40th Floor San Francisco, CA 94104
INTERNAL MEMORANDUM
TO: Elaine Forsythe, Responsible Partner, Antitrust & Competition Practice Group Howard Bellamy, Billing Partner, Antitrust & Competition Practice Group
FROM: Aaron Liu, Lead Associate, Antitrust & Competition Practice Group
DATE: June 3, 2024
RE: Matter Closing Memorandum — Torchlight Mining Corp. DOJ Antitrust Investigation — Matter No. 1039-00001
CLASSIFICATION: Privileged and Confidential — Attorney-Client Privilege / Work Product Doctrine
This memorandum and all attachments referenced herein are protected by the attorney-client privilege and the work product doctrine. This memorandum is intended solely for the internal use of Calderwood & Harkness LLP partners and associates identified above. It should not be disclosed to any third party, including the client, without the express prior authorization of the Responsible Partner. Inadvertent disclosure does not constitute a waiver of any applicable privilege or protection.
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I. Purpose and Scope of This Memorandum
The purpose of this memorandum is to document the final disposition, financial summary, key document locations, file-retention instructions, lessons learned, and post-matter handoff obligations arising from Calderwood & Harkness LLP's ("C&H") representation of Torchlight Mining Corp. ("TMC") in connection with the U.S. Department of Justice, Antitrust Division, criminal grand jury investigation designated as Grand Jury No. GJ-22-0194, convened in the U.S. District Court for the Northern District of California, San Francisco Division. The matter was assigned C&H Matter Number 1039-00001.
This memorandum is prepared in accordance with the firm's internal matter-closing protocols and is intended to serve as the definitive and comprehensive closing record for the matter file. It should be maintained in the firm's permanent matter records in both electronic format within the firm's document management system and in any physical files maintained at the San Francisco office. This memorandum consolidates information from the engagement files, internal investigation records, DOJ correspondence, vendor records, financial summaries, and the executed Non-Prosecution Agreement, and provides a single authoritative reference point for any future inquiries regarding this matter.
The representation spanned approximately twenty-seven months, from February 2022 through the execution of the Non-Prosecution Agreement in May 2024 and the completion of post-closing administrative tasks in June 2024. During this period, C&H conducted a comprehensive internal investigation, managed the production of approximately 555,000 documents to the DOJ, facilitated cooperation proffers, negotiated and secured a Non-Prosecution Agreement that resulted in a 49.2% cooperation and remediation credit against the applicable penalty, and oversaw the development and implementation of an enhanced antitrust compliance program for TMC.
The sections that follow address each element of the matter closure in detail.
II. Matter Summary
A. Client Identification
The client in this matter is Torchlight Mining Corp. ("TMC"), a corporation organized and existing under the Canada Business Corporations Act, CBCA Corporation No. 7841526-1, with its registered office located at 200 Bay Street, Suite 3400, Toronto, Ontario M5J 2J2, Canada. TMC is a diversified mining company engaged in the extraction, processing, and sale of specialty minerals across North America, with operations in Canada, the United States, and Mexico.
TMC's principal U.S. subsidiary is Torchlight Mining (U.S.) Inc., a corporation organized under the laws of the State of Nevada, Nevada Entity No. NV20160438721, with its principal office located at 8750 West Sahara Avenue, Suite 210, Reno, Nevada 89117. Torchlight Mining (U.S.) Inc. served as the primary operating entity for TMC's U.S. specialty minerals business during the relevant period and was the entity through which the majority of the relevant U.S. commercial activity was conducted.
TMC is publicly listed on the Toronto Stock Exchange (TSX) under the ticker symbol TRCL and on the New York Stock Exchange (NYSE) under the ticker symbol TMC. As a dual-listed issuer, TMC is subject to continuous disclosure obligations under both Canadian securities laws (administered by the Ontario Securities Commission and other provincial regulators) and U.S. securities laws (as a foreign private issuer filing on Form 40-F with the U.S. Securities and Exchange Commission).
TMC's U.S. Federal Employer Identification Number (EIN) is 83-2947106. Its Canadian Business Number is 741 829 456 RC0001.
The key client contacts throughout this engagement were as follows:
• Søren Dalmqvist, Chief Executive Officer, TMC
• Priya Anand, General Counsel, TMC
• Richard Fong, Chief Financial Officer, TMC
• Margaret Caldwell, Chair of the Board of Directors, TMC
• Janet Moreau-Shaw, Chair, Audit Committee, Board of Directors, TMC
Priya Anand served as the principal day-to-day client contact and was the authorized signatory on the engagement letter. Søren Dalmqvist was the authorized signatory on the Non-Prosecution Agreement pursuant to a resolution of the Board of Directors. Communications regarding litigation reserve adequacy were coordinated through Janet Moreau-Shaw in her capacity as Audit Committee Chair.
B. Nature of the Matter
C&H was engaged to defend TMC in a criminal grand jury investigation conducted by the U.S. Department of Justice, Antitrust Division. The investigation concerned suspected violations of Section 1 of the Sherman Act, 15 U.S.C. § 1, specifically price-fixing, market allocation, and bid-rigging in the North American specialty-minerals sector. The investigation encompassed three product categories: (i) high-purity feldspar, (ii) industrial talc, and (iii) rare-earth concentrates.
The DOJ alleged that senior commercial personnel at TMC and at least two competitor companies engaged in an unlawful agreement to fix prices charged to U.S. industrial and chemical-manufacturing customers, to allocate customers and geographic markets among the conspirators, and to rig bids submitted in response to requests for proposal from certain large-volume purchasers. The alleged conspiracy period ran from approximately January 2017 through August 2021, a span of approximately four years and eight months.
The individuals identified by the DOJ as primary participants in the alleged conspiracy were:
• Gavin Holt, Vice President of Sales, Specialty Minerals Division, TMC (San Francisco–based)
• Carl Edgerton, Vice President of Sales, Ridgecrest Minerals Inc. (Denver–based)
• Kevin Tsang, former Senior Vice President of Commercial Operations, Pinnacle Earth Resources Ltd. (Salt Lake City–based)
The DOJ's theory of the case, as communicated through the grand jury subpoena, the target letter, and subsequent discussions, was that Holt, Edgerton, and Tsang coordinated pricing decisions and customer allocations through a combination of direct communications (including encrypted messages sent via the VaultChat messaging application), in-person meetings at North American Specialty Minerals Council ("NASMC") quarterly conferences, and telephone calls. The coordination allegedly resulted in artificially elevated prices for specialty minerals sold to U.S. customers in the industrial and chemical-manufacturing sectors.
The investigation was triggered by a cooperation agreement entered into between the DOJ and Cascade Chemical Supply Co. ("Cascade"), a specialty-chemicals distributor based in Spokane, Washington. Cascade's president, Leonard Massey, entered into a cooperation arrangement with the DOJ in approximately September 2021 and provided information and documents that formed the basis for the grand jury investigation. Cascade was represented by Rebecca Ostrander of Whitfield, Strauss & Tully LLP, Spokane, Washington.
C. Adverse Party
The adverse party in this matter was the United States of America, acting through the U.S. Department of Justice, Antitrust Division, San Francisco Field Office, located at 450 Golden Gate Avenue, Room 10-0101, San Francisco, California 94102.
The lead prosecutors assigned to the investigation were Trial Attorney Denise Kowalski and Senior Trial Attorney Marcus Reeves, both of the San Francisco Field Office. The supervising official with authority over the investigation and the Non-Prosecution Agreement was Deputy Assistant Attorney General Julia Stafford-Hayes, based in the Antitrust Division's headquarters in Washington, D.C.
Throughout the investigation, the principal points of contact for C&H were Kowalski and Reeves. All substantive communications, including cooperation proffers, subpoena compliance submissions, and NPA negotiation correspondence, were directed to Kowalski and Reeves, with copies to Stafford-Hayes as appropriate during the NPA negotiation phase.
D. Co-Subjects/Co-Targets
Two other companies and their respective personnel were identified as co-subjects or co-targets in the investigation:
Ridgecrest Minerals Inc. is a corporation organized under the laws of the State of Delaware, with its principal office located at 1700 Lincoln Street, Suite 4200, Denver, Colorado 80203. Ridgecrest is a portfolio company of Marlowe Asset Management Peak Capital Partners LP, a Delaware limited partnership. Ridgecrest's CEO is Brian Novotny. The individual identified as a primary participant in the alleged conspiracy is Carl Edgerton, Vice President of Sales. Ridgecrest was represented in the investigation by Helen Marchetti of Davenport, Kline & Archer LLP, Denver, Colorado.
Pinnacle Earth Resources Ltd. is a corporation organized under the laws of the Province of Ontario, Canada, with its Canadian headquarters at 85 Elm Street West, Suite 600, Sudbury, Ontario P3C 1T3, and U.S. operations at 222 South Main Street, Suite 1500, Salt Lake City, Utah 84101. Pinnacle's CEO is Douglas Harlowe. The individual identified as a primary participant in the alleged conspiracy is Kevin Tsang, former Senior Vice President of Commercial Operations. Pinnacle was represented in the investigation by George Nakamura of Ashford Whitmore LLP, with offices in Toronto and New York.
C&H maintained arm's-length communications with counsel for both Ridgecrest and Pinnacle throughout the investigation. As discussed further in Section III.D below, C&H recommended against entering into joint defense agreements with counsel for either co-subject, a recommendation that was adopted by TMC.
E. C&H Staffing
The following C&H personnel were assigned to this matter throughout its duration:
• Elaine Forsythe, Partner, Antitrust & Competition Practice Group, San Francisco office — Responsible Partner. Ms. Forsythe oversaw all aspects of the representation, led client communications at the Board and C-suite level, participated in key DOJ meetings and proffer sessions, and led the NPA negotiation.
• Howard Bellamy, Partner, Antitrust & Competition Practice Group, New York office — Billing Partner. Mr. Bellamy managed the financial and billing aspects of the engagement, reviewed and approved all invoices, coordinated with TMC on budget matters, and participated in DOJ meetings as needed.
• Aaron Liu, Associate, Antitrust & Competition Practice Group, San Francisco office — Lead Associate. Mr. Liu managed the day-to-day conduct of the representation, coordinated the internal investigation, supervised document review and production, drafted cooperation submissions and NPA negotiation materials, conducted and supervised witness interviews, and served as the primary liaison with vendors and expert consultants.
• Monica Reyes, Associate, Antitrust & Competition Practice Group, San Francisco office — Working Associate. Ms. Reyes assisted with document review and production, privilege log preparation, witness interview preparation, and research and analysis throughout the engagement.
Additional C&H associates and paralegals were assigned to specific tasks on a project basis during periods of high activity, particularly during the document production phases and the NPA negotiation phase. Their time was billed under the same matter number and is reflected in the total fees reported in Section V below.
III. Engagement Timeline and Key Milestones
A. Matter Opening and Initial Phase (February–March 2022)
The matter originated with the DOJ's formal opening of Grand Jury Investigation No. GJ-22-0194 on February 10, 2022, in the U.S. District Court for the Northern District of California, San Francisco Division. The grand jury was empaneled to investigate potential violations of Section 1 of the Sherman Act in the North American specialty-minerals sector.
On February 14, 2022, TMC received a grand jury subpoena duces tecum, designated Subpoena No. GJ-22-0194-SD-003, served on Torchlight Mining (U.S.) Inc. at its registered agent in Nevada. The subpoena demanded the production of a broad range of documents relating to TMC's pricing, sales, customer relationships, communications with competitors, trade-association activities, and corporate policies, covering the period from January 1, 2015 through the date of the subpoena.
TMC General Counsel Priya Anand contacted Elaine Forsythe on February 15, 2022, to discuss potential representation. A conflicts check was initiated immediately and was cleared by the firm's conflicts committee on February 16, 2022. No conflicts of interest were identified with respect to any of the parties, subjects, or targets in the investigation.
On February 18, 2022, TMC formally engaged C&H for the representation. The engagement letter was executed by Elaine Forsythe and Howard Bellamy on behalf of C&H, and by Priya Anand on behalf of TMC. The engagement letter set forth the scope of the representation (defense of TMC in connection with the DOJ grand jury investigation), the applicable billing rates, and the terms and conditions of the engagement.
On February 22, 2022, C&H transmitted a letter to Trial Attorney Denise Kowalski at the DOJ Antitrust Division, San Francisco Field Office, acknowledging receipt of Subpoena No. GJ-22-0194-SD-003, entering C&H's appearance as counsel for TMC, and requesting a sixty-day extension of the initial production deadline to permit the identification and collection of responsive documents. The DOJ granted the extension request.
On February 25, 2022, C&H prepared and issued the initial matter budget and staffing plan to TMC. The initial budget estimate was USD 12 million, which covered the anticipated cost of the internal investigation and grand jury defense phase. The budget contemplated approximately twelve to eighteen months of active representation, including document review and production, witness interviews, economic analysis, and potential cooperation negotiations. The staffing plan allocated the core team as described in Section II.E above, with provision for additional resources during peak production periods.
On March 1, 2022, C&H prepared and TMC issued litigation hold notices to preserve all potentially relevant documents and electronically stored information ("ESI"). Two categories of hold notices were issued: (i) a company-wide hold notice directed to all TMC employees with access to pricing, sales, or competitor-contact information; and (ii) targeted hold notices directed specifically to personnel in the U.S. Specialty Minerals Division, including all identified custodians and their administrative support staff. The hold notices instructed recipients to preserve all documents, communications, and ESI potentially related to the matters under investigation, and to suspend any routine document-destruction activities that might affect potentially relevant materials.
On March 4, 2022, C&H prepared and TMC transmitted a notice of claim to Northland Mutual Insurance Co. under Directors' and Officers' Liability Insurance Policy No. NMI-DO-2021-5547. The notice described the DOJ investigation and the grand jury subpoena, and requested confirmation of coverage for defense costs incurred by TMC and its individual directors and officers in connection with the investigation.
On March 5, 2022, C&H established the internal investigation plan in consultation with TMC General Counsel Priya Anand and TMC's Audit Committee. The plan outlined the scope of the internal investigation, the sequence of document review and witness interviews, the timeline for interim and final reporting to the Board, and the framework for evaluating potential cooperation with the DOJ.
On March 15, 2022, C&H retained Redstone Digital Forensics Inc. ("Redstone"), a digital forensics and e-discovery services firm based in McLean, Virginia, to conduct forensic data collection and manage the e-discovery process. Neil Ashworth was designated as the Project Director for the engagement. Redstone was selected based on its experience with DOJ antitrust investigations and its capabilities with respect to the forensic recovery of encrypted messaging-platform data, which C&H anticipated would be a significant component of the document universe.
On March 18, 2022, C&H, in coordination with Redstone and TMC's information technology department, finalized the data collection protocol and custodian list. A total of thirty-four (34) custodians were identified based on a review of TMC's organizational structure, the scope of the subpoena, and preliminary information gathered from TMC's General Counsel regarding the individuals most likely to possess responsive documents and communications. The custodian list included all personnel in the Specialty Minerals Division with pricing, sales, or commercial responsibilities, as well as selected executives, finance personnel, and compliance staff.
On March 28, 2022, TMC filed its FY 2021 annual report on SEDAR+ (the Canadian Securities Administrators' electronic filing system) and with the U.S. Securities and Exchange Commission on Form 40-F. The annual report contained the first public disclosure of the DOJ investigation, prepared in coordination between C&H, TMC's General Counsel, and TMC's independent auditor, Calvert & Associates LLP. In connection with this filing, TMC established an initial litigation reserve of USD 30 million, reflecting C&H's preliminary assessment of the range of potential outcomes and the standards applicable to contingent liability disclosure under both International Financial Reporting Standards (as adopted in Canada) and SEC reporting requirements.
B. Document Production Phase (April 2022–June 2023)
The document production phase was the most resource-intensive component of the engagement, spanning approximately fifteen months and involving the collection, processing, review, and production of hundreds of thousands of documents.
On April 4, 2022, C&H made the first rolling production to the DOJ pursuant to Subpoena No. GJ-22-0194-SD-003. This initial production comprised approximately 42,000 documents and was accompanied by a privilege log identifying documents withheld on the basis of attorney-client privilege, work product protection, or joint defense privilege. The initial production focused on the highest-priority document categories identified in the subpoena, including pricing communications, customer correspondence, and sales records for the three product categories (high-purity feldspar, industrial talc, and rare-earth concentrates).
On May 20, 2022, TMC received a target letter from the DOJ Antitrust Division. The target letter, signed by Denise Kowalski and Marcus Reeves, notified TMC that it was a target of the grand jury investigation and described the scope of the suspected violations. The receipt of the target letter significantly escalated the matter and informed C&H's strategy regarding the internal investigation, cooperation considerations, and the ultimate disposition of the case.
Between August 1 and December 15, 2022, C&H made additional rolling productions to the DOJ pursuant to Subpoena No. GJ-22-0194-SD-003. These productions were made on a phased basis, organized by custodian, document type, and time period. By the conclusion of the rolling productions under the first subpoena, TMC had produced a cumulative total of approximately 487,000 documents, comprising approximately 3.2 million pages.
On May 15, 2023, the DOJ issued a second grand jury subpoena duces tecum, designated Subpoena No. GJ-22-0194-SD-007. The second subpoena sought additional categories of documents not fully covered by the first subpoena, including detailed pricing data and pricing models, customer contracts and amendments, and communications related to the North American Specialty Minerals Council ("NASMC"), the industry trade association. The issuance of the second subpoena expanded the scope of the document production effort and was a primary driver of the budget overage discussed in Section V below.
On June 30, 2023, C&H completed compliance with the second subpoena. An additional approximately 68,000 documents were produced to the DOJ, accompanied by a supplemental privilege log.
In total, across both Subpoenas SD-003 and SD-007, TMC produced approximately 555,000 documents, comprising approximately 3.2 million pages or more. All documents were produced in electronic format in accordance with the DOJ's production specifications, using Redstone's e-discovery platform for processing, review, and production.
C. Internal Investigation Phase (March 2022–January 2023)
The internal investigation was conducted by C&H at the direction of TMC's Board of Directors, through its Audit Committee and General Counsel, for the purpose of determining the facts and circumstances underlying the DOJ's investigation, assessing TMC's potential exposure, and informing the client's strategic decisions regarding cooperation and disposition.
Over the course of the internal investigation, C&H conducted interviews of twenty-three (23) current and former TMC employees, covering individuals in the Specialty Minerals Division, the finance department, the legal department, and senior management. All interviews were conducted pursuant to Upjohn warnings, and interviewees were advised that C&H represented TMC (not the individual), that the communications were privileged, and that the privilege belonged to TMC.
On July 1, 2022, C&H retained Hargrove Forensic Advisory LLC ("Hargrove"), an economic consulting firm based in Chicago, Illinois, to conduct an independent economic analysis of pricing patterns in the specialty-minerals sector and to assess the volume of affected commerce attributable to TMC. Dr. Vanessa Tremblay served as the Engagement Partner for Hargrove. Hargrove's analysis was essential to C&H's evaluation of TMC's potential penalty exposure and to the cooperation and NPA negotiation strategy.
Key witness interviews were conducted as follows:
• Sandra Chu (Regional Sales Manager, Specialty Minerals Division, TMC): interviewed July 18, 2022. Ms. Chu reported directly to Gavin Holt and was responsible for implementing pricing directives for the Western U.S. region. Ms. Chu provided information regarding pricing-adjustment instructions she received from Holt, which C&H's subsequent analysis correlated with competitor price movements on at least twelve occasions.
• Thomas Eriksen (Director of Business Development, Specialty Minerals Division, TMC): interviewed July 22, 2022. Mr. Eriksen attended NASMC quarterly conferences on behalf of TMC and had interactions with representatives of Ridgecrest and Pinnacle at these events. Mr. Eriksen's account of his conference activities was detailed but left ambiguous the extent to which he was a knowing participant in any pricing coordination, as opposed to a peripheral attendee at social and industry events where competitors were present.
• Gavin Holt (Vice President of Sales, Specialty Minerals Division, TMC): interview attempted August 5, 2022. Mr. Holt declined the interview request on the advice of his personal counsel, Patrick Dunleavy of Briarcliff Law Group PLLC, San Francisco. Mr. Holt had retained Mr. Dunleavy on June 10, 2022, and had asserted his Fifth Amendment privilege before the grand jury on June 14, 2022. Mr. Holt's refusal to participate in the internal investigation created a significant information gap with respect to the nature and extent of his communications with competitors.
• Priya Anand (General Counsel, TMC): interviewed August 12, 2022. Ms. Anand provided information regarding TMC's compliance program history, her awareness of the antitrust compliance program adopted in 2014, and the circumstances under which annual training was discontinued after 2018.
• Richard Fong (Chief Financial Officer, TMC): interviewed August 19, 2022. Mr. Fong provided information regarding pricing approval processes, the financial reporting implications of the investigation, and the establishment of the litigation reserve.
On September 15, 2022, C&H and Redstone completed the analysis of VaultChat messages recovered through forensic collection. VaultChat is an encrypted messaging application that was used by certain TMC personnel for business communications. The forensic recovery and analysis of VaultChat data was a technically complex and time-intensive process, requiring specialized forensic techniques coordinated through Redstone. The analysis identified at least thirty-seven (37) documented exchanges between Gavin Holt and Carl Edgerton (Ridgecrest) and/or Kevin Tsang (Pinnacle), spanning the period from March 2017 through July 2021. These exchanges included discussions of pricing levels, customer allocations, and bid strategies, and constituted the most direct evidence of the alleged conspiracy involving TMC personnel.
On October 10, 2022, C&H completed its analysis of TMC's participation in NASMC trade association activities. The analysis identified NASMC quarterly conferences held in Arlington, Virginia; Scottsdale, Arizona; and Orlando, Florida as the sites of alleged in-person coordination among the conspirators. Thomas Eriksen attended at least four conferences during the relevant period that coincided with confirmed attendance by Edgerton and/or Tsang. The analysis reviewed conference agendas, attendee lists, travel records, and expense reports to reconstruct the timeline of in-person interactions.
On November 1, 2022, C&H and Hargrove completed a joint pricing data analysis memorandum, which analyzed TMC's price movements across all three product categories against competitor price movements over the period from 2015 through 2022. The analysis identified statistically significant correlations between TMC price adjustments and competitor price adjustments during the alleged conspiracy period (2017–2021) that were not present in the pre-conspiracy baseline period (2015–2016) or the post-conspiracy period (2022). This analysis was instrumental in C&H's assessment of the strength of the DOJ's case and informed the recommendation to pursue a cooperation strategy.
On January 20, 2023, C&H presented the final internal investigation findings to the TMC Board of Directors. The presentation was made by Elaine Forsythe and Aaron Liu, with Dr. Vanessa Tremblay of Hargrove participating by telephone to address the economic analysis. The key conclusions of the internal investigation were as follows:
(i) Gavin Holt exchanged pricing information with competitors (specifically Carl Edgerton of Ridgecrest and Kevin Tsang of Pinnacle) on at least thirty-seven (37) documented occasions between March 2017 and July 2021, using the VaultChat messaging application and other communication channels.
(ii) Sandra Chu received pricing-adjustment instructions from Holt on at least twelve (12) occasions that correlated with competitor price movements, but the investigation did not uncover evidence that Ms. Chu had knowledge of the inter-competitor communications or was aware that the pricing instructions she received were the product of coordination with competitors.
(iii) Thomas Eriksen's direct participation in the alleged conspiracy was ambiguous. While he attended NASMC conferences at which competitors were present and had social interactions with Edgerton and Tsang, the investigation did not conclusively establish that Eriksen participated in substantive pricing discussions or customer-allocation agreements.
(iv) The investigation did not uncover evidence implicating any member of TMC's C-suite (including CEO Søren Dalmqvist, General Counsel Priya Anand, or CFO Richard Fong) or any member of the Board of Directors in the alleged conspiracy or in knowledge of the alleged conduct.
(v) TMC's antitrust compliance program, originally adopted in 2014, was materially deficient during the relevant period. Specifically, no annual antitrust compliance training had been conducted since 2018, there was no monitoring or oversight of employee interactions at trade-association events, there was no protocol for reporting or auditing contacts with competitors, and there was no mechanism for the compliance function to review or approve pricing communications.
Following the Board presentation, the Board authorized C&H to pursue a cooperation strategy with the DOJ, subject to continued consultation with the Board and General Counsel regarding the specific terms and conditions of any cooperation arrangement or disposition.
D. Gavin Holt — Individual Matters (June 2022 Onward)
On June 10, 2022, Gavin Holt retained personal counsel, Patrick Dunleavy of Briarcliff Law Group PLLC, 50 California Street, Suite 2800, San Francisco, California 94111. Mr. Dunleavy notified C&H of his engagement and requested that all communications with Mr. Holt be directed through his office.
On June 14, 2022, Mr. Holt appeared before the grand jury and asserted his Fifth Amendment privilege against self-incrimination, declining to testify. This assertion was consistent with the advice of his personal counsel and was expected given the nature of the investigation and the evidence suggesting Mr. Holt's direct involvement in the alleged conspiracy.
On August 5, 2022, Mr. Holt declined C&H's request for an interview in connection with the internal investigation, on the advice of Mr. Dunleavy. C&H communicated this development to TMC General Counsel Priya Anand and to the TMC Board.
C&H conducted a thorough assessment of potential conflicts of interest arising from the firm's simultaneous representation of TMC and the presence of Mr. Holt as a current employee who was the subject of individual scrutiny by the DOJ. On June 12, 2022, C&H prepared an internal memorandum analyzing Mr. Holt's individual exposure and the implications for the firm's representation of TMC. The memorandum concluded that C&H's representation of TMC was not adversely affected by a conflict, as the firm did not represent Mr. Holt individually, Mr. Holt had obtained separate personal counsel, and the interests of TMC and Mr. Holt were sufficiently divergent to warrant separate representation.
On July 15, 2022, C&H prepared a memorandum assessing whether TMC should enter into joint defense agreements with counsel for Ridgecrest Minerals Inc. (Helen Marchetti, Davenport, Kline & Archer LLP) or Pinnacle Earth Resources Ltd. (George Nakamura, Ashford Whitmore LLP). The memorandum recommended against joint defense agreements, based on the assessment that: (a) TMC's cooperation strategy could be undermined by information-sharing obligations that might arise under a joint defense agreement; (b) the interests of the co-subjects were not sufficiently aligned to warrant a joint defense arrangement; and (c) the risks of waiver of privilege or work product protection in the event of a breakdown of the joint defense outweighed the potential benefits. TMC adopted C&H's recommendation.
The NPA Holt carve-out, discussed in greater detail in Section IV.F below, reflects the divergence of interests between TMC and Mr. Holt. The executed NPA does not cover Gavin Holt individually, and the DOJ has expressly reserved the right to pursue criminal charges against Mr. Holt based on his individual conduct.
E. Cooperation and Proffer Phase (February–September 2023)
Following the TMC Board's authorization of a cooperation strategy in January 2023, C&H undertook a structured cooperation process with the DOJ Antitrust Division.
On February 15, 2023, C&H submitted a comprehensive cooperation proffer to the DOJ on behalf of TMC. The proffer described the findings of the internal investigation, summarized the evidence of the alleged conspiracy, identified the key participants and the nature and extent of their conduct, and outlined TMC's willingness to cooperate with the DOJ's ongoing investigation and any related prosecutions. The proffer was submitted to Denise Kowalski and Marcus Reeves, with a copy to Deputy Assistant Attorney General Julia Stafford-Hayes.
On March 10, 2023, Sandra Chu participated in a voluntary proffer session with the DOJ at the San Francisco Field Office. Ms. Chu was accompanied by C&H counsel (Aaron Liu) and provided testimony regarding her role in the Specialty Minerals Division, the pricing-adjustment instructions she received from Gavin Holt, her understanding of the basis for those instructions, and her interactions with customers. The proffer session was conducted pursuant to a proffer agreement negotiated by C&H, which provided customary use-and-derivative-use protections for Ms. Chu's statements.
On April 22, 2023, Thomas Eriksen participated in a voluntary proffer session with the DOJ, similarly accompanied by C&H counsel (Aaron Liu and Monica Reyes). Mr. Eriksen provided testimony regarding his attendance at NASMC conferences, his interactions with representatives of Ridgecrest and Pinnacle at those events, and his understanding of TMC's pricing practices.
On May 1, 2023, C&H submitted a supplemental cooperation submission to the DOJ, providing additional documentary evidence and analysis developed in connection with the second subpoena (SD-007) and the Hargrove economic analysis.
On August 1, 2023, C&H retained Meridian Compliance Partners LLC ("Meridian"), a compliance consulting firm based in Washington, D.C., to design an enhanced antitrust compliance program for TMC. Claudia Ferraro was designated as the Engagement Lead. Meridian was selected based on its extensive experience with DOJ antitrust compliance expectations and its familiarity with the DOJ's Evaluation of Corporate Compliance Programs guidance.
On August 25, 2023, Meridian delivered the Enhanced Antitrust Compliance Program design memorandum to TMC. The memorandum set forth a comprehensive program addressing each of the deficiencies identified in the internal investigation, including mandatory annual training, appointment of an independent Chief Compliance Officer, annual compliance certifications, competitor-contact protocols, and trade-association interaction policies.
On September 15, 2023, C&H submitted the enhanced compliance program proposal to the DOJ as part of TMC's ongoing cooperation. The proactive submission of the compliance program was intended to demonstrate TMC's commitment to remediation and to position the company favorably for a negotiated disposition.
F. NPA Negotiation and Execution Phase (November 2023–May 2024)
On November 1, 2023, the DOJ communicated to C&H that it was willing to negotiate a Non-Prosecution Agreement ("NPA") with TMC, in recognition of TMC's cooperation and remediation efforts. This communication was made by Denise Kowalski during a telephone conference with Elaine Forsythe and Aaron Liu.
On January 10, 2024, the DOJ circulated its initial draft NPA. C&H's review of the initial draft identified several objectionable provisions, including: (a) a monetary penalty of approximately USD 65 million, which C&H assessed as disproportionate in light of TMC's cooperation credit; (b) a four-year compliance monitor term, which C&H assessed as excessive given the scope and pace of TMC's compliance remediation; (c) overbroad cooperation obligations that could impose unreasonable burdens on TMC's operations; and (d) a vague material-breach standard that could expose TMC to prosecution for technical or inadvertent violations.
On February 5, 2024, C&H submitted a counter-draft NPA to the DOJ on behalf of TMC, together with a detailed cover letter transmitted to Deputy Assistant Attorney General Julia Stafford-Hayes, Trial Attorney Denise Kowalski, and Senior Trial Attorney Marcus Reeves. The cover letter set forth C&H's analysis of the appropriate penalty calculation, the basis for a reduced monitor term, proposed modifications to the cooperation obligations, and a revised material-breach standard incorporating notice and cure provisions.
On March 12, 2024, Hargrove delivered its final affected-commerce and penalty analysis. The analysis concluded that TMC's affected commerce — that is, the total volume of commerce in the relevant product categories attributable to TMC during the conspiracy period — was USD 478 million, out of a total affected commerce across all conspirators of approximately USD 1.34 billion. Applying the DOJ's standard 20% starting-point penalty (consistent with the Sentencing Guidelines framework), the baseline penalty was USD 95.6 million (USD 478 million × 20%). Hargrove's analysis, combined with C&H's assessment of the applicable mitigating factors, supported a cooperation and remediation credit of approximately 49.2%, yielding a net penalty of approximately USD 48.5 million.
On April 8, 2024, the DOJ and TMC (through C&H) reached agreement on the material terms of the NPA, including the USD 48.5 million penalty, a two-year compliance monitor term, refined cooperation obligations with a three-year duration, and a material-breach standard incorporating written notice and a thirty-day cure period for non-willful breaches.
On April 25, 2024, the TMC Board of Directors adopted a resolution authorizing CEO Søren Dalmqvist to execute the NPA on behalf of TMC. The resolution was adopted upon the recommendation of the Audit Committee and General Counsel, following a presentation by C&H regarding the final terms of the NPA and C&H's assessment that the NPA represented the most favorable achievable outcome for TMC.
On May 6, 2024, the NPA (DOJ Reference No. ATR-SF-2024-00312) was formally executed by Søren Dalmqvist on behalf of TMC and by Deputy Assistant Attorney General Julia Stafford-Hayes on behalf of the DOJ. The NPA was accompanied by two appendices: Appendix A (the Enhanced Antitrust Compliance Program) and Appendix B (the Agreed Statement of Facts).
On May 20, 2024, the DOJ formally closed its investigation as to TMC. Trial Attorney Denise Kowalski communicated the closure to C&H by letter, confirming that no criminal charges would be filed against TMC or any current TMC employee (other than Gavin Holt, who is expressly carved out of the NPA), provided that TMC complies with the terms and conditions of the NPA.
The matter was thereupon considered closed for purposes of C&H's active representation, subject to the post-closing administrative tasks and handoff obligations described in Sections VII and X below.
IV. Final Disposition — Non-Prosecution Agreement (ATR-SF-2024-00312)
The matter concluded with the execution of a Non-Prosecution Agreement between TMC and the DOJ, designated DOJ Reference No. ATR-SF-2024-00312 and executed on May 6, 2024. The following summarizes the material terms of the NPA.
A. Monetary Payment
TMC agreed to pay a monetary penalty of USD 48,500,000 (forty-eight million five hundred thousand dollars) to the United States Treasury.
The penalty was calculated on the basis of 20% of TMC's affected commerce during the conspiracy period. Hargrove's final analysis determined TMC's affected commerce to be USD 478 million. Applying the 20% starting-point penalty (consistent with the framework established by the United States Sentencing Guidelines for organizational defendants in antitrust cases), the baseline penalty was USD 95,600,000. The DOJ applied an approximate 49.2% cooperation and remediation credit, reflecting TMC's extensive cooperation during the investigation (including the internal investigation, document production, and witness proffers), its proactive compliance remediation efforts, and the absence of culpable conduct by TMC's senior management or Board of Directors. The resulting net penalty of USD 48,500,000 represents the final amount agreed upon by the parties.
The payment is due on or before July 5, 2024, which is sixty (60) days from the May 6, 2024 execution date. Payment is to be made by wire transfer to the U.S. Treasury in accordance with the instructions set forth in the NPA.
B. Cooperation Obligations
Under the NPA, TMC is required to continue to cooperate fully with the DOJ in any related investigations or prosecutions for a period of three years from the date of execution, through May 6, 2027. The cooperation obligations encompass the following:
• Making current and former TMC employees available for interviews and testimony as reasonably requested by the DOJ, at mutually convenient times and locations;
• Providing documents and information responsive to reasonable DOJ requests, subject to applicable privileges;
• Promptly notifying the DOJ of any information that comes to TMC's attention regarding potential violations of the antitrust laws related to the subject matter of the investigation; and
• Refraining from any action that would impede or obstruct the DOJ's ongoing investigations or prosecutions.
Priya Anand, TMC General Counsel, has been designated as the cooperation liaison responsible for coordinating TMC's compliance with these obligations.
C. Compliance Enhancements
TMC is required to implement and maintain the Enhanced Antitrust Compliance Program described in NPA Appendix A. The program incorporates the following elements:
• Mandatory annual antitrust compliance training for all employees in sales, marketing, pricing, business development, and senior management roles, with participation tracked and documented;
• Appointment of an independent Chief Compliance Officer with direct reporting authority to the Board of Directors and the CEO, and with adequate resources and budget to fulfill the compliance function;
• Annual compliance certifications executed by the CEO and General Counsel, attesting to the company's compliance with the NPA and the Enhanced Antitrust Compliance Program;
• Competitor-contact protocols requiring pre-approval and post-event reporting for any substantive contact with representatives of competing companies, whether in person, by telephone, or by electronic communication;
• Trade-association interaction policies establishing guidelines for employee participation in trade-association events, including prohibitions on discussion of competitively sensitive information (pricing, costs, customer terms, bid strategies), requirements for advance review of trade-association agendas, and mandatory post-event debriefing with the compliance function; and
• A confidential reporting mechanism (hotline and online portal) for employees to report suspected antitrust violations without fear of retaliation.
D. Compliance Monitor
The NPA requires the appointment of an independent compliance monitor for a period of two years from the date of execution, from May 6, 2024 through May 6, 2026. The monitor's role is to assess TMC's implementation and maintenance of the Enhanced Antitrust Compliance Program, to report to the DOJ on the adequacy of the program, and to make recommendations for any necessary improvements.
Meridian Compliance Partners LLC (Claudia Ferraro, Engagement Lead) has been pre-approved by the DOJ to serve as the independent compliance monitor. Meridian's engagement as monitor is a direct engagement between TMC and Meridian, separate from C&H's engagement of Meridian during the NPA negotiation phase. The monitor's fees and expenses will be borne by TMC and will be billed directly to TMC going forward.
The monitor's reporting schedule and milestones are set forth in the NPA and include interim reports at six-month intervals and a final report upon the expiration of the two-year monitor term.
E. No Criminal Charges
In consideration of TMC's cooperation and the monetary payment, the DOJ agrees not to bring criminal charges against TMC or any current TMC employee (other than Gavin Holt, as described in Section IV.F below) based on the conduct described in the NPA and the Agreed Statement of Facts (Appendix B), provided that TMC complies with all terms and conditions of the NPA throughout its three-year term.
F. Holt Carve-Out
The NPA expressly does not cover Gavin Holt individually. The DOJ has reserved the right to pursue criminal charges against Mr. Holt based on his individual conduct in connection with the alleged conspiracy. This carve-out was a condition of the DOJ's willingness to enter into the NPA with TMC and reflects the DOJ's view that Mr. Holt was a primary individual participant in the alleged conspiracy. Mr. Holt remains represented by Patrick Dunleavy of Briarcliff Law Group PLLC. C&H has no obligations to Mr. Holt with respect to any future proceedings, and TMC's cooperation obligations under the NPA include making information and employees available in connection with any prosecution of Mr. Holt.
G. Term and Breach Provisions
The NPA has a three-year term, running from May 6, 2024 through May 6, 2027. Upon the expiration of the term, provided that TMC has fully complied with all NPA obligations, the NPA will terminate and the DOJ will not bring criminal charges against TMC based on the described conduct.
In the event of a material breach by TMC of any term or condition of the NPA, the DOJ may, after providing written notice and an opportunity to cure (thirty days for non-willful breaches), prosecute TMC for the criminal violations described in the Agreed Statement of Facts (Appendix B). In such event, TMC has agreed that the factual admissions in Appendix B may be used against it in any subsequent proceeding.
V. Financial Summary
A. Calderwood & Harkness Fees and Disbursements
C&H's engagement with TMC was conducted on an hourly billing basis, with the following applicable rate structure:
In addition to professional fees, TMC was billed for out-of-pocket disbursements, including travel expenses, court-reporter fees, photocopying and printing, and telecommunications charges.
The initial budget estimate for the engagement, as communicated to TMC on February 25, 2022, was USD 12 million. This estimate covered the anticipated cost of the internal investigation and grand jury defense phase, based on the assumption that the matter would involve a single subpoena response, approximately twenty witness interviews, economic analysis, and potential cooperation negotiations over a twelve-to-eighteen-month period.
The initial budget estimate was exceeded due to several factors that expanded the scope of the engagement beyond the original projection. The primary drivers of the budget overage were: (a) the issuance of the second grand jury subpoena (SD-007) in May 2023, which required the collection, processing, review, and production of an additional approximately 68,000 documents; (b) the expanded witness cooperation program, including the preparation for and conduct of proffer sessions for Sandra Chu and Thomas Eriksen; (c) the extended NPA negotiation process, which involved multiple rounds of drafting, redlining, and substantive negotiation over a period of approximately six months; and (d) the complexity and time-intensity of the VaultChat forensic recovery and analysis.
The budget overage was discussed with and approved by TMC General Counsel Priya Anand in Q1 2023, when it became apparent that the expanded scope would require additional resources and time beyond the original estimate.
Total C&H fees and disbursements through matter close were approximately USD 18,700,000 (eighteen million seven hundred thousand dollars).
B. Vendor and Expert Fees
C&H retained the following vendors and expert consultants in connection with this matter, with total fees as follows:
Meridian's fees of approximately USD 1.1 million reflect the cost of the compliance program design and NPA negotiation phases only, through the date of NPA execution. Meridian's ongoing fees as the independent compliance monitor will be billed directly to TMC and are not included in this total.
C. Grand Total Professional Fees
The grand total of all professional fees incurred by TMC in connection with this matter, including C&H fees and disbursements and all vendor and expert fees, is approximately USD 23,950,000 (twenty-three million nine hundred fifty thousand dollars), calculated as follows:
D. NPA Monetary Payment
In addition to professional fees, TMC is obligated to pay the NPA monetary penalty of USD 48,500,000 to the U.S. Treasury. This payment is due on or before July 5, 2024 (sixty days from the May 6, 2024 NPA execution date). The combined financial impact of the matter — professional fees plus the NPA penalty — is approximately USD 72,450,000.
E. Litigation Reserve
TMC established a litigation reserve in connection with the DOJ investigation, coordinated among TMC's General Counsel, Audit Committee, independent auditor, and C&H.
The initial litigation reserve of USD 30 million was established in March 2022, in connection with the filing of TMC's FY 2021 annual report on SEDAR+ and with the SEC on Form 40-F. This amount reflected C&H's preliminary assessment of the range of potential outcomes at the early stage of the investigation, prior to the receipt of the target letter and prior to the completion of the internal investigation.
The reserve was revised upward to USD 50 million in Q3 2023, following the receipt of the DOJ target letter (May 20, 2022, with the reserve increase delayed to reflect the evolving case posture over the ensuing months) and the development of a more refined assessment of the likely penalty range based on the internal investigation findings, the Hargrove economic analysis, and the cooperation strategy. The revised reserve was intended to cover the anticipated NPA penalty and remaining professional fees.
Reserve adequacy coordination was conducted on an ongoing basis with TMC Audit Committee Chair Janet Moreau-Shaw and TMC's independent auditor, Calvert & Associates LLP (Daniel Moreau, engagement partner). C&H provided periodic assessments of the range of potential outcomes in connection with the auditor's review of the adequacy of the litigation reserve under applicable accounting standards.
F. D&O Insurance
Notice of the DOJ investigation was tendered to Northland Mutual Insurance Co. on March 4, 2022, under Directors' and Officers' Liability Insurance Policy No. NMI-DO-2021-5547. The policy carried an aggregate limit of USD 50 million, a retention (self-insured amount) of USD 2.5 million, and was in effect for the policy period from July 1, 2021 through July 1, 2022 (renewed annually thereafter).
Northland acknowledged coverage for defense costs incurred by individual directors and officers of TMC in connection with the DOJ investigation. However, Northland reserved rights regarding entity coverage (i.e., coverage for defense costs incurred by TMC as a corporate entity) and invoked the policy's regulatory/criminal exclusion as a potential basis for denying entity-level coverage.
Excess-layer carriers were also notified on a timely basis. Greystone Specialty Insurance Ltd. (Layer 2, USD 25 million excess of USD 50 million) and Sentinel Re Ltd. (Layer 3, USD 25 million excess of USD 75 million) were both notified on approximately March 8, 2022.
On April 28, 2022, C&H transmitted a letter to Northland Mutual contesting the applicability of the criminal-act exclusion at the pre-adjudication stage. C&H's position was that the exclusion, by its terms, required a final adjudication of criminal conduct before it could be invoked to deny coverage, and that Northland's reservation of rights was premature.
At the time of matter close, the insurance coverage issues remain open regarding entity defense-cost reimbursement. TMC General Counsel Priya Anand has been advised that these issues should be pursued directly by TMC or through engagement of dedicated insurance coverage counsel. C&H's engagement did not encompass insurance coverage litigation, and any future engagement in this area would require a separate engagement letter.
VI. Key Document Locations and File Index
A. Physical Files
A limited number of physical files exist for this matter, consisting primarily of original executed documents, correspondence received in hard copy, and certain Board materials. These physical files are located in the C&H San Francisco office, secure records room, filed under Matter No. 1039-00001, in designated file boxes. The vast majority of the matter file is maintained in electronic format as described below.
B. Electronic Files — C&H Document Management System
All C&H-generated memoranda, correspondence, analysis, and work product are stored in the firm's document management system ("DMS") under Matter No. 1039-00001. The DMS file is organized according to the following subfolder structure:
(i) Engagement & Intake — Engagement letter, conflict check documentation, client intake forms, matter opening memoranda, initial budget and staffing plan.
(ii) Litigation Hold & Preservation — Litigation hold notices (company-wide and targeted), custodian acknowledgment forms, preservation correspondence with TMC IT department, data collection protocol documentation.
(iii) Grand Jury Subpoena Compliance (SD-003 and SD-007) — Copies of Subpoenas SD-003 and SD-007, extension requests, production cover letters, production logs, privilege logs (First Production Privilege Log dated April 4, 2022, and Second Production Privilege Log dated June 30, 2023), all correspondence with the DOJ regarding subpoena compliance.
(iv) Target Letter Response & Defense Strategy — DOJ target letter (May 20, 2022), C&H response and analysis, defense strategy memoranda, grand jury defense planning materials.
(v) Internal Investigation — Witness interview memoranda (all 23 interviews), VaultChat analysis memorandum and supporting data, pricing data analysis (C&H/Hargrove joint memorandum), trade association analysis memorandum, final investigation findings presentation (January 20, 2023), Board materials.
(vi) Witness Preparation & Grand Jury Proceedings — Grand jury preparation materials, witness preparation outlines, proffer agreement templates and executed agreements, proffer session preparation materials for Sandra Chu and Thomas Eriksen.
(vii) DOJ Negotiations & Cooperation Submissions — Cooperation proffer (February 15, 2023), supplemental cooperation submission (May 1, 2023), all correspondence with the DOJ regarding cooperation and negotiation, internal strategy memoranda.
(viii) NPA Drafting & Execution — All drafts, redlines, and blacklines of the NPA, including the DOJ initial draft (January 10, 2024), TMC counter-draft (February 5, 2024), all subsequent iterations, the final execution version (May 6, 2024), and the final execution versions of Appendix A (Enhanced Antitrust Compliance Program) and Appendix B (Agreed Statement of Facts). Cover letters and negotiation correspondence.
(ix) Compliance Remediation & Monitor — Meridian Compliance Partners engagement materials, compliance program design memorandum (August 25, 2023), NPA Appendix A drafts and final, compliance monitor engagement documentation, monitor reporting framework.
(x) D&O Insurance & Financial Disclosure — Notice of claim to Northland Mutual (March 4, 2022), Northland reservation-of-rights letter, C&H response letter (April 28, 2022), excess-layer carrier notifications, all insurance-related correspondence, litigation reserve analysis memoranda, coordination with Calvert & Associates LLP.
(xi) Client Reporting & Board Communications — All memoranda and presentations prepared for TMC management, Audit Committee, and Board of Directors, including periodic status reports, the final investigation findings presentation (January 20, 2023), and the NPA authorization materials (April 2024).
(xii) Correspondence (DOJ, Briarcliff, Other Counsel) — All external correspondence organized by recipient/sender, including correspondence with the DOJ, with Patrick Dunleavy (Briarcliff Law Group PLLC, counsel to Gavin Holt), and with counsel for co-subjects (Helen Marchetti, Davenport, Kline & Archer LLP; George Nakamura, Ashford Whitmore LLP).
C. E-discovery Platform — Redstone Digital Forensics
All collected, processed, and produced documents are hosted on Redstone Digital Forensics Inc.'s e-discovery review platform. The hosted data set comprises the full universe of approximately 555,000 documents (approximately 3.2 million pages or more) collected from the 34 identified custodians and produced to the DOJ pursuant to Subpoenas SD-003 and SD-007, as well as documents collected but withheld on privilege grounds.
The Redstone Project Director is Neil Ashworth, contactable at Redstone Digital Forensics Inc., 7925 Jones Branch Drive, Suite 600, McLean, Virginia 22102.
A data retention arrangement is in place between C&H, TMC, and Redstone. C&H is to coordinate with TMC and Redstone regarding post-matter data retention, and the return or destruction of hosted data, in accordance with the terms of the Redstone engagement letter, C&H's records-retention policy, and TMC's document-retention obligations under the NPA. As discussed further in Section IX below, no destruction of Redstone-hosted data should be authorized without TMC's consent and confirmation that all NPA document-retention obligations have been satisfied.