PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED WORK PRODUCT
CALDERWOOD & HARKNESS LLP
MEMORANDUM
TO: Elaine Forsythe, Responsible Partner, Antitrust & Competition Practice Group
FROM: Aaron Liu, Lead Associate, Antitrust & Competition Practice Group
DATE: June 12, 2022
RE: Gavin Holt — Individual Criminal Exposure, Separate Representation, Fifth Amendment Assertion, and Implications for Torchlight Mining Corp. Defense Strategy
MATTER NO.: 1039-00001
CLIENT: Torchlight Mining Corp. (TSX: TRCL / NYSE: TMC)
INVESTIGATION: United States Department of Justice, Antitrust Division — Grand Jury Investigation No. GJ-22-0194 (N.D. Cal., San Francisco Division)
I. Purpose and Executive Summary
This memorandum analyzes the individual criminal exposure of Gavin Holt, former Vice President of U.S. Specialty Minerals Sales at Torchlight Mining Corp. ("TMC" or the "Company"), in connection with the ongoing grand jury investigation being conducted by the Antitrust Division of the United States Department of Justice ("DOJ"), designated Grand Jury Investigation No. GJ-22-0194, before the United States District Court for the Northern District of California, San Francisco Division. The memorandum addresses several interrelated developments that bear directly on TMC's defense posture and cooperation strategy.
First, this memorandum addresses Holt's retention of personal criminal defense counsel. On or about June 10, 2022, Holt engaged the Briarcliff Law Group PLLC, a San Francisco-based litigation boutique, to represent him individually in connection with the investigation. His lead attorney is Patrick Dunleavy, a former federal prosecutor with significant experience in antitrust criminal defense matters. Holt's decision to retain separate counsel was anticipated by this firm and is both appropriate and necessary given the circumstances described herein.
Second, this memorandum analyzes Holt's assertion of his Fifth Amendment privilege against self-incrimination. On June 14, 2022, Holt is scheduled to appear before the grand jury and, based on communications from Dunleavy to this firm, intends to invoke his Fifth Amendment privilege and decline to testify on any substantive matters. This blanket invocation underscores the severity of Holt's individual exposure and confirms that his counsel has assessed a genuine and substantial risk of criminal prosecution.
Third, and most critically for TMC's strategic planning, this memorandum assesses the implications of these developments for TMC's defense strategy. The analysis encompasses the material divergence of interests between TMC and Holt, the advisability (or inadvisability) of entering into a joint defense agreement with Holt's counsel, and the likely necessity of a "Holt carve-out" in any future non-prosecution agreement ("NPA") or other resolution between TMC and DOJ. The memorandum also addresses related considerations regarding other TMC witnesses, the ongoing internal investigation, and Directors & Officers insurance coverage.
Key Conclusion: Holt's interests and TMC's interests have materially and irreconcilably diverged. TMC should not enter into a joint defense agreement with Holt or his counsel. TMC's cooperation strategy should anticipate that DOJ will insist on excluding Holt from any entity-level resolution, and DOJ will likely require TMC to provide evidence regarding Holt's conduct as a condition of cooperation credit. TMC must be prepared to do so. The recommendations set forth in Section VI below are designed to protect TMC's strategic position while respecting Holt's individual constitutional rights and managing the ethical and practical complications that arise from this divergence.
II. Background
A. The Investigation
The grand jury investigation at the center of this memorandum was formally opened on February 10, 2022, and is designated Grand Jury No. GJ-22-0194 before the United States District Court for the Northern District of California, San Francisco Division. The investigation is being led by Trial Attorney Denise Kowalski and Senior Trial Attorney Marcus Reeves of the DOJ Antitrust Division, San Francisco Field Office, located at 450 Golden Gate Avenue, Room 10-0101, San Francisco, California 94102. The investigation is supervised at the senior leadership level by Deputy Assistant Attorney General Julia Stafford-Hayes in the Antitrust Division's Washington, D.C. headquarters. The involvement of the Deputy Assistant Attorney General confirms that DOJ views this investigation as a significant matter warranting senior oversight.
The investigation concerns alleged price-fixing, market allocation, and bid-rigging in the North American specialty-minerals sector—specifically, the markets for high-purity feldspar, industrial talc, and rare-earth concentrates. These are mineral commodities with concentrated supplier bases and significant commercial importance to downstream manufacturing sectors, including ceramics, coatings, electronics, and defense applications. The alleged conspiracy period spans approximately January 2017 through August 2021, a duration of approximately four years and eight months. The extended duration of the alleged conspiracy is significant both for purposes of assessing individual culpability and for sentencing calculations under the United States Sentencing Guidelines.
In addition to TMC, the investigation encompasses several other corporate and individual subjects and targets:
Ridgecrest Minerals Inc. — A Delaware corporation headquartered in Denver, Colorado. Ridgecrest's CEO is Brian Novotny. The individual most directly implicated in the alleged conspiracy at Ridgecrest is Carl Edgerton, Vice President of Sales. Ridgecrest is represented by the law firm Davenport, Kline & Archer LLP, with partner Helen Marchetti serving as lead outside counsel. Edgerton is understood to have retained separate counsel, although we have not been formally notified of the identity of his individual attorney.
Pinnacle Earth Resources Ltd. — An Ontario corporation headquartered in Sudbury, Ontario, with U.S. operations based in Salt Lake City, Utah. Pinnacle's CEO is Douglas Harlowe. The individual most directly implicated at Pinnacle is Kevin Tsang, former Senior Vice President of Commercial Operations. Pinnacle is represented by Ashford Whitmore LLP, with partner George Nakamura serving as lead outside counsel. We understand that Tsang has also retained separate counsel, but we do not have confirmation of the identity of his individual attorney at this time.
Cascade Chemical Supply Co. — A Washington corporation headquartered in Spokane, Washington, and the cooperating witness entity in this investigation. Cascade's president is Leonard Massey. Cascade is represented by Whitfield, Strauss & Tully LLP, with partner Rebecca Ostrander serving as lead counsel. Cascade entered into a cooperation agreement with DOJ on or about September 15, 2021, approximately five months before the grand jury investigation was formally opened. Cascade's cooperation triggered the broader investigation, and its cooperation agreement predates the involvement of all other corporate parties. As a downstream distributor and processor of specialty minerals, Cascade had direct visibility into the pricing patterns and commercial practices of its upstream suppliers—including TMC, Ridgecrest, and Pinnacle—which makes its testimony and documentary evidence particularly probative.
TMC received a grand jury subpoena duces tecum (designated Subpoena No. GJ-22-0194-SD-003) on February 14, 2022, four days after the investigation was formally opened. The subpoena called for the production of an extensive range of documents related to TMC's specialty minerals pricing, customer communications, competitor contacts, trade-association participation, and internal communications among commercial personnel. TMC promptly engaged Calderwood & Harkness LLP on February 18, 2022, and this firm has served as TMC's outside counsel for the investigation since that date.
On May 20, 2022, TMC received a target letter from DOJ, signed by Senior Trial Attorney Marcus Reeves and approved by Deputy Assistant Attorney General Julia Stafford-Hayes. The target letter elevated TMC's status from "subject" to "target" of the investigation and identified Gavin Holt by name as a key individual whose conduct is at the center of the investigation. The receipt of the target letter represented a material escalation and confirmed that DOJ has developed sufficient evidence to consider seeking an indictment against TMC as an entity, as well as against individuals associated with TMC. The target letter prompted several of the developments discussed in this memorandum, including Holt's retention of separate counsel and his decision to assert his Fifth Amendment privilege.
B. Gavin Holt — Profile and Role
Gavin Holt is a former officer of TMC who served as Vice President of U.S. Specialty Minerals Sales. In that capacity, Holt led TMC's entire commercial pricing function for the U.S. Specialty Minerals Division from approximately 2016 through 2021. The U.S. Specialty Minerals Division is a significant business unit within TMC, generating approximately USD 687 million in revenue in fiscal year 2021, which accounted for approximately 20% of TMC's consolidated revenue of approximately CAD 4.27 billion (approximately USD 3.38 billion at prevailing exchange rates). Holt was the most senior commercial executive within the division and had direct authority over pricing decisions, customer assignments, and bid responses.
Holt's role placed him at the nexus of the alleged anticompetitive conduct. As the VP responsible for pricing, he had both the authority and the motive to coordinate pricing levels with counterparts at competitor firms. As discussed in greater detail in Section III.B below, the internal investigation has identified Holt as the central TMC participant in the alleged conspiracy, having communicated directly with Carl Edgerton of Ridgecrest and Kevin Tsang of Pinnacle on numerous documented occasions.
Holt resigned from TMC effective September 30, 2021. His departure occurred approximately four months before the grand jury investigation was formally opened on February 10, 2022, and approximately two weeks after Cascade Chemical Supply Co. entered into its cooperation agreement with DOJ on or about September 15, 2021. The temporal proximity between Cascade's cooperation agreement and Holt's resignation is significant and raises the reasonable inference that Holt may have become aware—through industry contacts, informal channels, or other means—that Cascade had begun cooperating with the government, or that Holt otherwise anticipated government scrutiny and determined that departing TMC would distance him from the anticipated investigation. While we cannot confirm Holt's knowledge of Cascade's cooperation at the time of his resignation, the timing is noteworthy and will likely be viewed by DOJ as indicative of consciousness of guilt.
Holt is the TMC individual most directly implicated in the alleged pricing communications with counterparts at Ridgecrest and Pinnacle. His seniority, his direct involvement over a multi-year period, and his central role in the commercial function that is the subject of the investigation make him the principal individual target on the TMC side of this matter.
C. Holt's Retention of Personal Counsel
On or about June 10, 2022, Holt retained Briarcliff Law Group PLLC as his personal counsel in connection with the grand jury investigation. Briarcliff is a San Francisco-based litigation boutique located at 50 California Street, Suite 2800, San Francisco, California 94111. The lead attorney representing Holt is Patrick Dunleavy, a partner at Briarcliff with extensive experience in white-collar criminal defense, including antitrust matters. Dunleavy is a former Assistant United States Attorney for the Northern District of California and has handled several prior antitrust defense matters in both the Northern District of California and the District of Columbia.
Holt's decision to retain separate counsel followed TMC's receipt of the target letter from DOJ on May 20, 2022, which identified Holt by name as a key individual whose conduct is under investigation. The target letter served as a clear signal that Holt's individual interests could not be adequately protected by TMC's counsel. Indeed, Calderwood & Harkness had been advising TMC since February 18, 2022—when the firm was first engaged—that Holt's interests might diverge from TMC's and that separate representation for Holt might become necessary. As the investigation progressed and the evidence of Holt's direct participation in the alleged conduct mounted, the need for separate counsel became increasingly apparent. The receipt of the target letter crystallized that need, and Holt's retention of Briarcliff was both anticipated and appropriate under the circumstances.
Patrick Dunleavy contacted Calderwood & Harkness on June 10, 2022, to advise that he had been retained by Holt and to request certain logistical information regarding the investigation timeline. That communication was brief and did not involve any exchange of substantive information regarding TMC's internal investigation findings or cooperation strategy.
D. Holt's Assertion of Fifth Amendment Privilege
On June 14, 2022, Holt appeared before the grand jury (GJ-22-0194) in the Northern District of California and, on the advice of his personal counsel Patrick Dunleavy, asserted his Fifth Amendment privilege against self-incrimination and refused to testify. Holt's invocation was blanket in nature—he declined to answer any substantive questions posed by the government attorneys, including questions regarding his role at TMC, his communications with representatives of competitor firms, his knowledge of pricing practices in the specialty minerals sector, and the circumstances of his resignation from TMC in September 2021.
The blanket nature of Holt's invocation is significant. Rather than asserting the privilege selectively—responding to some questions while declining to answer others on self-incrimination grounds—Holt refused to provide any testimony whatsoever. This approach is consistent with the advice that defense counsel typically provides to clients facing a genuine risk of individual prosecution, as any partial testimony could waive the privilege as to related subject matter and expose the witness to further questioning on related topics.
Holt's Fifth Amendment assertion confirms several important conclusions. First, it confirms that Holt's individual criminal exposure is serious and that his own counsel has assessed a real and substantial risk of criminal prosecution. Second, it confirms that Holt is not cooperating with the government and will not receive any cooperation credit from DOJ—a factor that significantly increases the likelihood of his indictment. Third, and most importantly for TMC's strategic planning, it confirms that Holt's interests and TMC's interests are fundamentally divergent: TMC is pursuing cooperation, while Holt is pursuing a strategy of non-cooperation and invocation of constitutional protections.
III. Analysis of Holt's Individual Criminal Exposure
A. Applicable Legal Framework
The alleged conduct at issue in Grand Jury Investigation No. GJ-22-0194—price-fixing, market allocation, and bid-rigging—constitutes per se violations of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. Unlike antitrust claims analyzed under the rule of reason, per se violations do not require the government to demonstrate anticompetitive effects or market power; the existence of an agreement among competitors to fix prices, allocate markets, or rig bids is itself a criminal offense, regardless of the reasonableness of the agreed-upon prices or the economic effects of the arrangement. See United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223 (1940); United States v. Trenton Potteries Co., 273 U.S. 392 (1927).
Criminal penalties for individuals convicted of violating Section 1 of the Sherman Act are severe. As amended by the Antitrust Criminal Penalty Enhancement and Reform Act of 2004, Pub. L. 108-237, and further amended in 2020, the statute provides for imprisonment of up to ten (10) years per violation and individual fines of up to one million dollars ($1,000,000) per violation. In practice, the DOJ Antitrust Division regularly seeks and obtains prison sentences for individual participants in hard-core horizontal cartel conduct, and the average prison sentence in antitrust cases prosecuted by the Division in recent years has been approximately fourteen months, with sentences of two years or more not uncommon for high-level participants in large-scale conspiracies.
Several DOJ policies and guidance documents are relevant to the assessment of Holt's individual exposure:
The Yates Memorandum. In September 2015, then-Deputy Attorney General Sally Quillian Yates issued a memorandum titled "Individual Accountability for Corporate Wrongdoing," which directed all DOJ components—including the Antitrust Division—to prioritize the prosecution of individuals responsible for corporate misconduct. The Yates Memorandum requires that, to receive any cooperation credit, a corporation must provide all relevant facts about the individuals involved in the misconduct. The Yates Memorandum has been reaffirmed and reinforced by subsequent Deputy Attorneys General and remains a central tenet of DOJ's approach to corporate investigations. Under this framework, TMC's ability to obtain cooperation credit from DOJ will depend in significant part on TMC's willingness to provide information regarding Holt's individual conduct.
Antitrust Division Leniency Program. The Antitrust Division operates a well-established leniency program under which the first participant in a cartel to self-report and cooperate fully can receive immunity from criminal prosecution. In this investigation, that position has been taken by Cascade Chemical Supply Co., which entered a cooperation agreement with DOJ in approximately September 2021. TMC is not eligible for leniency and must pursue cooperation credit through other channels, most likely through an NPA or DPA negotiation.
Cooperation Credit Guidelines. The Antitrust Division's guidelines for evaluating cooperation credit consider the timeliness and completeness of a company's disclosure, its willingness to make witnesses available, its production of documents and evidence, and—critically—its identification and provision of evidence against culpable individuals. TMC's cooperation credit will be enhanced by its willingness to provide evidence regarding Holt's conduct, and diminished to the extent it is perceived as shielding Holt or coordinating its defense with his.
The United States Sentencing Guidelines provide the framework for calculating potential sentences in antitrust cases. For individuals, the base offense level for antitrust offenses under U.S.S.G. § 2R1.1 is 12, with increases based on the volume of commerce attributable to the defendant's participation in the conspiracy. Given the estimated volume of commerce involved in this case (discussed below), the specific offense characteristics would likely result in a significantly elevated offense level, placing Holt's advisory guideline range in a zone that includes a substantial term of imprisonment.
B. Evidence Implicating Holt
The internal investigation conducted by Calderwood & Harkness on behalf of TMC is ongoing, but findings through the date of this memorandum have identified a substantial body of evidence implicating Holt in the alleged conspiracy. The principal categories of evidence are summarized below.
Direct Communications with Competitors. The internal investigation has identified at least thirty-seven (37) documented occasions between March 2017 and July 2021 on which Holt exchanged pricing information, customer allocation discussions, or bid coordination communications with Carl Edgerton of Ridgecrest Minerals Inc. and Kevin Tsang of Pinnacle Earth Resources Ltd. The first documented exchange between Holt and Edgerton occurred on March 14, 2017, via the VaultChat encrypted messaging application, and consisted of a discussion regarding planned price increases for high-purity feldspar in the second quarter of 2017. Subsequent communications covered pricing levels for industrial talc and rare-earth concentrates, allocation of specific customer accounts among the competitors, and coordination regarding responses to competitive bid solicitations from major downstream purchasers.
Communication Channels. The communications occurred primarily through two channels: (1) the VaultChat encrypted messaging application, which Holt and his counterparts used for the majority of their written communications, and (2) in-person conversations held during quarterly conferences of the North American Specialty Minerals Council ("NASMC"), an industry trade association. The NASMC conferences at which relevant side meetings are alleged to have occurred were held in Arlington, Virginia; Scottsdale, Arizona; and Orlando, Florida, among other locations. The use of an encrypted messaging application for pricing discussions is itself significant, as it suggests consciousness of the impropriety of the communications and an intent to conceal them from detection. Additional communications occurred via occasional telephone calls, although these calls are less well documented than the VaultChat exchanges and NASMC interactions.
The VaultChat Messages. The VaultChat messages recovered to date through TMC's forensic examination of company-issued devices and corporate cloud accounts contain explicit references to pricing levels, customer allocation discussions, and coordination regarding bid responses. These messages constitute direct evidence of per se antitrust violations and are among the most probative evidence in the investigation. Representative examples include messages in which Holt and Edgerton discussed and agreed upon specific per-ton price points for high-purity feldspar to be quoted to particular customers, messages in which Holt and Tsang agreed to refrain from bidding on specific accounts allocated to the other's company, and messages in which all three participants coordinated the timing of price increase announcements to avoid competitive undercutting. The content of these messages leaves little room for innocent interpretation.
Sandra Chu's Implementation of Holt's Instructions. Sandra Chu, Director of Pricing Analytics in TMC's U.S. Specialty Minerals Division, received instructions from Holt to adjust published price lists on at least twelve (12) occasions that correlated closely in timing and magnitude with competitor price movements—i.e., with price adjustments made by Ridgecrest and Pinnacle within a narrow temporal window. While Chu received these instructions in the ordinary course of her reporting relationship with Holt, and while there is no direct evidence that Chu was aware of the inter-competitor communications underlying Holt's instructions, the pattern of correlated pricing adjustments is powerful circumstantial evidence of coordination and is consistent with the pricing agreements documented in the VaultChat messages.
Volume of Affected Commerce. DOJ's estimated total volume of affected commerce across all participants in the alleged conspiracy is approximately USD 1.34 billion for the period January 2017 through August 2021. TMC's share of affected commerce is estimated at approximately USD 478 million, representing approximately 35.7% of the total. These figures are significant both for sentencing purposes and for the calculation of potential criminal fines under the alternative-fine provisions of 18 U.S.C. § 3571(d), which permits fines of up to twice the gross gain or twice the gross loss resulting from the offense.
Holt's Central Role and Duration of Involvement. Holt was the central TMC participant in the alleged conspiracy. His seniority as a Vice President, his direct authority over commercial pricing, and his sustained involvement over a period of approximately four and a half years place him among the most culpable individual actors in the alleged conspiracy across all participating firms. DOJ's assessment of individual culpability in cartel cases weighs heavily the defendant's seniority, degree of participation, and duration of involvement—all of which weigh strongly against Holt.
C. Cascade Chemical as Cooperating Witness
As noted above, Cascade Chemical Supply Co. entered into a cooperation agreement with DOJ on or about September 15, 2021, approximately five months before the grand jury investigation was formally opened. Cascade occupies a particularly significant role in this investigation because of its position as a downstream distributor and processor of specialty minerals. In that capacity, Cascade had direct commercial relationships with TMC, Ridgecrest, and Pinnacle, and therefore had visibility into the pricing patterns, bid responses, and customer allocation practices of all three upstream suppliers.
Cascade's cooperation agreement requires it to provide full and truthful testimony, produce all relevant documents, and make its employees available for interviews and grand jury testimony. Cascade's president, Leonard Massey, is believed to have already provided testimony to the grand jury, and other Cascade personnel with direct knowledge of dealings with Holt and TMC's U.S. Specialty Minerals Division are expected to testify as well. Cascade's testimony is likely to include evidence regarding the pricing patterns it observed from TMC and its competitors, any direct communications between Cascade personnel and Holt regarding pricing or supply terms, and any documentary evidence in Cascade's possession that corroborates the coordination alleged by DOJ.
Cascade is represented by Whitfield, Strauss & Tully LLP, with partner Rebecca Ostrander serving as lead counsel. Cascade's cooperation agreement preceded the formal opening of the investigation and provided DOJ with the foundation upon which the broader investigation was constructed. As the first cooperating entity, Cascade received the most favorable treatment from DOJ and is expected to receive a non-prosecution agreement or, at minimum, a deferred prosecution agreement with minimal conditions.
The existence of a cooperating witness entity with direct commercial relationships with TMC significantly increases the evidentiary foundation available to DOJ and makes it more difficult for any individual defendant—including Holt—to challenge the government's case on sufficiency-of-evidence grounds.
D. Assessment of Prosecution Risk for Holt
Based on the foregoing analysis, the individual prosecution of Gavin Holt is highly probable. This assessment is grounded in the following considerations:
(a) Direct evidence of participation. The thirty-seven or more documented VaultChat messages and NASMC conference interactions provide direct evidence of Holt's participation in the alleged conspiracy. This is not a case that depends on circumstantial evidence or inference; the government possesses communications in which Holt explicitly discussed and agreed upon pricing levels, customer allocations, and bid responses with his counterparts at competitor firms.
(b) Central role as commercial leader. Holt was not a peripheral participant or a low-level employee who was following instructions from above. He was the Vice President responsible for TMC's entire commercial pricing function in the U.S. Specialty Minerals Division—a position that gave him the authority to implement the agreed-upon pricing and the commercial knowledge to participate meaningfully in the coordination. DOJ consistently seeks to hold senior participants accountable and views the seniority of the defendant as an aggravating factor.
(c) Extended duration of the conspiracy. The alleged conspiracy spanned approximately four and a half years, from approximately January 2017 through August 2021. The length of Holt's involvement demonstrates sustained, deliberate participation rather than an isolated lapse in judgment, and will be treated as an aggravating factor under the Sentencing Guidelines.
(d) Non-cooperation. Holt has asserted his Fifth Amendment privilege and refused to testify before the grand jury. While this is his constitutional right and may not be used against him at trial, it means that he will not receive any cooperation credit from DOJ. The Antitrust Division's practice is to pursue prosecution of non-cooperating individuals when sufficient evidence exists, and to offer more favorable treatment to individuals who cooperate early and fully. Holt's refusal to cooperate forecloses that avenue.
(e) DOJ's emphasis on individual accountability. As discussed in Section III.A, DOJ policy under the Yates Memorandum and the Antitrust Division's longstanding practice prioritizes the prosecution of individuals who participate in hard-core cartel conduct. In a case of this magnitude—involving USD 1.34 billion in affected commerce and a multi-year conspiracy among major industry participants—it would be unusual for DOJ not to seek individual indictments against the principal actors.
Even if TMC successfully resolves the matter at the entity level through cooperation and a non-prosecution agreement, Holt faces the prospect of individual indictment. DOJ routinely prosecutes individuals separately from, and subsequent to, the resolution of entity-level matters. Indeed, entity-level cooperation agreements typically require the entity to continue cooperating with DOJ's prosecution of individuals, including by making witnesses available and providing testimony.
With respect to potential sentencing exposure, a precise calculation of Holt's advisory guideline range would require a detailed analysis that is beyond the scope of this memorandum. However, based on the base offense level for antitrust offenses under U.S.S.G. § 2R1.1, adjusted upward for the volume of commerce involved (TMC's share alone is approximately USD 478 million) and the duration of the conspiracy, Holt could face a guideline range that includes a significant term of imprisonment—likely in the range of eighteen to thirty-six months, depending on the ultimate calculation of the offense level and criminal history category, and subject to any applicable departures or variances. This estimate is preliminary and subject to revision as additional facts are developed.
IV. Implications for TMC's Defense Strategy
A. Divergence of Interests Between TMC and Holt
The developments described in Sections II and III above have produced a material and irreconcilable divergence between TMC's interests and Holt's interests. This divergence is not merely theoretical; it has concrete, practical implications for virtually every aspect of TMC's defense strategy going forward.
TMC's strategic interest lies in cooperating fully with DOJ to obtain the most favorable resolution available for the entity. Based on our assessment of the evidence, the strength of the government's case, and the current posture of the investigation, the optimal outcome for TMC is a non-prosecution agreement, or, at minimum, a deferred prosecution agreement with manageable compliance terms. Achieving this outcome requires TMC to demonstrate genuine, timely, and comprehensive cooperation with DOJ. Under the Yates Memorandum and the Antitrust Division's cooperation credit guidelines, full cooperation requires, among other things, that TMC make current and former employees available for interviews and testimony, produce all relevant documents and communications, and provide information that identifies and implicates the individuals responsible for the alleged conduct. In practical terms, this means that TMC's cooperation will necessarily involve providing evidence against Holt—including the VaultChat messages, testimony from Sandra Chu and other witnesses, and TMC's analysis of the pricing-adjustment patterns that correlate with competitor price movements.
Holt's interest, by contrast, is to minimize his personal criminal exposure. This means limiting the disclosure of incriminating information to the maximum extent possible, invoking his constitutional protections against self-incrimination, and challenging the government's evidence at every stage. Holt's blanket assertion of the Fifth Amendment before the grand jury on June 14, 2022 is entirely consistent with this strategy and demonstrates that his counsel has determined that any testimony would create an unacceptable risk of self-incrimination.
These interests are fundamentally irreconcilable. TMC cannot simultaneously cooperate fully with DOJ—which requires disclosing evidence of Holt's conduct—and protect Holt from the consequences of that disclosure. TMC's cooperation will necessarily involve providing evidence that DOJ will use to build its case against Holt individually. Holt, for his part, seeks to suppress or limit precisely the kind of evidence that TMC must provide to demonstrate its cooperation bona fides. There is no middle ground between these positions, and any attempt to balance them would compromise TMC's cooperation strategy without meaningfully protecting Holt.
It bears emphasis that Holt's resignation from TMC effective September 30, 2021 means that he is no longer a TMC employee. TMC owes him no duty of loyalty, no obligation to protect his interests in this investigation, and no obligation to subordinate its own strategic interests to his. While ethical considerations, D&O insurance obligations, and potential indemnification commitments may impose certain procedural obligations on TMC with respect to Holt (discussed further in Section V below), none of these considerations requires or permits TMC to compromise its cooperation strategy for Holt's benefit.
B. No Joint Defense Agreement with Holt
Recommendation: Calderwood & Harkness should NOT enter into a joint defense agreement ("JDA") with Briarcliff Law Group PLLC or Patrick Dunleavy on behalf of Gavin Holt.
A joint defense agreement, sometimes referred to as a common-interest agreement, is a mechanism by which parties with aligned interests in litigation or an investigation agree to share privileged information, work product, and strategic analysis without waiving their respective privileges. JDAs are common in multi-defendant antitrust investigations and can be a valuable tool when the interests of the parties are genuinely aligned. However, the circumstances of this case make a JDA between TMC and Holt inadvisable, counterproductive, and potentially harmful to TMC's interests. The rationale for this recommendation rests on several independent grounds:
First, TMC is pursuing a cooperation strategy with DOJ, and sharing privileged work product or internal investigation findings with Holt's counsel would compromise TMC's ability to cooperate freely. If Holt's counsel were privy to TMC's internal investigation findings—including witness interview summaries, document analysis, and legal assessments—Holt could use that information to anticipate the government's case and develop counter-narratives that undermine TMC's cooperation proffer. DOJ would rightly view this as a form of indirect obstruction and would penalize TMC's cooperation credit accordingly.
Second, a JDA would create significant complications if TMC is later required—as it almost certainly will be—to provide testimony or evidence against Holt as part of its cooperation obligations. Information shared under a JDA is protected by the common-interest privilege, which could create arguments that TMC has waived or compromised its ability to disclose certain information to the government. While the weight of authority holds that parties to a JDA can withdraw and thereafter disclose information to the government, the existence of a prior JDA would create unnecessary complexity, potential litigation over privilege issues, and a perception by DOJ that TMC's cooperation was qualified or conditional.
Third, information shared under a JDA could be used by Holt to tailor his defense in ways that directly undermine TMC's cooperation narrative. For example, if Holt learned through a JDA that TMC's internal investigation had identified certain weaknesses in the evidence or certain witnesses whose testimony was ambiguous, Holt could exploit those weaknesses in his own defense in ways that would contradict or complicate TMC's account to DOJ.
Fourth, the ethical obligations of Calderwood & Harkness run exclusively to TMC as the client. Entering into a JDA with a former employee whose interests conflict fundamentally with the client's interests would create untenable conflicts of interest. Calderwood & Harkness cannot simultaneously advocate for TMC's cooperation strategy—which requires full disclosure of Holt's conduct—and participate in a common-interest arrangement that presupposes aligned interests with Holt.
Fifth, DOJ may view a JDA with Holt negatively, interpreting it as a signal that TMC is not fully cooperating or is coordinating its defense strategy with the individual most culpable for the alleged conduct. In an investigation where DOJ has emphasized individual accountability and has identified Holt by name in its target letter, any perception of coordination between TMC and Holt would be damaging to TMC's cooperation posture.
For all of these reasons, Calderwood & Harkness should decline any request from Briarcliff or Dunleavy to enter into a JDA, and should communicate that decision to Briarcliff in clear but professional terms.
It should be noted that this recommendation does not preclude TMC from entering into JDAs with other parties in the investigation whose interests may be more closely aligned with TMC's. For example, depending on the posture of Ridgecrest Minerals and Pinnacle Earth Resources as the investigation develops, a limited JDA with one or both of those entities might be strategically advantageous. However, any such JDA should be evaluated on its own merits and should not include Holt or his counsel as a participant.
C. Communications with Briarcliff Law Group / Patrick Dunleavy
While Calderwood & Harkness should not enter into a JDA with Briarcliff, it will be necessary to maintain a professional but carefully limited relationship with Holt's counsel. The investigation will inevitably require certain logistical interactions between the two firms, including coordination regarding document production (to the extent Holt possesses TMC documents or TMC possesses documents belonging to Holt personally), scheduling of grand jury appearances and witness interviews, and other procedural matters.
Calderwood & Harkness's communications with Briarcliff should be governed by the following protocols:
(a) All communications should be restricted to logistical matters—document production, scheduling, identification of privilege issues with respect to Holt's personal files, and similar procedural topics. No communications should include substantive case strategy, internal investigation findings, cooperation proffer content, or TMC's assessment of the evidence.
(b) All communications with Briarcliff, whether oral or written, should be documented contemporaneously and retained in the case file.
(c) All written communications to Briarcliff should be reviewed and approved by the responsible partner (Elaine Forsythe) before transmission.
(d) Oral communications with Briarcliff should be conducted by attorneys at the associate level or above, with a second Calderwood & Harkness attorney present or listening whenever possible, and should be memorialized in a follow-up email or memorandum to file.
(e) If Dunleavy or any Briarcliff attorney seeks to engage in substantive discussions regarding case strategy, evidence, or cooperation matters, the Calderwood & Harkness attorney should decline politely and refer the matter to Forsythe.
Separately, if Holt seeks indemnification from TMC for legal fees incurred in connection with the investigation, that request should be analyzed under the applicable indemnification provisions in Holt's employment agreement, TMC's articles of incorporation and bylaws, and the terms of TMC's D&O insurance policy. The indemnification analysis is beyond the scope of this memorandum and is addressed in a separate work stream.
D. The "Holt Carve-Out" in Any Future NPA or Resolution
Based on DOJ practice in antitrust investigations—particularly those involving alleged hard-core cartel conduct and identifiable individual participants—any non-prosecution agreement between TMC and DOJ will almost certainly include a carve-out expressly preserving DOJ's right to pursue individual criminal charges against Gavin Holt.
The standard structure of such an NPA is well established. DOJ agrees not to bring criminal charges against the corporate entity (TMC) or any current TMC employee based on the described anticompetitive conduct, subject to TMC's compliance with the terms of the agreement, including ongoing cooperation and compliance undertakings. However, the NPA expressly reserves the government's right to prosecute specific individuals who are excluded from the agreement's protections—most commonly former employees who have declined to cooperate with the investigation, individuals who have been identified as targets, or individuals whose conduct is deemed too egregious to be resolved through a corporate-level agreement. In this case, Holt fits all three categories.
TMC should anticipate and prepare for this carve-out in its negotiations with DOJ. It is virtually certain that the government will insist on it, and any attempt by TMC to resist the Holt carve-out would be counterproductive. From TMC's perspective, the Holt carve-out is acceptable—and indeed strategically desirable—for several reasons:
(a) Holt is a former employee who resigned from TMC before the investigation commenced. TMC has no ongoing employment relationship with him and no strategic interest in protecting him from prosecution.
(b) Protecting Holt is not a strategic priority for TMC. TMC's cooperation strategy is premised on the narrative that Holt acted without corporate authorization and that TMC's compliance failure was one of inadequate monitoring, not corporate intent. Seeking to shield Holt from prosecution would undermine this narrative.
(c) Insisting on coverage for Holt in an NPA would reduce TMC's cooperation credit and potentially jeopardize the NPA itself. DOJ would view any resistance to the Holt carve-out as inconsistent with genuine cooperation and as an indication that TMC is prioritizing an individual's interests over its cooperation obligations.
(d) DOJ's individual accountability policies—particularly the Yates Memorandum and the Antitrust Division's longstanding practice—make the Holt carve-out essentially non-negotiable. In a case where DOJ has identified Holt by name in its target letter, possesses direct evidence of his participation in the conspiracy, and has observed his blanket invocation of the Fifth Amendment, the Division will not agree to an NPA that shields him from prosecution.
While the Holt carve-out is expected and acceptable, TMC should ensure that the language of the carve-out is carefully and narrowly drafted. Specifically, the NPA should identify Holt by name as the individual excluded from the agreement's protections, and the carve-out language should not inadvertently extend to other current or former TMC employees who were not involved in the alleged conduct. TMC should negotiate for explicit language confirming that the NPA's no-prosecution commitment covers all current and former TMC employees other than Holt (and any other specifically excluded individuals, if any), provided that TMC remains in compliance with the terms of the agreement. Calderwood & Harkness should prepare proposed NPA language for review by Forsythe and for use in negotiations with DOJ.
E. Implications for Ongoing Internal Investigation and Witness Interviews
Holt has refused to be interviewed by Calderwood & Harkness as part of the internal investigation being conducted on behalf of TMC. His refusal was communicated through his personal counsel, Patrick Dunleavy, who advised Calderwood & Harkness that Holt would decline any interview requests from TMC's counsel on the grounds that participating in such an interview could compromise his Fifth Amendment rights and his individual defense strategy. The refusal was communicated in writing and is documented in a separate memorandum regarding the Holt interview attempt, dated August 5, 2022.
Holt's refusal to participate in the internal investigation is disappointing but not unexpected, given the divergence of interests described above and his counsel's understandable concern that any statements made by Holt in an interview could be disclosed to DOJ as part of TMC's cooperation. While TMC could in theory seek to compel Holt's participation through litigation—for example, by asserting contractual obligations under Holt's former employment agreement—such an approach would be impractical, time-consuming, and unlikely to yield useful information given that Holt would almost certainly continue to assert his Fifth Amendment privilege in any compelled setting.
Calderwood & Harkness should document Holt's refusal to cooperate with the internal investigation in the investigation record and should be prepared to disclose this refusal to DOJ as part of TMC's cooperation proffer. The refusal will serve two purposes: it will further demonstrate the divergence between TMC and Holt, and it will support TMC's claim of genuine cooperation by showing that TMC attempted to secure Holt's participation but was rebuffed.
The internal investigation can and should proceed without Holt's cooperation. The evidentiary record is sufficiently robust to support TMC's cooperation proffer even in the absence of Holt's testimony. Specifically, the investigation has access to the thirty-seven or more documented VaultChat exchanges between Holt and his counterparts, testimony from other TMC witnesses (including Sandra Chu, Thomas Eriksen, and others among the twenty-three interviews conducted or planned), TMC's pricing and transaction data, NASMC conference records, travel and expense records, and other documentary evidence. While Holt's testimony would have added to the evidentiary record, its absence does not materially impair TMC's ability to cooperate with DOJ or to demonstrate the scope and nature of the alleged conduct.
F. Implications for Other TMC Witnesses
In addition to Holt, the internal investigation has identified two TMC employees whose conduct and knowledge are relevant to the investigation and whose individual exposure must be assessed. Neither has been identified as a target by DOJ at this time, but their status could change depending on the investigation's development.
Sandra Chu. Chu is the Director of Pricing Analytics in TMC's U.S. Specialty Minerals Division and reported directly to Holt during the alleged conspiracy period. As noted above, Chu received instructions from Holt to adjust published price lists on at least twelve (12) occasions that correlated closely with competitor price movements. However, the internal investigation has found no direct evidence that Chu was aware of the inter-competitor communications underlying Holt's pricing instructions. Chu has stated in her internal interview that she understood Holt's instructions to be based on his commercial judgment and market analysis, and that she had no reason to suspect that the pricing adjustments were coordinated with competitors. Chu remains employed by TMC and is cooperating fully with the internal investigation. The risk of Chu's individual prosecution appears low at this time, given the absence of evidence that she knowingly participated in the alleged conspiracy. However, Chu should be advised of her right to retain personal counsel at her own expense or through TMC's indemnification provisions, and that advisement should be documented.
Thomas Eriksen. Eriksen is a TMC commercial manager who attended four NASMC quarterly conferences during the alleged conspiracy period where side meetings between Holt, Edgerton, and Tsang are alleged to have occurred. However, the evidence regarding Eriksen's direct participation in those side meetings is ambiguous. Eriksen has denied knowledge of any pricing agreements or coordination with competitors, and the VaultChat messages recovered to date do not reference Eriksen by name or suggest that he was a participant in the communications between Holt and his counterparts. Eriksen remains employed by TMC and is cooperating fully with the internal investigation. Similar advisement regarding his right to retain personal counsel should be made and documented.
For both Chu and Eriksen, Calderwood & Harkness should continue to represent their interests as TMC employees to the extent that there is no conflict between their interests and TMC's. If conflicts emerge—for example, if DOJ identifies either individual as a target, if evidence surfaces suggesting that either had knowledge of the inter-competitor communications, or if either individual's testimony becomes adverse to TMC's interests—separate counsel referrals should be made promptly. Calderwood & Harkness has identified a list of qualified criminal defense attorneys in the San Francisco Bay Area and in TMC's other principal operating locations who could serve as individual counsel for Chu or Eriksen if the need arises.
G. No Evidence of C-Suite or Board Knowledge
The internal investigation conducted by Calderwood & Harkness to date has found no evidence that any member of TMC's senior executive leadership or Board of Directors had knowledge of, participated in, or authorized the alleged anticompetitive conduct. Specifically, the investigation has found no evidence implicating TMC's Chief Executive Officer, Søren Dalmqvist; General Counsel, Priya Anand; Chief Financial Officer, Richard Fong; Board Chair, Margaret Caldwell; or any other C-suite executive or Board member. This finding is based on a comprehensive review of documents, email communications, calendar records, and witness interviews conducted to date.
This finding is critical for TMC's defense strategy and cooperation narrative. The absence of C-suite or Board involvement supports the characterization that Holt was acting without corporate authorization—a rogue actor, operating within his sphere of commercial authority but without the knowledge or endorsement of TMC's leadership. This characterization is central to TMC's mitigation case and significantly strengthens the argument for a non-prosecution agreement rather than a criminal prosecution of TMC as an entity. Under DOJ's Principles of Federal Prosecution of Business Organizations (the "Filip Factors"), a corporation's culpability is assessed in part based on the seniority of the individuals involved in the misconduct and whether the misconduct was authorized, tolerated, or facilitated by senior management. The absence of senior management involvement weighs heavily in TMC's favor.
The absence of C-suite involvement also supports the argument that TMC's compliance failure was one of inadequate monitoring and program maintenance rather than institutional or corporate intent to engage in anticompetitive conduct. TMC's existing antitrust compliance program, which was adopted in approximately 2014, had several deficiencies that, in hindsight, created the conditions that allowed Holt's conduct to go undetected. Specifically, the program had not conducted annual antitrust compliance training since 2018—a gap of approximately four years. The program included no monitoring of employee interactions at trade-association events such as the NASMC conferences. The program had no systematic audit of competitor contacts or communications by commercial personnel. And the program lacked a reporting mechanism that would have flagged the suspicious pricing-adjustment patterns identified by the internal investigation. These deficiencies are significant, but they are qualitatively different from corporate authorization or toleration of the misconduct. TMC is in the process of remediating these compliance gaps as part of its broader cooperation and compliance enhancement strategy, which is the subject of a separate memorandum.
V. D&O Insurance Considerations Related to Holt
TMC tendered notice of the grand jury investigation to Northland Mutual Insurance Co. on March 4, 2022, under Directors & Officers Liability Policy No. NMI-DO-2021-5547. The policy period runs from July 1, 2021 through July 1, 2022, and is renewed annually. The policy provides an aggregate limit of USD 50 million, subject to a retention (self-insured deductible) of USD 2.5 million. The policy contains standard Side A (individual directors and officers), Side B (corporate reimbursement), and Side C (entity securities) insuring agreements.
Northland acknowledged receipt of TMC's notice and confirmed coverage for defense costs of individual directors and officers under Side A of the policy, subject to all applicable terms, conditions, and exclusions. Northland reserved its rights with respect to entity coverage under Side B and Side C, citing the regulatory/criminal conduct exclusion and the insured-versus-insured exclusion as potential coverage defenses that may apply depending on the ultimate disposition of the investigation. The reservation of rights is not unexpected and will be addressed in ongoing coverage discussions with Northland.
TMC's D&O insurance tower includes two excess-layer carriers in addition to the Northland primary policy:
Layer 2: Greystone Specialty Insurance Ltd., providing USD 25 million in excess of USD 50 million (i.e., USD 25 million excess of the Northland primary limit).
Layer 3: Sentinel Re Ltd., providing USD 25 million in excess of USD 75 million (i.e., USD 25 million excess of the combined Northland and Greystone limits).
The total tower thus provides up to USD 100 million in aggregate coverage, subject to the retention and applicable terms, conditions, and exclusions.
With respect to Holt's individual coverage under the D&O policy, the following analysis applies. As a former officer of TMC, Holt is an "insured person" under the policy and may be entitled to Side A coverage for defense costs incurred in connection with the grand jury investigation. Side A coverage applies to individual directors and officers when the corporation is unable or unwilling to indemnify them, and provides direct payment of defense costs and, in some cases, judgments and settlements. The policy's coverage for former officers typically extends to claims arising out of acts committed during the individual's service as an officer, which would encompass the alleged conduct occurring between 2017 and 2021 while Holt was serving as VP of U.S. Specialty Minerals Sales.
However, Holt's coverage is subject to the policy's criminal-act exclusion, which typically excludes coverage for loss arising from criminal conduct upon a final adjudication establishing that the insured person committed such conduct. Importantly, the exclusion typically does not apply until a final adjudication—meaning that Holt would be entitled to defense cost coverage during the investigation and any pre-trial proceedings, with the insurer reserving the right to seek reimbursement if Holt is ultimately convicted. The specific terms of the criminal-act exclusion in the Northland policy should be reviewed in detail by coverage counsel.
Holt's coverage under the D&O policy is separate from TMC's entity coverage, and Holt's claim would be processed through his own counsel (Briarcliff Law Group) directly with Northland. TMC should coordinate with Northland to ensure that Holt's potential individual claim does not erode the coverage available for TMC's own defense costs or for the defense costs of other insured individuals—including Søren Dalmqvist, Priya Anand, Margaret Caldwell, Richard Fong, and Chief Operating Officer Danielle Moreau-Shaw—who may require coverage in connection with the investigation or any related proceedings. The priority of payments and allocation of limits among multiple claimants under the same policy is a complex coverage issue that should be addressed with Northland and, if necessary, with the excess carriers.
A detailed analysis of D&O coverage issues is addressed in the separate D&O Coverage Analysis Memorandum prepared by Calderwood & Harkness and dated March 20, 2022. The insurance-related recommendations in this memorandum should be read in conjunction with that analysis.
VI. Recommendations
Based on the foregoing analysis, this memorandum makes the following recommendations:
1. Do not enter into a joint defense agreement with Holt or his counsel. Calderwood & Harkness should not enter into a joint defense agreement with Briarcliff Law Group PLLC or Patrick Dunleavy on behalf of Gavin Holt. The divergence of interests between TMC and Holt is too great, and a JDA would compromise TMC's cooperation strategy, create privilege complications, and be viewed negatively by DOJ. Any request from Briarcliff to enter into a JDA should be declined in clear, professional terms.
2. Limit communications with Briarcliff to logistical matters only. All substantive communications should be avoided. Communications should be restricted to document production, scheduling, and similar procedural topics. All communications with Briarcliff should be routed through Elaine Forsythe and documented in the case file prior to transmission.
3. Proceed with the internal investigation without Holt's participation. Holt's refusal to cooperate with the internal investigation should be documented in the investigation record. The investigation should proceed on the basis of the substantial evidentiary record already developed, including the VaultChat messages, witness interviews, and pricing data. TMC should be prepared to disclose Holt's refusal to cooperate to DOJ as part of its cooperation proffer.
4. Prepare TMC for the Holt carve-out in any future NPA. Calderwood & Harkness should brief CEO Søren Dalmqvist and General Counsel Priya Anand on the practical certainty that DOJ will insist on reserving the right to prosecute Holt individually as a condition of any non-prosecution agreement with TMC. TMC's leadership should understand and accept this outcome as part of the entity's cooperation strategy.
5. Ensure the NPA carve-out language is narrowly drafted. The carve-out should identify Holt by name as the individual excluded from the NPA's protections and should not inadvertently expose other current or former TMC employees who were not involved in the alleged conduct. Calderwood & Harkness should prepare proposed NPA language that confirms the protection of current TMC employees—including Sandra Chu and Thomas Eriksen—under the NPA's no-prosecution commitment, subject to TMC's compliance with the agreement's terms.
6. Advise Sandra Chu and Thomas Eriksen of their right to retain personal counsel. Both Chu and Eriksen should be informed, in a documented communication, of their right to retain personal criminal defense counsel at their own expense or, to the extent available, through TMC's indemnification provisions. Calderwood & Harkness should continue to represent their interests as TMC employees to the extent there is no conflict, and should monitor the investigation for any emerging conflicts that would require referral to separate counsel.
7. Continue to develop evidence supporting the narrative that Holt acted without C-suite or Board authorization. This narrative is central to TMC's mitigation case and to the ar