1039-00001 · Torchlight Mining Corp · documents

post-proffer-debrief-chu.docx DOCUMENT Litigation

63 / 88 ← → ✕

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT

This document is protected from disclosure by the attorney-client privilege, the attorney work-product doctrine, and all other applicable privileges and protections. Any unauthorized review, use, disclosure, or distribution is strictly prohibited. If you have received this document in error, notify Calderwood & Harkness LLP immediately and destroy all copies.

CALDERWOOD & HARKNESS LLP 555 California Street, 40th Floor San Francisco, CA 94104

Matter No.: 1039-00001

MEMORANDUM

TO: Elaine Forsythe, Responsible Partner, Antitrust & Competition Practice Group

FROM: Aaron Liu, Lead Associate, Antitrust & Competition Practice Group

CC: Monica Reyes, Working Associate, Antitrust & Competition Practice Group; Howard Bellamy, Billing Partner, Antitrust & Competition Practice Group

DATE: March 12, 2023

RE: Post-Proffer Debriefing Memorandum — Voluntary Proffer Session of Sandra Chu, Director of Pricing Analytics, U.S. Specialty Minerals Division, Torchlight Mining Corp., with the U.S. Department of Justice, Antitrust Division, San Francisco Field Office — March 10, 2023

MATTER: In re Grand Jury Investigation No. GJ-22-0194, U.S. District Court, Northern District of California, San Francisco Division

I. PURPOSE AND SCOPE OF THIS MEMORANDUM

This memorandum summarizes the voluntary proffer session of Sandra Chu ("Chu"), Director of Pricing Analytics, U.S. Specialty Minerals Division, Torchlight Mining Corp. ("TMC"), conducted on March 10, 2023, at the U.S. Department of Justice ("DOJ"), Antitrust Division, San Francisco Field Office, located at 450 Golden Gate Avenue, Room 10-0101, San Francisco, California 94102. The proffer session was conducted in connection with the ongoing federal grand jury investigation into suspected price-fixing and bid-rigging conduct in the U.S. specialty minerals industry, proceeding under Grand Jury Investigation No. GJ-22-0194, pending in the United States District Court for the Northern District of California, San Francisco Division.

The session was conducted pursuant to a proffer agreement, commonly referred to as a "queen-for-a-day" letter, negotiated between Calderwood & Harkness LLP, on behalf of TMC and Chu individually, and the DOJ Antitrust Division. The terms of the proffer agreement were set forth in the letter dated March 5, 2023, from Elaine Forsythe to Trial Attorney Denise Kowalski of the DOJ Antitrust Division, San Francisco Field Office. The proffer agreement was executed by all parties prior to the commencement of the session, and Chu was advised of its terms and confirmed her understanding both before and at the outset of the session.

The purpose of this memorandum is to provide a comprehensive record and analysis of the proffer session for the benefit of the Calderwood & Harkness litigation team working on this matter. Specifically, this memorandum documents the following:

(a) the attendees at the proffer session;

(b) the logistics and ground rules governing the session;

(d) Chu's responses to those questions, including verbatim or near-verbatim quotations where noted;

(e) the documents discussed, referenced, or shown to Chu during the session; and

(f) the assessment of the session's impact on TMC's cooperation posture, the DOJ's apparent investigative strategy, Chu's individual exposure, and the firm's defense strategy going forward.

This memorandum constitutes attorney work product prepared in anticipation of litigation and is protected in its entirety by the attorney-client privilege and the work-product doctrine as articulated in Hickman v. Taylor, 329 U.S. 495 (1947), and Federal Rule of Civil Procedure 26(b)(3) and its criminal analogues. The memorandum reflects the mental impressions, conclusions, opinions, and legal theories of counsel. It is not to be disclosed, disseminated, or distributed outside of Calderwood & Harkness LLP, or to the client or any third party, without the express prior written authorization of the Responsible Partner, Elaine Forsythe. Any such unauthorized disclosure may constitute a waiver of applicable privileges.

II. SESSION LOGISTICS

A. Date, Time, and Location

The proffer session took place on Friday, March 10, 2023. The session commenced at approximately 9:30 a.m. Pacific Time and concluded at approximately 3:45 p.m. Pacific Time, for a total elapsed duration of approximately six hours and fifteen minutes. The session included the following breaks:

• A short break at approximately 11:00 a.m. (approximately 15 minutes);

• A lunch break at approximately 12:15 p.m. (approximately 45 minutes; the session resumed at approximately 1:00 p.m.); and

• A short break at approximately 2:30 p.m. (approximately 15 minutes).

The session was held at the DOJ Antitrust Division, San Francisco Field Office, 450 Golden Gate Avenue, Room 10-0101, San Francisco, California 94102. The session took place in a DOJ conference room on the tenth floor of the federal building. To our knowledge, no audio or video recording of the session was made, consistent with the terms of the proffer agreement, which did not provide for recording. The DOJ's paralegal/analyst took handwritten notes throughout the session, as described further below.

B. Attendees. The following individuals were present throughout the proffer session:

For the United States Department of Justice, Antitrust Division:

• Denise Kowalski, Trial Attorney, Antitrust Division, San Francisco Field Office. Kowalski served as the lead questioner throughout the session. She directed the majority of the substantive questioning and controlled the pace and direction of the inquiry.

• Marcus Reeves, Senior Trial Attorney, Antitrust Division, San Francisco Field Office. Reeves participated in questioning on a supplemental basis, particularly during the segment of the session addressing Chu's knowledge of inter-competitor communications (Section IV.C below) and during the discussion of NASMC trade association interactions (Section IV.E below).

• One additional DOJ paralegal or analyst whose name was not provided to us and who was not introduced by name at the outset of the session. This individual was seated at the conference table with a legal pad and took handwritten notes throughout the entirety of the session. The individual did not ask any questions or otherwise participate substantively in the session.

For Torchlight Mining Corp. and Calderwood & Harkness LLP:

• Sandra Chu, Director of Pricing Analytics, U.S. Specialty Minerals Division, Torchlight Mining Corp. Chu was the proffer witness.

• Elaine Forsythe, Responsible Partner, Antitrust & Competition Practice Group, Calderwood & Harkness LLP. Ms. Forsythe attended in her capacity as lead counsel for TMC and as counsel for Chu in connection with the proffer session. Ms. Forsythe intervened on a limited basis during the session to clarify the scope of certain questions and to confer briefly with Chu during breaks.

• Aaron Liu, Lead Associate, Antitrust & Competition Practice Group, Calderwood & Harkness LLP. I attended in my capacity as working associate on the matter and took detailed notes throughout the session, which form the basis for this memorandum.

No court reporter was present. As noted above, the DOJ's paralegal/analyst took handwritten notes. Aaron Liu took contemporaneous handwritten notes on behalf of Calderwood & Harkness LLP, supplemented by additional notes dictated immediately following the session. This memorandum is based on those notes.

C. Proffer Agreement Terms

The proffer session was governed by the queen-for-a-day proffer letter dated March 5, 2023, which was negotiated between Calderwood & Harkness LLP and the DOJ Antitrust Division and executed by all parties prior to the commencement of the session. The key protections and terms of the proffer agreement are as follows:

(i) Use Restrictions. Statements made by Chu during the proffer session cannot be used directly against Chu in the government's case-in-chief in any criminal prosecution of Chu. This restriction applies solely to Chu's own statements and does not extend to evidence derived from or obtained as a result of those statements.

(ii) Permitted Uses. Notwithstanding the foregoing use restriction, the government reserved the right to use Chu's statements for the following purposes: (a) for impeachment, should Chu testify inconsistently at any subsequent proceeding; (b) to obtain investigative leads, including the development of additional evidence or witnesses; and (c) in connection with any prosecution of Chu for perjury, false statements, or obstruction of justice arising from the proffer session itself or any related proceeding.

(iii) No Recording. The proffer agreement provided that the session would not be recorded by any party. As noted above, the DOJ's paralegal/analyst took handwritten notes.

(iv) Scope. The proffer agreement covered statements made by Chu during the March 10, 2023 session and did not extend to any subsequent sessions or communications unless separately agreed in writing.

Chu was advised of these terms by Calderwood & Harkness LLP during the preparatory session held on March 8, 2023, at our offices. At the outset of the proffer session on March 10, Kowalski recited the material terms of the proffer agreement on the record, and Chu verbally confirmed her understanding and her willingness to proceed. Ms. Forsythe also confirmed on the record that Calderwood & Harkness LLP was representing Chu in connection with the proffer session.

It should be noted that the proffer session was presented to the DOJ as part of TMC's broader cooperation with the Antitrust Division, consistent with the corporate cooperation proffer submitted by Calderwood & Harkness LLP to the DOJ on February 15, 2023. That cooperation proffer outlined TMC's commitment to producing relevant documents, making current and former employees available for interviews and proffer sessions, and providing factual narratives to facilitate the DOJ's investigation. The Chu proffer session was the first employee proffer session conducted pursuant to that cooperation framework.

III. BACKGROUND ON SANDRA CHU

Sandra Chu currently holds the title of Director, Pricing Analytics, U.S. Specialty Minerals Division, Torchlight Mining Corp. She has been employed by TMC continuously since approximately 2013, initially as a Senior Pricing Analyst before being promoted to Director of Pricing Analytics in approximately 2016. In her current role, Chu is responsible for managing a team of three pricing analysts within the U.S. Specialty Minerals Division and for overseeing the compilation, maintenance, and dissemination of TMC's published price lists for three principal product categories: high-purity feldspar, industrial talc, and rare-earth concentrates, all of which are sold to U.S. industrial and chemical-manufacturing customers.

During the period most relevant to the grand jury investigation — approximately 2017 through 2021 — Chu reported directly to Gavin Holt, who held the title of Vice President, U.S. Specialty Minerals Sales. Holt served as Chu's direct supervisor and as the primary decision-maker on pricing matters for the three product categories at issue. Holt departed TMC effective September 30, 2021, under circumstances that are documented separately in the internal investigation file. Following Holt's departure, Chu's reporting line was restructured, and she currently reports to Holt's successor in a reorganized commercial leadership structure within the U.S. Specialty Minerals Division. The precise details of the current reporting line are not material to this memorandum but are documented in the TMC organizational chart produced in discovery (Bates No. TMC-ORG-00047).

Chu's primary responsibilities during the relevant period included: compiling and analyzing pricing data for the three product categories; maintaining and updating TMC's published price lists; preparing quarterly pricing recommendation memoranda for review by senior commercial leadership (principally Holt); analyzing pricing trends in the specialty minerals market using publicly available industry data and internal TMC sales data; and coordinating with regional sales managers regarding customer-specific pricing deviations from published list prices.

Chu remains employed by TMC and continues to perform her role as Director of Pricing Analytics. She has been cooperative with the internal investigation and with the firm's preparation for the proffer session.

Chu was previously interviewed by Calderwood & Harkness LLP on July 18, 2022, as part of the internal investigation initiated by TMC's General Counsel, Priya Anand, following receipt of the grand jury subpoena. That interview, which lasted approximately three hours, was conducted by Elaine Forsythe and Aaron Liu at Calderwood & Harkness's San Francisco office. The substance of that interview is documented in the Internal Investigation Witness Interview Memorandum — Sandra Chu, dated July 22, 2022 (Work Product File No. WP-1039-00001-INT-009), which is incorporated by reference herein.

The key finding from the internal investigation as it pertains to Chu is as follows: Chu received instructions from Gavin Holt to adjust TMC's published price lists on at least twelve (12) occasions between approximately 2017 and 2021, and those instructions correlated temporally with competitor price movements by Ridgecrest Minerals Inc. ("Ridgecrest") and Pinnacle Earth Resources Ltd. ("Pinnacle"). However, the internal investigation, which included a review of approximately 555,000 documents and interviews with seventeen TMC employees and former employees, did not identify any direct evidence that Chu knew of the inter-competitor communications underlying Holt's pricing instructions. There is no documentary evidence — including emails, instant messages, VaultChat messages, calendar entries, or other records — linking Chu to any communication with competitor personnel regarding pricing or market allocation.

IV. SUMMARY OF DOJ QUESTIONS AND CHU'S RESPONSES

The following is a detailed summary of the DOJ's questions and Chu's responses during the proffer session, organized by subject matter and presented in approximate chronological order. Quotations attributed to Chu or to DOJ personnel are based on my contemporaneous handwritten notes and reflect the substance and, where indicated, the near-verbatim language of the statements made. They should not be treated as exact transcriptions.

A. Chu's Role and Reporting Structure (Approximately 9:30 a.m. – 10:15 a.m.)

Kowalski opened the substantive portion of the session with a series of background questions designed to establish Chu's position, tenure, responsibilities, and reporting relationships within TMC. The questioning during this segment was methodical and largely non-confrontational, consistent with the typical approach of building a foundation before moving to more sensitive topics.

Chu described her role in detail, explaining that she managed a team of three pricing analysts in the U.S. Specialty Minerals Division. She stated that her team's core responsibilities included maintaining TMC's published price lists for the three product categories at issue — high-purity feldspar, industrial talc, and rare-earth concentrates — as well as analyzing market data from publicly available industry sources, preparing quarterly pricing recommendation memoranda for senior commercial leadership, and tracking historical pricing trends to inform strategic planning. Chu stated that the pricing recommendation memoranda were typically prepared on a quarterly basis, aligned with TMC's fiscal quarter calendar, and were submitted to her direct supervisor for review and approval.

Chu confirmed that she reported directly to Gavin Holt from approximately 2016 — when she was promoted to Director of Pricing Analytics — through Holt's departure from TMC effective September 30, 2021. Chu described Holt as the primary and ultimate decision-maker on pricing for the three product categories at issue. She explained that her role was analytical and advisory in nature: she prepared the pricing analyses and formulated recommendations, but the final decisions regarding published list prices were made by Holt, who had the authority to approve, modify, or reject her recommendations. Chu stated that Holt exercised this authority regularly and that it was not uncommon for Holt to modify her team's pricing recommendations before they were implemented.

Kowalski asked Chu to describe her interactions with other TMC personnel in connection with pricing matters. Chu identified Thomas Eriksen, Regional Sales Manager for TMC's Western Region, as someone with whom she coordinated regarding customer-specific pricing. Chu explained that Eriksen would occasionally request deviations from published list prices for specific customer accounts based on volume commitments, competitive dynamics in particular geographic markets, or other commercial considerations. However, Chu stated clearly that Eriksen did not set or have authority over published list prices, which remained within Holt's purview. Chu did not identify any other TMC personnel who had direct involvement in the setting of published list prices during the relevant period.

Kowalski also asked about Chu's interactions with TMC senior leadership, including CEO Søren Dalmqvist and General Counsel Priya Anand. Chu stated that she had no regular interactions with Dalmqvist regarding pricing matters and that her contact with Anand's office was limited to compliance-related communications and, more recently, matters related to the litigation hold and the internal investigation.

B. Pricing Process and Price-List Adjustments (Approximately 10:15 a.m. – 11:00 a.m.)

The DOJ devoted substantial attention during this segment to understanding the mechanics of TMC's pricing process, with a particular focus on the distinction between the standard quarterly pricing review cycle and the mid-cycle pricing adjustments that are central to the investigation.

Chu described the standard pricing process as follows: On a quarterly basis, her team would compile and analyze relevant data, including raw-material cost inputs, supply-and-demand forecasts, historical sales volumes, customer-specific pricing history, and publicly available competitive market data (including industry reports and pricing benchmarks published by the North American Specialty Minerals Council ("NASMC")). Based on this analysis, Chu's team would prepare a pricing memorandum containing specific recommendations for each product line — whether to increase, decrease, or hold published list prices, and by what amount. The memorandum would be submitted to Holt for review, typically two to three weeks before the start of the next fiscal quarter. Holt would then schedule a meeting with Chu to discuss the recommendations, after which he would approve, modify, or reject the proposed adjustments. Once approved, Chu's team would update the published price lists and distribute them to the sales organization.

Kowalski then shifted to the critical topic: instances in which Holt directed price adjustments outside the standard quarterly review cycle. This line of questioning was clearly designed to establish the pattern of mid-cycle pricing adjustments that, as the internal investigation has documented, correlated temporally with competitor price movements.

Chu confirmed that on multiple occasions during the period from approximately 2017 through 2021, Holt directed her to implement mid-cycle price adjustments — that is, adjustments to published list prices that fell outside the normal quarterly review process. These mid-cycle adjustments included both price increases and price holds (i.e., instructions not to reduce a price that Chu's team had recommended be reduced) on specific product lines, primarily high-purity feldspar and industrial talc, though Chu recalled at least one instance involving rare-earth concentrates.

When asked to estimate the frequency of such mid-cycle adjustments, Chu stated that they occurred on "at least ten to twelve occasions" during the approximately four-year period from 2017 through 2021. This estimate is consistent with the internal investigation's finding that at least twelve instances of mid-cycle pricing adjustments correlated with competitor price movements, and it is consistent with Chu's statement during her July 18, 2022 interview with Calderwood & Harkness.

Kowalski asked Chu what basis or justification Holt provided when directing these mid-cycle adjustments. Chu stated that Holt typically provided brief and general explanations. She recalled Holt saying things to the effect of "the market is moving," or "competitors are adjusting," or that he had "market intelligence" suggesting that the pricing change was warranted. Chu stated that Holt did not typically identify the specific source of his market intelligence, nor did he provide written analyses or data to support the mid-cycle adjustments. Chu acknowledged that the mid-cycle adjustments were generally communicated via short email instructions from Holt, directing her to implement a specific price change on a specific product line, effective on a specific date.

When asked whether she ever pressed Holt for the specific source of his market intelligence or for additional justification for the mid-cycle adjustments, Chu stated that she did not. She explained that she understood it to be within Holt's purview as Vice President of Sales to have visibility into market conditions and competitive dynamics, and that she did not consider it her place to challenge his pricing directives. Chu stated that Holt was her direct supervisor and the individual with ultimate pricing authority, and that she relied on his judgment regarding the commercial necessity of mid-cycle adjustments.

At this point, the DOJ showed Chu several documents from TMC's own production — specifically, a series of emails from Holt to Chu directing specific price adjustments. These documents are discussed in greater detail in Section V below. Chu confirmed the authenticity of the emails and confirmed that she had implemented the pricing changes directed in each email.

The session broke at approximately 11:00 a.m. for approximately fifteen minutes.

C. Chu's Knowledge of Inter-Competitor Communications (Approximately 11:15 a.m. – 12:15 p.m.)

This was the most critical segment of the proffer session from both a factual and strategic standpoint. The DOJ's questioning during this period was directed at establishing the extent of Chu's knowledge — or lack thereof — regarding Holt's alleged communications with counterparts at Ridgecrest Minerals Inc. and Pinnacle Earth Resources Ltd. concerning pricing.

Kowalski asked Chu directly whether she was aware that Gavin Holt communicated with counterparts at competitor companies regarding pricing for high-purity feldspar, industrial talc, or rare-earth concentrates. Specifically, Kowalski asked whether Chu was aware that Holt communicated with Carl Edgerton, Vice President of Sales at Ridgecrest Minerals Inc., or with Kevin Tsang, former Senior Vice President of Commercial Operations at Pinnacle Earth Resources Ltd., about pricing decisions, pricing strategies, or the timing of price adjustments.

Chu stated clearly and without equivocation that she was not aware of any direct communications between Holt and competitors regarding pricing during the time the relevant conduct was occurring. She stated that she first learned of the alleged inter-competitor communications in early 2022, when she was contacted by TMC's General Counsel, Priya Anand, in connection with the implementation of the litigation hold following TMC's receipt of the grand jury subpoena. Chu stated that she subsequently learned additional details regarding the nature of the alleged communications when she was interviewed by Calderwood & Harkness LLP on July 18, 2022, as part of the internal investigation.

Kowalski pressed further, asking whether Chu had ever seen or been shown any messages exchanged through the VaultChat messaging application, which the investigation has identified as the primary communication channel used by Holt to communicate with Edgerton and Tsang. Chu stated that she had not. She stated that she was not aware that Holt used the VaultChat application, and that she herself did not have a VaultChat account and had never used the application. Kowalski asked whether Chu had ever been copied on, forwarded, or otherwise made privy to any communications — whether by email, text message, instant message, or any other medium — between Holt and either Edgerton or Tsang. Chu stated that she had not.

Reeves then interjected with a line of questioning regarding the NASMC conferences. Reeves asked whether Chu had ever observed Holt interacting with competitor personnel at NASMC quarterly conferences or at any other industry events. Chu stated that she had attended two NASMC quarterly conferences during the relevant period — one held in Arlington, Virginia, and one held in Scottsdale, Arizona — but that her attendance at these conferences was focused on industry-benchmarking sessions, panel presentations, and other programmatic content. Chu stated that she did not attend private dinners, receptions, or side meetings with competitor personnel, and that she did not observe Holt in private meetings with competitor personnel at these conferences. She stated that she was generally aware that Holt interacted with industry contacts at NASMC events, as would be expected of a senior sales executive, but that she did not know the specific nature of those interactions.

Kowalski then returned to the broader question of whether Chu found it unusual that Holt directed mid-cycle price adjustments with limited explanation. This question was posed carefully and appeared designed to test whether Chu had reason to suspect the existence of an agreement with competitors, even if she lacked direct knowledge. Chu paused before responding and then stated that, in retrospect, the pattern of mid-cycle adjustments "could be seen as unusual," but that at the time the adjustments were being made, she attributed them to Holt's senior position, his broader visibility into market conditions, and his authority as the decision-maker on pricing matters. Chu did not concede that she had any suspicion at the time that Holt's instructions were based on communications with competitors.

Kowalski asked one additional question in this segment: whether Chu was aware of any customer-allocation arrangements or bid-rigging agreements involving TMC and any competitor. Chu stated firmly that she was not aware of any such arrangements and had no knowledge of any conduct other than the pricing adjustments described above.

The session broke for lunch at approximately 12:15 p.m. and resumed at approximately 1:00 p.m.

D. Specific Pricing Events and Correlation with Competitor Movements (Approximately 1:00 p.m. – 2:30 p.m.)

The afternoon session focused on specific pricing events and the DOJ's analysis of the temporal correlation between TMC's price adjustments and those of Ridgecrest and Pinnacle. This segment was the most document-intensive portion of the session.

Kowalski presented Chu with a series of documents and data analyses, including DOJ-prepared charts showing side-by-side timelines of TMC, Ridgecrest, and Pinnacle price movements for the three product categories from 2017 to 2021. These charts, which Chu had not previously seen, are discussed in greater detail in Section V below.

The DOJ walked Chu through approximately six specific instances in which Holt's instructions to Chu to adjust TMC's published list prices were followed within one to two weeks by similar price adjustments at Ridgecrest and/or Pinnacle, or in which TMC's adjustments followed similar competitor moves within a comparable timeframe. For each instance, Kowalski identified the specific date of Holt's instruction to Chu, the product line affected, the nature and magnitude of the adjustment, and the dates of the corresponding Ridgecrest and/or Pinnacle adjustments.

For each of these six instances, the DOJ asked Chu the same core question: whether she had advance knowledge of the competitor price movement — that is, whether she knew before implementing the TMC price change that Ridgecrest or Pinnacle was making or planning a similar adjustment. In each instance, Chu stated consistently and without hesitation that she did not have advance knowledge of any competitor price movement. She stated that her actions in implementing the price changes were based solely on Holt's instructions and that she was not privy to any information regarding competitor pricing intentions.

Kowalski asked Chu whether she had access to non-public competitor pricing data at any time during the relevant period. Chu confirmed that she did not. She stated that her team monitored publicly available industry reports, including publications from NASMC and other industry research firms, and that she had access to TMC's own internal sales data, but that she did not have access to non-public pricing data from Ridgecrest, Pinnacle, or any other competitor.

The DOJ then turned to the question of internal record-keeping. Kowalski asked Chu to describe the internal records maintained by her team regarding price adjustments. Chu described several categories of records: (a) spreadsheets tracking published list prices by product line and effective date; (b) quarterly pricing recommendation memoranda prepared by her team for Holt's review; (c) email chains between Chu and Holt regarding pricing instructions and approvals; and (d) archived copies of published price lists distributed to the sales organization and, in some cases, to customers.

Kowalski asked specifically whether Chu's team tracked the reasons or justifications for each price change. Chu stated that the quarterly pricing memoranda typically included detailed market justifications — including references to raw-material costs, demand trends, and competitive benchmarking data — supporting the recommended adjustments. However, Chu acknowledged that mid-cycle adjustments directed by Holt were often implemented on the basis of Holt's brief email instructions without detailed written justifications. Chu stated that her team did not independently prepare written justifications for the mid-cycle adjustments, as these adjustments were directed by Holt and were understood to be based on his own assessment of market conditions. This acknowledgment is consistent with the internal investigation's findings regarding the absence of documented business justifications for the mid-cycle adjustments.

The session broke at approximately 2:30 p.m. for approximately fifteen minutes.

E. NASMC Trade Association Interactions (Approximately 2:45 p.m. – 3:15 p.m.)

The DOJ devoted the next segment of the session to TMC's participation in the North American Specialty Minerals Council ("NASMC"), an industry trade association headquartered in Arlington, Virginia, which hosts quarterly conferences attended by executives from the major specialty minerals producers in North America.

Kowalski asked Chu to describe TMC's participation in NASMC during the relevant period. Chu confirmed that TMC was a member of NASMC and that TMC personnel regularly attended NASMC quarterly conferences. Chu stated that she personally attended two NASMC quarterly conferences during the 2017–2021 period — one held in Arlington, Virginia (Chu could not recall the specific date but believed it was in 2018 or 2019) and one held in Scottsdale, Arizona (which Chu believed was in 2019 or 2020).

Chu stated that her attendance at these conferences was focused on industry-benchmarking sessions and panel presentations. She described participating in sessions where aggregate industry data — including production volumes, demand forecasts, and pricing indices — were presented and discussed. Chu stated that she did not attend private dinners, social receptions, or side meetings with competitor personnel during these conferences, and that her interactions with attendees from other companies were limited to brief exchanges in the context of the formal conference programming.

Kowalski asked about Holt's attendance at NASMC conferences. Chu stated that Holt typically attended all quarterly NASMC conferences and that she understood he interacted with a wide range of industry contacts at these events. However, Chu reiterated that she did not know the specific nature of Holt's interactions with competitor personnel at NASMC events and that she was not present for any private or one-on-one meetings between Holt and individuals from competitor companies.

Reeves asked whether TMC had any policies governing employee conduct at trade-association events, including policies regarding interactions with competitors. Chu stated that she was not aware of any specific policies governing NASMC interactions. She recalled receiving antitrust compliance training at some point — she believed it was in approximately 2017 or 2018 — but she could not recall the specific content of that training as it related to trade-association conduct. She stated that she did not recall receiving any subsequent antitrust compliance training after approximately 2018.

This response is consistent with the internal investigation's finding that TMC's antitrust compliance program, which was formally adopted in 2014, had not conducted annual or regularly scheduled compliance training since approximately 2018, and that TMC had no specific protocols or monitoring mechanisms in place to govern employee interactions at trade-association events, including NASMC conferences. The compliance deficiencies identified by the internal investigation are being addressed through the enhanced compliance program currently under development with Meridian Compliance Partners LLC, as discussed further in Section VII.C below.

F. Post-Holt Departure and Current Practices (Approximately 3:15 p.m. – 3:45 p.m.)

In the final segment of the session, the DOJ asked Chu about changes in TMC's pricing practices following Holt's departure from the company on September 30, 2021.

Chu described several significant changes to TMC's pricing process that were implemented in the wake of Holt's departure and, subsequently, in connection with the internal investigation and the company's cooperation with the DOJ. Specifically, Chu stated that mid-cycle pricing adjustments now require written business justifications, supported by market data or other documented rationale, and that such adjustments must be approved by a more senior level of authority — specifically, the division president — rather than by the VP of Sales alone. Chu also stated that all pricing decisions, whether quarterly or mid-cycle, are now documented in a standardized format, and that the pricing team maintains records of the justifications for each adjustment.

Chu mentioned that she is aware TMC has been developing an enhanced antitrust compliance program, although she stated that she was not directly involved in its design and could not speak to its specific provisions. She indicated that she understood the enhanced program would include regular compliance training and protocols for trade-association interactions, among other elements.

Kowalski and Reeves indicated that they had no further questions. The session concluded at approximately 3:45 p.m. Ms. Forsythe thanked the DOJ team, and the parties departed without further substantive discussion.

V. DOCUMENTS DISCUSSED DURING THE PROFFER SESSION

During the course of the proffer session, the DOJ presented, referenced, or showed Chu the following categories of documents. For each category, I have described the nature of the documents, their relevance to the questioning, and Chu's responses regarding them.

1. Holt-to-Chu Email Instructions. The DOJ presented Chu with a series of approximately eight to ten (8–10) emails from Gavin Holt to Sandra Chu, dated between approximately 2017 and 2021, directing specific price adjustments for high-purity feldspar and industrial talc product lines. These emails were drawn from TMC's own document production, submitted under Grand Jury Subpoena No. GJ-22-0194-SD-003, and bore Bates stamps within the TMC production range. The emails were generally brief — typically one to three sentences — and directed Chu to implement specific price increases or holds on specified product lines effective on specified dates. Holt's stated justifications in the emails were limited and typically referenced "market conditions," "competitor movements," or similar general language. Chu confirmed the authenticity of each email presented, confirmed that she received and read each email at or around the time it was sent, and confirmed that she implemented the pricing changes directed in each email.

2. TMC Published Price Lists. The DOJ presented multiple versions of TMC's published price lists for high-purity feldspar, industrial talc, and rare-earth concentrates, spanning the period from approximately 2017 to 2021. These price lists reflected the adjustments that Chu implemented at Holt's direction, both during the regular quarterly cycle and on a mid-cycle basis. Chu confirmed the authenticity of the price lists and confirmed that they accurately reflected the prices that were published and distributed to TMC's sales organization and customers.

3. Pricing Correlation Charts. The DOJ presented Chu with a series of charts — prepared by the DOJ's investigative team and not previously seen by Chu or by Calderwood & Harkness — showing side-by-side timelines of price movements by TMC, Ridgecrest Minerals Inc., and Pinnacle Earth Resources Ltd. for the three product categories (high-purity feldspar, industrial talc, and rare-earth concentrates) from 2017 to 2021. The charts visually depicted the temporal correlation between TMC's price adjustments and those of Ridgecrest and/or Pinnacle, with the interval between corresponding adjustments ranging from approximately one to fourteen days in the instances highlighted by the DOJ. Kowalski asked Chu to review the TMC pricing data reflected in the charts and to confirm whether it appeared consistent with her records. Chu examined the charts and stated that the TMC pricing data depicted in the charts appeared consistent with her records, though she noted that she could not verify the accuracy of the Ridgecrest or Pinnacle data, as she did not have access to those companies' pricing records. Calderwood & Harkness was not provided copies of these charts, and we should request them in connection with any future discovery or negotiation.

4. NASMC Conference Attendance Records. The DOJ presented documents reflecting TMC personnel attendance at NASMC quarterly conferences during the relevant period. The documents appeared to be registration records or attendance lists maintained by NASMC. Chu confirmed her own attendance at two NASMC conferences, as described in Section IV.E above. The records also reflected Holt's attendance at multiple NASMC conferences, though Chu was not asked to confirm Holt's attendance at specific events.

5. TMC Quarterly Pricing Memoranda. The DOJ presented several of the quarterly pricing analytics reports prepared by Chu's team for Holt's review. These were internal documents from TMC's production. Kowalski asked Chu to walk through the analytical methodology reflected in the memoranda, including the data sources, analytical frameworks, and recommendation formats. Chu did so in detail, explaining the inputs and assumptions underlying her team's pricing recommendations. The DOJ's interest in these memoranda appeared to be focused on contrasting the thoroughness of the quarterly process with the cursory nature of the mid-cycle adjustment process — specifically, the absence of comparable written analysis supporting the mid-cycle adjustments directed by Holt.

VI. ASSESSMENT OF CHU'S CREDIBILITY AND DEMEANOR

Chu was composed, forthcoming, and consistent throughout the duration of the proffer session. She maintained a calm and professional demeanor during all segments of the questioning, including during the most sensitive and potentially confrontational exchanges regarding her knowledge of Holt's alleged inter-competitor communications. She did not appear evasive, defensive, or unduly anxious at any point.

Chu's responses during the proffer session were consistent in all material respects with the statements she provided during her July 18, 2022 interview with Calderwood & Harkness LLP as part of the internal investigation. No inconsistencies were observed between her proffer session statements and her prior interview, nor were any inconsistencies identified between her statements and the documentary record reviewed during the session.

Chu did not volunteer information beyond what was asked. She answered all questions directly and succinctly, without evasion or unnecessary elaboration. Where she could not recall specific details — such as the precise dates of her NASMC conference attendance — she said so forthrightly rather than speculating. This approach was consistent with the preparation guidance provided to her by Calderwood & Harkness in advance of the session.

Chu's account that she did not know of Holt's inter-competitor communications was consistent and unshaken under repeated and probing questioning from both Kowalski and Reeves. The DOJ approached this topic from multiple angles — asking about VaultChat, about NASMC conferences, about whether she found the mid-cycle adjustments unusual — and Chu's responses remained steady and internally consistent each time. She did not waver, contradict herself, or offer implausible explanations.

Critically, Chu appropriately acknowledged that the pattern of mid-cycle pricing adjustments directed by Holt, viewed in retrospect, "could be seen as unusual." This acknowledgment demonstrated candor and cooperativeness without constituting an admission harmful to TMC. By framing her observation in retrospective terms, Chu communicated that she did not harbor suspicions at the time the conduct was occurring — a distinction that is both factually accurate based on the evidence and strategically important for TMC's defense posture.

Overall, Chu presented as a credible, cooperative, and reliable witness. Her performance during the proffer session was consistent with our assessment of her as a corroborative fact witness whose testimony supports the narrative that the alleged conduct was directed by Holt without the knowledge of other TMC personnel, including Chu.

VII. ASSESSMENT OF DOJ'S FOCUS AREAS AND APPARENT STRATEGY

A. DOJ's Primary Interest in Chu

Based on the tone, substance, and direction of the DOJ's questioning during the proffer session, the DOJ appears primarily interested in Sandra Chu as a corroborative fact witness rather than as a target or subject of the investigation. The DOJ's questions were focused on three principal areas in which Chu's testimony would be useful to the government:

(a) Holt's Pricing Authority and Behavior. The DOJ sought to establish through Chu's testimony that Holt was the unilateral decision-maker on pricing for the three product categories at issue, that he exercised this authority without meaningful oversight or challenge, and that he directed pricing adjustments — particularly mid-cycle adjustments — based on purported "market intelligence" that he did not share with or explain to Chu or other subordinates.

(b) Mechanics of Price Adjustments. The DOJ sought to use Chu's testimony to establish the specific mechanics by which TMC's price adjustments were implemented — i.e., that Holt would issue a brief email directive to Chu, Chu would update the published price lists, and the adjusted prices would be disseminated to the sales organization and customers. This testimony provides the factual foundation for the DOJ's argument that Holt had the ability to implement pricing changes quickly and with minimal internal scrutiny, facilitating the alleged coordination with competitors.

(c) Absence of Legitimate Business Justifications. The DOJ sought to use Chu's testimony to establish that mid-cycle price adjustments directed by Holt lacked the documented market justifications that characterized the standard quarterly pricing process. This testimony supports the DOJ's circumstantial case that the mid-cycle adjustments were driven by inter-competitor communications rather than by legitimate competitive analysis.

The DOJ did not appear to treat Chu as a target or subject of the investigation. The questioning tone throughout the session was investigative and exploratory rather than adversarial or accusatory. Neither Kowalski nor Reeves attempted to establish Chu's active participation in any agreement or conspiracy, and neither suggested — directly or by implication — that Chu was a party to or knowing participant in the alleged price-fixing conduct. The DOJ's use of the pricing-correlation charts suggests that they are building a pattern-and-timing case focused on the synchronized nature of competitor price movements, using Chu's testimony to establish the factual predicate on the TMC side.

B. DOJ's Focus on Holt

The proffer session confirmed that the DOJ's investigation remains squarely focused on Gavin Holt as the key TMC participant in the alleged conspiracy. The DOJ's questions were carefully designed to establish the following elements of Holt's role:

• Holt exercised unilateral pricing authority within the U.S. Specialty Minerals Division, with no effective check or oversight from subordinates (including Chu) or senior leadership;

• Holt directed mid-cycle pricing adjustments using vague and unsubstantiated references to "market intelligence," without providing Chu or others with the actual source or basis for his directives;

• Holt was the sole TMC contact point with competitor counterparts — specifically, Carl Edgerton at Ridgecrest Minerals Inc. and Kevin Tsang at Pinnacle Earth Resources Ltd. — and did not involve or inform other TMC personnel regarding those contacts; and

• Holt's communications with competitors were conducted through the VaultChat application, a platform that Chu was unaware of and had no access to, further supporting the inference that Holt deliberately concealed the communications from his colleagues.

This focus on Holt is consistent with the framework contemplated in the ongoing Non-Prosecution Agreement ("NPA") negotiations between Calderwood & Harkness (on behalf of TMC) and the DOJ. As previously reported, the draft NPA includes a Holt carve-out, pursuant to which the DOJ reserves the right to pursue criminal charges against Holt individually, notwithstanding any resolution with TMC at the corporate level. Holt, through his personal counsel Patrick Dunleavy of Briarcliff Law Group PLLC, asserted his Fifth Amendment privilege against self-incrimination and declined to testify before the grand jury on June 14, 2022. Holt's assertion of the Fifth Amendment privilege, combined with the DOJ's apparent focus on him as the central participant in the alleged conspiracy, further underscores the importance of Chu and other TMC witnesses (including Thomas Eriksen) in providing the factual testimony that the DOJ cannot obtain directly from Holt.

C. DOJ's Interest in Compliance Gaps

The DOJ's questions regarding TMC's trade-association policies — or, more precisely, the absence thereof — and the lapse in antitrust compliance training since approximately 2018 suggest that the DOJ may cite TMC's compliance deficiencies as evidence of a permissive corporate culture that facilitated the alleged conduct. Chu's testimony that she was unaware of any specific policies governing NASMC interactions, and that she could not recall receiving antitrust compliance training after approximately 2017 or 2018, provides the DOJ with a factual basis to argue that TMC failed to maintain adequate internal controls and compliance safeguards during the period of the alleged conspiracy.

This line of inquiry is consistent with the DOJ's stated enforcement priorities regarding corporate compliance programs, as articulated in the Antitrust Division's July 2019 guidance on the evaluation of corporate compliance programs in criminal antitrust investigations (updated in 2023). The DOJ's compliance-related questions also have direct implications for the NPA negotiations, as the scope of compliance-enhancement obligations that the DOJ will require as a condition of any NPA will likely be informed by the perceived severity of TMC's compliance failures.

This underscores the critical importance of the enhanced antitrust compliance program currently under development with Meridian Compliance Partners LLC, under the direction of Claudia Ferraro. TMC intends to submit the enhanced compliance program to the DOJ as part of its cooperation and remediation effort, and it is essential that the program be sufficiently robust and comprehensive to address the specific deficiencies highlighted by the DOJ's questioning — including, at a minimum, regular antitrust compliance training for all commercial personnel, specific protocols for trade-association interactions, monitoring and auditing mechanisms, and a clear reporting structure for compliance concerns.

D. No Apparent Interest in Chu as Target

Based on the totality of the DOJ's questioning during the proffer session — including the tone, substance, and direction of the inquiry — it is our assessment that the DOJ does not appear to be pursuing Sandra Chu as a potential defendant or target of the investigation. The following factors support this assessment:

• The DOJ's questions were directed at establishing what Chu knew and when she knew it, rather than at establishing Chu's active participation in any agreement, conspiracy, or anticompetitive conduct. The questions were phrased in a manner consistent with the development of a cooperating fact witness, not the interrogation of a suspect.

• Neither Kowalski nor Reeves suggested — directly or by implication — that Chu was a party to, knowing participant in, or willful facilitator of the alleged price-fixing conduct. There were no accusations, no confrontational exchanges, and no attempts to secure admissions of wrongdoing from Chu.

• Chu's consistent testimony that she lacked knowledge of Holt's inter-competitor communications was not challenged or contradicted by the DOJ with documentary or other evidence. The absence of such evidence is consistent with the internal investigation's findings, which, based on a review of approximately 555,000 documents, did not identify any documentary link between Chu and the alleged conspiracy.

• The DOJ did not present any evidence or ask any questions suggesting the existence of undisclosed documentary evidence implicating Chu.

While we cannot definitively rule out any future change in the DOJ's posture toward Chu, the proffer session strongly supports the conclusion that Chu's individual exposure remains minimal and that the DOJ views her as a fact witness whose testimony is valuable to the government's case against other targets — principally Holt — rather than as a participant in the alleged conduct.

VIII. IMPACT ON TMC'S COOPERATION POSTURE

A. Positive Indicators

The Chu proffer session proceeded smoothly and, on balance, represents a positive development for TMC's cooperation posture with the DOJ. Several specific indicators support this assessment:

• Chu's testimony was cooperative, credible, and internally consistent, both within the proffer session itself and in comparison to her prior interview with Calderwood & Harkness. The DOJ appeared satisfied with her responses and did not express any dissatisfaction or skepticism regarding the completeness or accuracy of her account.

• Chu's testimony reinforced the central narrative that TMC has been advancing in its cooperation submissions — namely, that the alleged price-fixing conduct was driven by Gavin Holt individually, acting without the authorization, knowledge, or involvement of TMC's senior leadership (including CEO Søren Dalmqvist, General Counsel Priya Anand, and Board Chair Margaret Caldwell) or the TMC Board of Directors. The proffer session provided no evidence to the contrary, and the DOJ did not suggest that it possessed evidence implicating TMC senior leadership.

• The DOJ's receptiveness to the proffer session, including the professional and non-adversarial tone of the questioning, suggests that TMC's cooperation is being credited by the Antitrust Division. The session proceeded in a manner consistent with a cooperative relationship between the company and the government, which bodes well for the ongoing NPA negotiations.

• The successful completion of the Chu proffer session establishes a track record of employee cooperation that can be cited in future submissions to the DOJ, demonstrating TMC's good-faith commitment to facilitating the government's investigation.

B. Areas of Concern

Notwithstanding the foregoing positive indicators, several aspects of the proffer session and the DOJ's presentation of evidence raise concerns that warrant careful attention in our ongoing defense strategy and NPA negotiations:

• Pricing-Correlation Data. The DOJ's pricing-correlation charts, which visually depicted the near-contemporaneous price movements by TMC, Ridgecrest, and Pinnacle across the three product categories from 2017 to 2021, are compelling evidence of coordinated pricing conduct. While the charts alone do not establish an agreement (as opposed to independent parallel pricing), the tight temporal correlation — particularly in instances where the interval between corresponding adjustments was as short as one to two days — will be difficult to rebut if used in connection with any prosecution of Holt or any future enforcement action. We should prioritize obtaining copies of these charts and subjecting the underlying data to rigorous analysis by our forensic economics experts.

• Absence of Documented Business Justifications. Chu's acknowledgment that mid-cycle pricing adjustments directed by Holt lacked the detailed written justifications that accompanied the standard quarterly pricing recommendations may be used by the DOJ to argue that TMC's internal controls were inadequate to prevent or detect anticompetitive conduct. This finding could affect the magnitude of cooperation credit or penalty reduction in the NPA negotiations, as the DOJ may argue that TMC's failure to maintain adequate pricing controls contributed to the perpetuation of the alleged conspiracy.

• Compliance-Training Gap. The fact that TMC's antitrust compliance training lapsed after approximately 2018, and that TMC had no specific protocols for monitoring trade-association interactions, was noted by the DOJ and may be cited in the NPA negotiations as a basis for imposing more extensive compliance-enhancement obligations. This gap is particularly problematic because it encompasses the majority of the relevant period (2018–2021), during which the alleged price-fixing conduct is alleged to have continued.

C. Next Steps

Based on the foregoing assessment, the following next steps are recommended:

1. Eriksen Proffer Preparation. Continue preparation for the proffer session of Thomas Eriksen, Regional Sales Manager, Western Region, which is scheduled for April 22, 2023. Particular attention should be devoted to Eriksen's NASMC conference attendance, his interactions with competitor personnel, and the ambiguity identified during the internal investigation regarding the extent of Eriksen's knowledge of Holt's activities. Eriksen's proffer presents greater risk than Chu's, given the unresolved questions about his involvement, and will require more extensive preparatory work.

2. Supplemental Cooperation Submission. Finalize the supplemental cooperation submission, targeted for May 1, 2023, which should incorporate the Chu proffer session as evidence of TMC's ongoing cooperation with the DOJ. The submission should highlight Chu's cooperativeness, the consistency of her testimony with TMC's cooperation narrative, and TMC's continued commitment to making employees available for the government's investigation.

3. Forensic Economics Analysis. Coordinate with Hargrove Forensic Advisory LLC (Dr. Vanessa Tremblay, lead engagement partner) regarding the affected-commerce analysis and the economic rebuttal to the pricing-correlation data presented by the DOJ. Dr. Tremblay's team should be provided with a detailed summary of the DOJ's pricing-correlation charts (to the extent we can reconstruct them from our notes) and should be asked to prepare an analysis of alternative explanations for the observed pricing patterns, including independent responses to common cost and demand factors.

4. Enhanced Compliance Program. Continue development of the enhanced antitrust compliance program with Meridian Compliance Partners LLC (Claudia Ferraro) to address the specific compliance gaps highlighted by the DOJ's questioning. The program should be designed to satisfy the DOJ's evaluation criteria for corporate compliance programs and should be ready for submission to the DOJ in connection with the NPA negotiations. Priority components include: annual antitrust compliance training for all commercial personnel; trade-association interaction protocols and monitoring; pricing-decision documentation requirements; whistleblower and reporting mechanisms; and periodic auditing and testing of compliance controls.

5. Holt Monitoring. Continue to monitor developments regarding Gavin Holt's status. Holt's assertion of Fifth Amendment rights through Briarcliff Law Group PLLC (Patrick Dunleavy) before the grand jury on June 14, 2022, means that the DOJ cannot compel his testimony absent an immunity grant. This may result in the DOJ focusing additional pressure on TMC's cooperation as the primary source of factual testimony regarding the alleged conspiracy. We should be prepared for the possibility that the DOJ may seek to leverage TMC's cooperation obligations to obtain testimony or evidence that it cannot obtain directly from Holt.

IX. PRIVILEGE AND CONFIDENTIALITY NOTICE

This memorandum is prepared for the sole use of Calderwood & Harkness LLP attorneys and staff working on Matter No. 1039-00001, In re Grand Jury Investigation No. GJ-22-0194, U.S. District Court, Northern District of California, San Francisco Division. It is not intended for distribution to any person or entity outside of Calderwood & Harkness LLP.

This memorandum reflects the mental impressions, conclusions, opinions, and legal theories of counsel and constitutes attorney work product prepared in anticipation of litigation, protected from disclosure under Federal Rule of Civil Procedure 26(b)(3), its criminal analogue, and applicable case law, including Hickman v. Taylor, 329 U.S. 495 (1947), and Upjohn Co. v. United States, 449 U.S. 383 (1981). The memorandum is also protected by the attorney-client privilege to the extent it reflects confidential communications between Calderwood & Harkness LLP and its client, Torchlight Mining Corp.

This memorandum must not be distributed to the client, Torchlight Mining Corp., or to any third party, without the express written authorization of the Responsible Partner, Elaine Forsythe. In the event that this memorandum or any portion thereof is authorized for transmittal to the client, such transmittal should be made under a cover communication that expressly preserves the attorney-client privilege and work-product protection, and the client

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
This document is protected from disclosure by the attorney-client privilege, the attorney work-product doctrine, and all other applicable privileges and protections. Any unauthorized review, use, disclosure, or distribution is strictly prohibited. If you have received this document in error, notify Calderwood & Harkness LLP immediately and destroy all copies.
CALDERWOOD & HARKNESS LLP 555 California Street, 40th Floor San Francisco, CA 94104
Matter No.: 1039-00001
MEMORANDUM
TO: Elaine Forsythe, Responsible Partner, Antitrust & Competition Practice Group
FROM: Aaron Liu, Lead Associate, Antitrust & Competition Practice Group
CC: Monica Reyes, Working Associate, Antitrust & Competition Practice Group; Howard Bellamy, Billing Partner, Antitrust & Competition Practice Group
DATE: March 12, 2023
RE: Post-Proffer Debriefing Memorandum — Voluntary Proffer Session of Sandra Chu, Director of Pricing Analytics, U.S. Specialty Minerals Division, Torchlight Mining Corp., with the U.S. Department of Justice, Antitrust Division, San Francisco Field Office — March 10, 2023
MATTER: In re Grand Jury Investigation No. GJ-22-0194, U.S. District Court, Northern District of California, San Francisco Division
I. PURPOSE AND SCOPE OF THIS MEMORANDUM
This memorandum summarizes the voluntary proffer session of Sandra Chu ("Chu"), Director of Pricing Analytics, U.S. Specialty Minerals Division, Torchlight Mining Corp. ("TMC"), conducted on March 10, 2023, at the U.S. Department of Justice ("DOJ"), Antitrust Division, San Francisco Field Office, located at 450 Golden Gate Avenue, Room 10-0101, San Francisco, California 94102. The proffer session was conducted in connection with the ongoing federal grand jury investigation into suspected price-fixing and bid-rigging conduct in the U.S. specialty minerals industry, proceeding under Grand Jury Investigation No. GJ-22-0194, pending in the United States District Court for the Northern District of California, San Francisco Division.
The session was conducted pursuant to a proffer agreement, commonly referred to as a "queen-for-a-day" letter, negotiated between Calderwood & Harkness LLP, on behalf of TMC and Chu individually, and the DOJ Antitrust Division. The terms of the proffer agreement were set forth in the letter dated March 5, 2023, from Elaine Forsythe to Trial Attorney Denise Kowalski of the DOJ Antitrust Division, San Francisco Field Office. The proffer agreement was executed by all parties prior to the commencement of the session, and Chu was advised of its terms and confirmed her understanding both before and at the outset of the session.
The purpose of this memorandum is to provide a comprehensive record and analysis of the proffer session for the benefit of the Calderwood & Harkness litigation team working on this matter. Specifically, this memorandum documents the following:
(a) the attendees at the proffer session;
(b) the logistics and ground rules governing the session;
(c) the DOJ's questions and lines of inquiry, organized by subject matter and approximate chronology;
(d) Chu's responses to those questions, including verbatim or near-verbatim quotations where noted;
(e) the documents discussed, referenced, or shown to Chu during the session; and
(f) the assessment of the session's impact on TMC's cooperation posture, the DOJ's apparent investigative strategy, Chu's individual exposure, and the firm's defense strategy going forward.
This memorandum constitutes attorney work product prepared in anticipation of litigation and is protected in its entirety by the attorney-client privilege and the work-product doctrine as articulated in Hickman v. Taylor, 329 U.S. 495 (1947), and Federal Rule of Civil Procedure 26(b)(3) and its criminal analogues. The memorandum reflects the mental impressions, conclusions, opinions, and legal theories of counsel. It is not to be disclosed, disseminated, or distributed outside of Calderwood & Harkness LLP, or to the client or any third party, without the express prior written authorization of the Responsible Partner, Elaine Forsythe. Any such unauthorized disclosure may constitute a waiver of applicable privileges.
II. SESSION LOGISTICS
A. Date, Time, and Location
The proffer session took place on Friday, March 10, 2023. The session commenced at approximately 9:30 a.m. Pacific Time and concluded at approximately 3:45 p.m. Pacific Time, for a total elapsed duration of approximately six hours and fifteen minutes. The session included the following breaks:
• A short break at approximately 11:00 a.m. (approximately 15 minutes);
• A lunch break at approximately 12:15 p.m. (approximately 45 minutes; the session resumed at approximately 1:00 p.m.); and
• A short break at approximately 2:30 p.m. (approximately 15 minutes).
The session was held at the DOJ Antitrust Division, San Francisco Field Office, 450 Golden Gate Avenue, Room 10-0101, San Francisco, California 94102. The session took place in a DOJ conference room on the tenth floor of the federal building. To our knowledge, no audio or video recording of the session was made, consistent with the terms of the proffer agreement, which did not provide for recording. The DOJ's paralegal/analyst took handwritten notes throughout the session, as described further below.
B. Attendees. The following individuals were present throughout the proffer session:
For the United States Department of Justice, Antitrust Division:
• Denise Kowalski, Trial Attorney, Antitrust Division, San Francisco Field Office. Kowalski served as the lead questioner throughout the session. She directed the majority of the substantive questioning and controlled the pace and direction of the inquiry.
• Marcus Reeves, Senior Trial Attorney, Antitrust Division, San Francisco Field Office. Reeves participated in questioning on a supplemental basis, particularly during the segment of the session addressing Chu's knowledge of inter-competitor communications (Section IV.C below) and during the discussion of NASMC trade association interactions (Section IV.E below).
• One additional DOJ paralegal or analyst whose name was not provided to us and who was not introduced by name at the outset of the session. This individual was seated at the conference table with a legal pad and took handwritten notes throughout the entirety of the session. The individual did not ask any questions or otherwise participate substantively in the session.
For Torchlight Mining Corp. and Calderwood & Harkness LLP:
• Sandra Chu, Director of Pricing Analytics, U.S. Specialty Minerals Division, Torchlight Mining Corp. Chu was the proffer witness.
• Elaine Forsythe, Responsible Partner, Antitrust & Competition Practice Group, Calderwood & Harkness LLP. Ms. Forsythe attended in her capacity as lead counsel for TMC and as counsel for Chu in connection with the proffer session. Ms. Forsythe intervened on a limited basis during the session to clarify the scope of certain questions and to confer briefly with Chu during breaks.
• Aaron Liu, Lead Associate, Antitrust & Competition Practice Group, Calderwood & Harkness LLP. I attended in my capacity as working associate on the matter and took detailed notes throughout the session, which form the basis for this memorandum.
No court reporter was present. As noted above, the DOJ's paralegal/analyst took handwritten notes. Aaron Liu took contemporaneous handwritten notes on behalf of Calderwood & Harkness LLP, supplemented by additional notes dictated immediately following the session. This memorandum is based on those notes.
C. Proffer Agreement Terms
The proffer session was governed by the queen-for-a-day proffer letter dated March 5, 2023, which was negotiated between Calderwood & Harkness LLP and the DOJ Antitrust Division and executed by all parties prior to the commencement of the session. The key protections and terms of the proffer agreement are as follows:
(i) Use Restrictions. Statements made by Chu during the proffer session cannot be used directly against Chu in the government's case-in-chief in any criminal prosecution of Chu. This restriction applies solely to Chu's own statements and does not extend to evidence derived from or obtained as a result of those statements.
(ii) Permitted Uses. Notwithstanding the foregoing use restriction, the government reserved the right to use Chu's statements for the following purposes: (a) for impeachment, should Chu testify inconsistently at any subsequent proceeding; (b) to obtain investigative leads, including the development of additional evidence or witnesses; and (c) in connection with any prosecution of Chu for perjury, false statements, or obstruction of justice arising from the proffer session itself or any related proceeding.
(iii) No Recording. The proffer agreement provided that the session would not be recorded by any party. As noted above, the DOJ's paralegal/analyst took handwritten notes.
(iv) Scope. The proffer agreement covered statements made by Chu during the March 10, 2023 session and did not extend to any subsequent sessions or communications unless separately agreed in writing.
Chu was advised of these terms by Calderwood & Harkness LLP during the preparatory session held on March 8, 2023, at our offices. At the outset of the proffer session on March 10, Kowalski recited the material terms of the proffer agreement on the record, and Chu verbally confirmed her understanding and her willingness to proceed. Ms. Forsythe also confirmed on the record that Calderwood & Harkness LLP was representing Chu in connection with the proffer session.
It should be noted that the proffer session was presented to the DOJ as part of TMC's broader cooperation with the Antitrust Division, consistent with the corporate cooperation proffer submitted by Calderwood & Harkness LLP to the DOJ on February 15, 2023. That cooperation proffer outlined TMC's commitment to producing relevant documents, making current and former employees available for interviews and proffer sessions, and providing factual narratives to facilitate the DOJ's investigation. The Chu proffer session was the first employee proffer session conducted pursuant to that cooperation framework.
III. BACKGROUND ON SANDRA CHU
Sandra Chu currently holds the title of Director, Pricing Analytics, U.S. Specialty Minerals Division, Torchlight Mining Corp. She has been employed by TMC continuously since approximately 2013, initially as a Senior Pricing Analyst before being promoted to Director of Pricing Analytics in approximately 2016. In her current role, Chu is responsible for managing a team of three pricing analysts within the U.S. Specialty Minerals Division and for overseeing the compilation, maintenance, and dissemination of TMC's published price lists for three principal product categories: high-purity feldspar, industrial talc, and rare-earth concentrates, all of which are sold to U.S. industrial and chemical-manufacturing customers.
During the period most relevant to the grand jury investigation — approximately 2017 through 2021 — Chu reported directly to Gavin Holt, who held the title of Vice President, U.S. Specialty Minerals Sales. Holt served as Chu's direct supervisor and as the primary decision-maker on pricing matters for the three product categories at issue. Holt departed TMC effective September 30, 2021, under circumstances that are documented separately in the internal investigation file. Following Holt's departure, Chu's reporting line was restructured, and she currently reports to Holt's successor in a reorganized commercial leadership structure within the U.S. Specialty Minerals Division. The precise details of the current reporting line are not material to this memorandum but are documented in the TMC organizational chart produced in discovery (Bates No. TMC-ORG-00047).
Chu's primary responsibilities during the relevant period included: compiling and analyzing pricing data for the three product categories; maintaining and updating TMC's published price lists; preparing quarterly pricing recommendation memoranda for review by senior commercial leadership (principally Holt); analyzing pricing trends in the specialty minerals market using publicly available industry data and internal TMC sales data; and coordinating with regional sales managers regarding customer-specific pricing deviations from published list prices.
Chu remains employed by TMC and continues to perform her role as Director of Pricing Analytics. She has been cooperative with the internal investigation and with the firm's preparation for the proffer session.
Chu was previously interviewed by Calderwood & Harkness LLP on July 18, 2022, as part of the internal investigation initiated by TMC's General Counsel, Priya Anand, following receipt of the grand jury subpoena. That interview, which lasted approximately three hours, was conducted by Elaine Forsythe and Aaron Liu at Calderwood & Harkness's San Francisco office. The substance of that interview is documented in the Internal Investigation Witness Interview Memorandum — Sandra Chu, dated July 22, 2022 (Work Product File No. WP-1039-00001-INT-009), which is incorporated by reference herein.
The key finding from the internal investigation as it pertains to Chu is as follows: Chu received instructions from Gavin Holt to adjust TMC's published price lists on at least twelve (12) occasions between approximately 2017 and 2021, and those instructions correlated temporally with competitor price movements by Ridgecrest Minerals Inc. ("Ridgecrest") and Pinnacle Earth Resources Ltd. ("Pinnacle"). However, the internal investigation, which included a review of approximately 555,000 documents and interviews with seventeen TMC employees and former employees, did not identify any direct evidence that Chu knew of the inter-competitor communications underlying Holt's pricing instructions. There is no documentary evidence — including emails, instant messages, VaultChat messages, calendar entries, or other records — linking Chu to any communication with competitor personnel regarding pricing or market allocation.
IV. SUMMARY OF DOJ QUESTIONS AND CHU'S RESPONSES
The following is a detailed summary of the DOJ's questions and Chu's responses during the proffer session, organized by subject matter and presented in approximate chronological order. Quotations attributed to Chu or to DOJ personnel are based on my contemporaneous handwritten notes and reflect the substance and, where indicated, the near-verbatim language of the statements made. They should not be treated as exact transcriptions.
A. Chu's Role and Reporting Structure (Approximately 9:30 a.m. – 10:15 a.m.)
Kowalski opened the substantive portion of the session with a series of background questions designed to establish Chu's position, tenure, responsibilities, and reporting relationships within TMC. The questioning during this segment was methodical and largely non-confrontational, consistent with the typical approach of building a foundation before moving to more sensitive topics.
Chu described her role in detail, explaining that she managed a team of three pricing analysts in the U.S. Specialty Minerals Division. She stated that her team's core responsibilities included maintaining TMC's published price lists for the three product categories at issue — high-purity feldspar, industrial talc, and rare-earth concentrates — as well as analyzing market data from publicly available industry sources, preparing quarterly pricing recommendation memoranda for senior commercial leadership, and tracking historical pricing trends to inform strategic planning. Chu stated that the pricing recommendation memoranda were typically prepared on a quarterly basis, aligned with TMC's fiscal quarter calendar, and were submitted to her direct supervisor for review and approval.
Chu confirmed that she reported directly to Gavin Holt from approximately 2016 — when she was promoted to Director of Pricing Analytics — through Holt's departure from TMC effective September 30, 2021. Chu described Holt as the primary and ultimate decision-maker on pricing for the three product categories at issue. She explained that her role was analytical and advisory in nature: she prepared the pricing analyses and formulated recommendations, but the final decisions regarding published list prices were made by Holt, who had the authority to approve, modify, or reject her recommendations. Chu stated that Holt exercised this authority regularly and that it was not uncommon for Holt to modify her team's pricing recommendations before they were implemented.
Kowalski asked Chu to describe her interactions with other TMC personnel in connection with pricing matters. Chu identified Thomas Eriksen, Regional Sales Manager for TMC's Western Region, as someone with whom she coordinated regarding customer-specific pricing. Chu explained that Eriksen would occasionally request deviations from published list prices for specific customer accounts based on volume commitments, competitive dynamics in particular geographic markets, or other commercial considerations. However, Chu stated clearly that Eriksen did not set or have authority over published list prices, which remained within Holt's purview. Chu did not identify any other TMC personnel who had direct involvement in the setting of published list prices during the relevant period.
Kowalski also asked about Chu's interactions with TMC senior leadership, including CEO Søren Dalmqvist and General Counsel Priya Anand. Chu stated that she had no regular interactions with Dalmqvist regarding pricing matters and that her contact with Anand's office was limited to compliance-related communications and, more recently, matters related to the litigation hold and the internal investigation.
B. Pricing Process and Price-List Adjustments (Approximately 10:15 a.m. – 11:00 a.m.)
The DOJ devoted substantial attention during this segment to understanding the mechanics of TMC's pricing process, with a particular focus on the distinction between the standard quarterly pricing review cycle and the mid-cycle pricing adjustments that are central to the investigation.
Chu described the standard pricing process as follows: On a quarterly basis, her team would compile and analyze relevant data, including raw-material cost inputs, supply-and-demand forecasts, historical sales volumes, customer-specific pricing history, and publicly available competitive market data (including industry reports and pricing benchmarks published by the North American Specialty Minerals Council ("NASMC")). Based on this analysis, Chu's team would prepare a pricing memorandum containing specific recommendations for each product line — whether to increase, decrease, or hold published list prices, and by what amount. The memorandum would be submitted to Holt for review, typically two to three weeks before the start of the next fiscal quarter. Holt would then schedule a meeting with Chu to discuss the recommendations, after which he would approve, modify, or reject the proposed adjustments. Once approved, Chu's team would update the published price lists and distribute them to the sales organization.
Kowalski then shifted to the critical topic: instances in which Holt directed price adjustments outside the standard quarterly review cycle. This line of questioning was clearly designed to establish the pattern of mid-cycle pricing adjustments that, as the internal investigation has documented, correlated temporally with competitor price movements.
Chu confirmed that on multiple occasions during the period from approximately 2017 through 2021, Holt directed her to implement mid-cycle price adjustments — that is, adjustments to published list prices that fell outside the normal quarterly review process. These mid-cycle adjustments included both price increases and price holds (i.e., instructions not to reduce a price that Chu's team had recommended be reduced) on specific product lines, primarily high-purity feldspar and industrial talc, though Chu recalled at least one instance involving rare-earth concentrates.
When asked to estimate the frequency of such mid-cycle adjustments, Chu stated that they occurred on "at least ten to twelve occasions" during the approximately four-year period from 2017 through 2021. This estimate is consistent with the internal investigation's finding that at least twelve instances of mid-cycle pricing adjustments correlated with competitor price movements, and it is consistent with Chu's statement during her July 18, 2022 interview with Calderwood & Harkness.
Kowalski asked Chu what basis or justification Holt provided when directing these mid-cycle adjustments. Chu stated that Holt typically provided brief and general explanations. She recalled Holt saying things to the effect of "the market is moving," or "competitors are adjusting," or that he had "market intelligence" suggesting that the pricing change was warranted. Chu stated that Holt did not typically identify the specific source of his market intelligence, nor did he provide written analyses or data to support the mid-cycle adjustments. Chu acknowledged that the mid-cycle adjustments were generally communicated via short email instructions from Holt, directing her to implement a specific price change on a specific product line, effective on a specific date.
When asked whether she ever pressed Holt for the specific source of his market intelligence or for additional justification for the mid-cycle adjustments, Chu stated that she did not. She explained that she understood it to be within Holt's purview as Vice President of Sales to have visibility into market conditions and competitive dynamics, and that she did not consider it her place to challenge his pricing directives. Chu stated that Holt was her direct supervisor and the individual with ultimate pricing authority, and that she relied on his judgment regarding the commercial necessity of mid-cycle adjustments.
At this point, the DOJ showed Chu several documents from TMC's own production — specifically, a series of emails from Holt to Chu directing specific price adjustments. These documents are discussed in greater detail in Section V below. Chu confirmed the authenticity of the emails and confirmed that she had implemented the pricing changes directed in each email.
The session broke at approximately 11:00 a.m. for approximately fifteen minutes.
C. Chu's Knowledge of Inter-Competitor Communications (Approximately 11:15 a.m. – 12:15 p.m.)
This was the most critical segment of the proffer session from both a factual and strategic standpoint. The DOJ's questioning during this period was directed at establishing the extent of Chu's knowledge — or lack thereof — regarding Holt's alleged communications with counterparts at Ridgecrest Minerals Inc. and Pinnacle Earth Resources Ltd. concerning pricing.
Kowalski asked Chu directly whether she was aware that Gavin Holt communicated with counterparts at competitor companies regarding pricing for high-purity feldspar, industrial talc, or rare-earth concentrates. Specifically, Kowalski asked whether Chu was aware that Holt communicated with Carl Edgerton, Vice President of Sales at Ridgecrest Minerals Inc., or with Kevin Tsang, former Senior Vice President of Commercial Operations at Pinnacle Earth Resources Ltd., about pricing decisions, pricing strategies, or the timing of price adjustments.
Chu stated clearly and without equivocation that she was not aware of any direct communications between Holt and competitors regarding pricing during the time the relevant conduct was occurring. She stated that she first learned of the alleged inter-competitor communications in early 2022, when she was contacted by TMC's General Counsel, Priya Anand, in connection with the implementation of the litigation hold following TMC's receipt of the grand jury subpoena. Chu stated that she subsequently learned additional details regarding the nature of the alleged communications when she was interviewed by Calderwood & Harkness LLP on July 18, 2022, as part of the internal investigation.
Kowalski pressed further, asking whether Chu had ever seen or been shown any messages exchanged through the VaultChat messaging application, which the investigation has identified as the primary communication channel used by Holt to communicate with Edgerton and Tsang. Chu stated that she had not. She stated that she was not aware that Holt used the VaultChat application, and that she herself did not have a VaultChat account and had never used the application. Kowalski asked whether Chu had ever been copied on, forwarded, or otherwise made privy to any communications — whether by email, text message, instant message, or any other medium — between Holt and either Edgerton or Tsang. Chu stated that she had not.
Reeves then interjected with a line of questioning regarding the NASMC conferences. Reeves asked whether Chu had ever observed Holt interacting with competitor personnel at NASMC quarterly conferences or at any other industry events. Chu stated that she had attended two NASMC quarterly conferences during the relevant period — one held in Arlington, Virginia, and one held in Scottsdale, Arizona — but that her attendance at these conferences was focused on industry-benchmarking sessions, panel presentations, and other programmatic content. Chu stated that she did not attend private dinners, receptions, or side meetings with competitor personnel, and that she did not observe Holt in private meetings with competitor personnel at these conferences. She stated that she was generally aware that Holt interacted with industry contacts at NASMC events, as would be expected of a senior sales executive, but that she did not know the specific nature of those interactions.
Kowalski then returned to the broader question of whether Chu found it unusual that Holt directed mid-cycle price adjustments with limited explanation. This question was posed carefully and appeared designed to test whether Chu had reason to suspect the existence of an agreement with competitors, even if she lacked direct knowledge. Chu paused before responding and then stated that, in retrospect, the pattern of mid-cycle adjustments "could be seen as unusual," but that at the time the adjustments were being made, she attributed them to Holt's senior position, his broader visibility into market conditions, and his authority as the decision-maker on pricing matters. Chu did not concede that she had any suspicion at the time that Holt's instructions were based on communications with competitors.
Kowalski asked one additional question in this segment: whether Chu was aware of any customer-allocation arrangements or bid-rigging agreements involving TMC and any competitor. Chu stated firmly that she was not aware of any such arrangements and had no knowledge of any conduct other than the pricing adjustments described above.
The session broke for lunch at approximately 12:15 p.m. and resumed at approximately 1:00 p.m.
D. Specific Pricing Events and Correlation with Competitor Movements (Approximately 1:00 p.m. – 2:30 p.m.)
The afternoon session focused on specific pricing events and the DOJ's analysis of the temporal correlation between TMC's price adjustments and those of Ridgecrest and Pinnacle. This segment was the most document-intensive portion of the session.
Kowalski presented Chu with a series of documents and data analyses, including DOJ-prepared charts showing side-by-side timelines of TMC, Ridgecrest, and Pinnacle price movements for the three product categories from 2017 to 2021. These charts, which Chu had not previously seen, are discussed in greater detail in Section V below.
The DOJ walked Chu through approximately six specific instances in which Holt's instructions to Chu to adjust TMC's published list prices were followed within one to two weeks by similar price adjustments at Ridgecrest and/or Pinnacle, or in which TMC's adjustments followed similar competitor moves within a comparable timeframe. For each instance, Kowalski identified the specific date of Holt's instruction to Chu, the product line affected, the nature and magnitude of the adjustment, and the dates of the corresponding Ridgecrest and/or Pinnacle adjustments.
For each of these six instances, the DOJ asked Chu the same core question: whether she had advance knowledge of the competitor price movement — that is, whether she knew before implementing the TMC price change that Ridgecrest or Pinnacle was making or planning a similar adjustment. In each instance, Chu stated consistently and without hesitation that she did not have advance knowledge of any competitor price movement. She stated that her actions in implementing the price changes were based solely on Holt's instructions and that she was not privy to any information regarding competitor pricing intentions.
Kowalski asked Chu whether she had access to non-public competitor pricing data at any time during the relevant period. Chu confirmed that she did not. She stated that her team monitored publicly available industry reports, including publications from NASMC and other industry research firms, and that she had access to TMC's own internal sales data, but that she did not have access to non-public pricing data from Ridgecrest, Pinnacle, or any other competitor.
The DOJ then turned to the question of internal record-keeping. Kowalski asked Chu to describe the internal records maintained by her team regarding price adjustments. Chu described several categories of records: (a) spreadsheets tracking published list prices by product line and effective date; (b) quarterly pricing recommendation memoranda prepared by her team for Holt's review; (c) email chains between Chu and Holt regarding pricing instructions and approvals; and (d) archived copies of published price lists distributed to the sales organization and, in some cases, to customers.
Kowalski asked specifically whether Chu's team tracked the reasons or justifications for each price change. Chu stated that the quarterly pricing memoranda typically included detailed market justifications — including references to raw-material costs, demand trends, and competitive benchmarking data — supporting the recommended adjustments. However, Chu acknowledged that mid-cycle adjustments directed by Holt were often implemented on the basis of Holt's brief email instructions without detailed written justifications. Chu stated that her team did not independently prepare written justifications for the mid-cycle adjustments, as these adjustments were directed by Holt and were understood to be based on his own assessment of market conditions. This acknowledgment is consistent with the internal investigation's findings regarding the absence of documented business justifications for the mid-cycle adjustments.
The session broke at approximately 2:30 p.m. for approximately fifteen minutes.
E. NASMC Trade Association Interactions (Approximately 2:45 p.m. – 3:15 p.m.)
The DOJ devoted the next segment of the session to TMC's participation in the North American Specialty Minerals Council ("NASMC"), an industry trade association headquartered in Arlington, Virginia, which hosts quarterly conferences attended by executives from the major specialty minerals producers in North America.
Kowalski asked Chu to describe TMC's participation in NASMC during the relevant period. Chu confirmed that TMC was a member of NASMC and that TMC personnel regularly attended NASMC quarterly conferences. Chu stated that she personally attended two NASMC quarterly conferences during the 2017–2021 period — one held in Arlington, Virginia (Chu could not recall the specific date but believed it was in 2018 or 2019) and one held in Scottsdale, Arizona (which Chu believed was in 2019 or 2020).
Chu stated that her attendance at these conferences was focused on industry-benchmarking sessions and panel presentations. She described participating in sessions where aggregate industry data — including production volumes, demand forecasts, and pricing indices — were presented and discussed. Chu stated that she did not attend private dinners, social receptions, or side meetings with competitor personnel during these conferences, and that her interactions with attendees from other companies were limited to brief exchanges in the context of the formal conference programming.
Kowalski asked about Holt's attendance at NASMC conferences. Chu stated that Holt typically attended all quarterly NASMC conferences and that she understood he interacted with a wide range of industry contacts at these events. However, Chu reiterated that she did not know the specific nature of Holt's interactions with competitor personnel at NASMC events and that she was not present for any private or one-on-one meetings between Holt and individuals from competitor companies.
Reeves asked whether TMC had any policies governing employee conduct at trade-association events, including policies regarding interactions with competitors. Chu stated that she was not aware of any specific policies governing NASMC interactions. She recalled receiving antitrust compliance training at some point — she believed it was in approximately 2017 or 2018 — but she could not recall the specific content of that training as it related to trade-association conduct. She stated that she did not recall receiving any subsequent antitrust compliance training after approximately 2018.
This response is consistent with the internal investigation's finding that TMC's antitrust compliance program, which was formally adopted in 2014, had not conducted annual or regularly scheduled compliance training since approximately 2018, and that TMC had no specific protocols or monitoring mechanisms in place to govern employee interactions at trade-association events, including NASMC conferences. The compliance deficiencies identified by the internal investigation are being addressed through the enhanced compliance program currently under development with Meridian Compliance Partners LLC, as discussed further in Section VII.C below.
F. Post-Holt Departure and Current Practices (Approximately 3:15 p.m. – 3:45 p.m.)
In the final segment of the session, the DOJ asked Chu about changes in TMC's pricing practices following Holt's departure from the company on September 30, 2021.
Chu described several significant changes to TMC's pricing process that were implemented in the wake of Holt's departure and, subsequently, in connection with the internal investigation and the company's cooperation with the DOJ. Specifically, Chu stated that mid-cycle pricing adjustments now require written business justifications, supported by market data or other documented rationale, and that such adjustments must be approved by a more senior level of authority — specifically, the division president — rather than by the VP of Sales alone. Chu also stated that all pricing decisions, whether quarterly or mid-cycle, are now documented in a standardized format, and that the pricing team maintains records of the justifications for each adjustment.
Chu mentioned that she is aware TMC has been developing an enhanced antitrust compliance program, although she stated that she was not directly involved in its design and could not speak to its specific provisions. She indicated that she understood the enhanced program would include regular compliance training and protocols for trade-association interactions, among other elements.
Kowalski and Reeves indicated that they had no further questions. The session concluded at approximately 3:45 p.m. Ms. Forsythe thanked the DOJ team, and the parties departed without further substantive discussion.
V. DOCUMENTS DISCUSSED DURING THE PROFFER SESSION
During the course of the proffer session, the DOJ presented, referenced, or showed Chu the following categories of documents. For each category, I have described the nature of the documents, their relevance to the questioning, and Chu's responses regarding them.
1. Holt-to-Chu Email Instructions. The DOJ presented Chu with a series of approximately eight to ten (8–10) emails from Gavin Holt to Sandra Chu, dated between approximately 2017 and 2021, directing specific price adjustments for high-purity feldspar and industrial talc product lines. These emails were drawn from TMC's own document production, submitted under Grand Jury Subpoena No. GJ-22-0194-SD-003, and bore Bates stamps within the TMC production range. The emails were generally brief — typically one to three sentences — and directed Chu to implement specific price increases or holds on specified product lines effective on specified dates. Holt's stated justifications in the emails were limited and typically referenced "market conditions," "competitor movements," or similar general language. Chu confirmed the authenticity of each email presented, confirmed that she received and read each email at or around the time it was sent, and confirmed that she implemented the pricing changes directed in each email.
2. TMC Published Price Lists. The DOJ presented multiple versions of TMC's published price lists for high-purity feldspar, industrial talc, and rare-earth concentrates, spanning the period from approximately 2017 to 2021. These price lists reflected the adjustments that Chu implemented at Holt's direction, both during the regular quarterly cycle and on a mid-cycle basis. Chu confirmed the authenticity of the price lists and confirmed that they accurately reflected the prices that were published and distributed to TMC's sales organization and customers.
3. Pricing Correlation Charts. The DOJ presented Chu with a series of charts — prepared by the DOJ's investigative team and not previously seen by Chu or by Calderwood & Harkness — showing side-by-side timelines of price movements by TMC, Ridgecrest Minerals Inc., and Pinnacle Earth Resources Ltd. for the three product categories (high-purity feldspar, industrial talc, and rare-earth concentrates) from 2017 to 2021. The charts visually depicted the temporal correlation between TMC's price adjustments and those of Ridgecrest and/or Pinnacle, with the interval between corresponding adjustments ranging from approximately one to fourteen days in the instances highlighted by the DOJ. Kowalski asked Chu to review the TMC pricing data reflected in the charts and to confirm whether it appeared consistent with her records. Chu examined the charts and stated that the TMC pricing data depicted in the charts appeared consistent with her records, though she noted that she could not verify the accuracy of the Ridgecrest or Pinnacle data, as she did not have access to those companies' pricing records. Calderwood & Harkness was not provided copies of these charts, and we should request them in connection with any future discovery or negotiation.
4. NASMC Conference Attendance Records. The DOJ presented documents reflecting TMC personnel attendance at NASMC quarterly conferences during the relevant period. The documents appeared to be registration records or attendance lists maintained by NASMC. Chu confirmed her own attendance at two NASMC conferences, as described in Section IV.E above. The records also reflected Holt's attendance at multiple NASMC conferences, though Chu was not asked to confirm Holt's attendance at specific events.
5. TMC Quarterly Pricing Memoranda. The DOJ presented several of the quarterly pricing analytics reports prepared by Chu's team for Holt's review. These were internal documents from TMC's production. Kowalski asked Chu to walk through the analytical methodology reflected in the memoranda, including the data sources, analytical frameworks, and recommendation formats. Chu did so in detail, explaining the inputs and assumptions underlying her team's pricing recommendations. The DOJ's interest in these memoranda appeared to be focused on contrasting the thoroughness of the quarterly process with the cursory nature of the mid-cycle adjustment process — specifically, the absence of comparable written analysis supporting the mid-cycle adjustments directed by Holt.
VI. ASSESSMENT OF CHU'S CREDIBILITY AND DEMEANOR
Chu was composed, forthcoming, and consistent throughout the duration of the proffer session. She maintained a calm and professional demeanor during all segments of the questioning, including during the most sensitive and potentially confrontational exchanges regarding her knowledge of Holt's alleged inter-competitor communications. She did not appear evasive, defensive, or unduly anxious at any point.
Chu's responses during the proffer session were consistent in all material respects with the statements she provided during her July 18, 2022 interview with Calderwood & Harkness LLP as part of the internal investigation. No inconsistencies were observed between her proffer session statements and her prior interview, nor were any inconsistencies identified between her statements and the documentary record reviewed during the session.
Chu did not volunteer information beyond what was asked. She answered all questions directly and succinctly, without evasion or unnecessary elaboration. Where she could not recall specific details — such as the precise dates of her NASMC conference attendance — she said so forthrightly rather than speculating. This approach was consistent with the preparation guidance provided to her by Calderwood & Harkness in advance of the session.
Chu's account that she did not know of Holt's inter-competitor communications was consistent and unshaken under repeated and probing questioning from both Kowalski and Reeves. The DOJ approached this topic from multiple angles — asking about VaultChat, about NASMC conferences, about whether she found the mid-cycle adjustments unusual — and Chu's responses remained steady and internally consistent each time. She did not waver, contradict herself, or offer implausible explanations.
Critically, Chu appropriately acknowledged that the pattern of mid-cycle pricing adjustments directed by Holt, viewed in retrospect, "could be seen as unusual." This acknowledgment demonstrated candor and cooperativeness without constituting an admission harmful to TMC. By framing her observation in retrospective terms, Chu communicated that she did not harbor suspicions at the time the conduct was occurring — a distinction that is both factually accurate based on the evidence and strategically important for TMC's defense posture.
Overall, Chu presented as a credible, cooperative, and reliable witness. Her performance during the proffer session was consistent with our assessment of her as a corroborative fact witness whose testimony supports the narrative that the alleged conduct was directed by Holt without the knowledge of other TMC personnel, including Chu.
VII. ASSESSMENT OF DOJ'S FOCUS AREAS AND APPARENT STRATEGY
A. DOJ's Primary Interest in Chu
Based on the tone, substance, and direction of the DOJ's questioning during the proffer session, the DOJ appears primarily interested in Sandra Chu as a corroborative fact witness rather than as a target or subject of the investigation. The DOJ's questions were focused on three principal areas in which Chu's testimony would be useful to the government:
(a) Holt's Pricing Authority and Behavior. The DOJ sought to establish through Chu's testimony that Holt was the unilateral decision-maker on pricing for the three product categories at issue, that he exercised this authority without meaningful oversight or challenge, and that he directed pricing adjustments — particularly mid-cycle adjustments — based on purported "market intelligence" that he did not share with or explain to Chu or other subordinates.
(b) Mechanics of Price Adjustments. The DOJ sought to use Chu's testimony to establish the specific mechanics by which TMC's price adjustments were implemented — i.e., that Holt would issue a brief email directive to Chu, Chu would update the published price lists, and the adjusted prices would be disseminated to the sales organization and customers. This testimony provides the factual foundation for the DOJ's argument that Holt had the ability to implement pricing changes quickly and with minimal internal scrutiny, facilitating the alleged coordination with competitors.
(c) Absence of Legitimate Business Justifications. The DOJ sought to use Chu's testimony to establish that mid-cycle price adjustments directed by Holt lacked the documented market justifications that characterized the standard quarterly pricing process. This testimony supports the DOJ's circumstantial case that the mid-cycle adjustments were driven by inter-competitor communications rather than by legitimate competitive analysis.
The DOJ did not appear to treat Chu as a target or subject of the investigation. The questioning tone throughout the session was investigative and exploratory rather than adversarial or accusatory. Neither Kowalski nor Reeves attempted to establish Chu's active participation in any agreement or conspiracy, and neither suggested — directly or by implication — that Chu was a party to or knowing participant in the alleged price-fixing conduct. The DOJ's use of the pricing-correlation charts suggests that they are building a pattern-and-timing case focused on the synchronized nature of competitor price movements, using Chu's testimony to establish the factual predicate on the TMC side.
B. DOJ's Focus on Holt
The proffer session confirmed that the DOJ's investigation remains squarely focused on Gavin Holt as the key TMC participant in the alleged conspiracy. The DOJ's questions were carefully designed to establish the following elements of Holt's role:
• Holt exercised unilateral pricing authority within the U.S. Specialty Minerals Division, with no effective check or oversight from subordinates (including Chu) or senior leadership;
• Holt directed mid-cycle pricing adjustments using vague and unsubstantiated references to "market intelligence," without providing Chu or others with the actual source or basis for his directives;
• Holt was the sole TMC contact point with competitor counterparts — specifically, Carl Edgerton at Ridgecrest Minerals Inc. and Kevin Tsang at Pinnacle Earth Resources Ltd. — and did not involve or inform other TMC personnel regarding those contacts; and
• Holt's communications with competitors were conducted through the VaultChat application, a platform that Chu was unaware of and had no access to, further supporting the inference that Holt deliberately concealed the communications from his colleagues.
This focus on Holt is consistent with the framework contemplated in the ongoing Non-Prosecution Agreement ("NPA") negotiations between Calderwood & Harkness (on behalf of TMC) and the DOJ. As previously reported, the draft NPA includes a Holt carve-out, pursuant to which the DOJ reserves the right to pursue criminal charges against Holt individually, notwithstanding any resolution with TMC at the corporate level. Holt, through his personal counsel Patrick Dunleavy of Briarcliff Law Group PLLC, asserted his Fifth Amendment privilege against self-incrimination and declined to testify before the grand jury on June 14, 2022. Holt's assertion of the Fifth Amendment privilege, combined with the DOJ's apparent focus on him as the central participant in the alleged conspiracy, further underscores the importance of Chu and other TMC witnesses (including Thomas Eriksen) in providing the factual testimony that the DOJ cannot obtain directly from Holt.
C. DOJ's Interest in Compliance Gaps
The DOJ's questions regarding TMC's trade-association policies — or, more precisely, the absence thereof — and the lapse in antitrust compliance training since approximately 2018 suggest that the DOJ may cite TMC's compliance deficiencies as evidence of a permissive corporate culture that facilitated the alleged conduct. Chu's testimony that she was unaware of any specific policies governing NASMC interactions, and that she could not recall receiving antitrust compliance training after approximately 2017 or 2018, provides the DOJ with a factual basis to argue that TMC failed to maintain adequate internal controls and compliance safeguards during the period of the alleged conspiracy.
This line of inquiry is consistent with the DOJ's stated enforcement priorities regarding corporate compliance programs, as articulated in the Antitrust Division's July 2019 guidance on the evaluation of corporate compliance programs in criminal antitrust investigations (updated in 2023). The DOJ's compliance-related questions also have direct implications for the NPA negotiations, as the scope of compliance-enhancement obligations that the DOJ will require as a condition of any NPA will likely be informed by the perceived severity of TMC's compliance failures.
This underscores the critical importance of the enhanced antitrust compliance program currently under development with Meridian Compliance Partners LLC, under the direction of Claudia Ferraro. TMC intends to submit the enhanced compliance program to the DOJ as part of its cooperation and remediation effort, and it is essential that the program be sufficiently robust and comprehensive to address the specific deficiencies highlighted by the DOJ's questioning — including, at a minimum, regular antitrust compliance training for all commercial personnel, specific protocols for trade-association interactions, monitoring and auditing mechanisms, and a clear reporting structure for compliance concerns.
D. No Apparent Interest in Chu as Target
Based on the totality of the DOJ's questioning during the proffer session — including the tone, substance, and direction of the inquiry — it is our assessment that the DOJ does not appear to be pursuing Sandra Chu as a potential defendant or target of the investigation. The following factors support this assessment:
• The DOJ's questions were directed at establishing what Chu knew and when she knew it, rather than at establishing Chu's active participation in any agreement, conspiracy, or anticompetitive conduct. The questions were phrased in a manner consistent with the development of a cooperating fact witness, not the interrogation of a suspect.
• Neither Kowalski nor Reeves suggested — directly or by implication — that Chu was a party to, knowing participant in, or willful facilitator of the alleged price-fixing conduct. There were no accusations, no confrontational exchanges, and no attempts to secure admissions of wrongdoing from Chu.
• Chu's consistent testimony that she lacked knowledge of Holt's inter-competitor communications was not challenged or contradicted by the DOJ with documentary or other evidence. The absence of such evidence is consistent with the internal investigation's findings, which, based on a review of approximately 555,000 documents, did not identify any documentary link between Chu and the alleged conspiracy.
• The DOJ did not present any evidence or ask any questions suggesting the existence of undisclosed documentary evidence implicating Chu.
While we cannot definitively rule out any future change in the DOJ's posture toward Chu, the proffer session strongly supports the conclusion that Chu's individual exposure remains minimal and that the DOJ views her as a fact witness whose testimony is valuable to the government's case against other targets — principally Holt — rather than as a participant in the alleged conduct.
VIII. IMPACT ON TMC'S COOPERATION POSTURE
A. Positive Indicators
The Chu proffer session proceeded smoothly and, on balance, represents a positive development for TMC's cooperation posture with the DOJ. Several specific indicators support this assessment:
• Chu's testimony was cooperative, credible, and internally consistent, both within the proffer session itself and in comparison to her prior interview with Calderwood & Harkness. The DOJ appeared satisfied with her responses and did not express any dissatisfaction or skepticism regarding the completeness or accuracy of her account.
• Chu's testimony reinforced the central narrative that TMC has been advancing in its cooperation submissions — namely, that the alleged price-fixing conduct was driven by Gavin Holt individually, acting without the authorization, knowledge, or involvement of TMC's senior leadership (including CEO Søren Dalmqvist, General Counsel Priya Anand, and Board Chair Margaret Caldwell) or the TMC Board of Directors. The proffer session provided no evidence to the contrary, and the DOJ did not suggest that it possessed evidence implicating TMC senior leadership.
• The DOJ's receptiveness to the proffer session, including the professional and non-adversarial tone of the questioning, suggests that TMC's cooperation is being credited by the Antitrust Division. The session proceeded in a manner consistent with a cooperative relationship between the company and the government, which bodes well for the ongoing NPA negotiations.
• The successful completion of the Chu proffer session establishes a track record of employee cooperation that can be cited in future submissions to the DOJ, demonstrating TMC's good-faith commitment to facilitating the government's investigation.
B. Areas of Concern
Notwithstanding the foregoing positive indicators, several aspects of the proffer session and the DOJ's presentation of evidence raise concerns that warrant careful attention in our ongoing defense strategy and NPA negotiations:
• Pricing-Correlation Data. The DOJ's pricing-correlation charts, which visually depicted the near-contemporaneous price movements by TMC, Ridgecrest, and Pinnacle across the three product categories from 2017 to 2021, are compelling evidence of coordinated pricing conduct. While the charts alone do not establish an agreement (as opposed to independent parallel pricing), the tight temporal correlation — particularly in instances where the interval between corresponding adjustments was as short as one to two days — will be difficult to rebut if used in connection with any prosecution of Holt or any future enforcement action. We should prioritize obtaining copies of these charts and subjecting the underlying data to rigorous analysis by our forensic economics experts.
• Absence of Documented Business Justifications. Chu's acknowledgment that mid-cycle pricing adjustments directed by Holt lacked the detailed written justifications that accompanied the standard quarterly pricing recommendations may be used by the DOJ to argue that TMC's internal controls were inadequate to prevent or detect anticompetitive conduct. This finding could affect the magnitude of cooperation credit or penalty reduction in the NPA negotiations, as the DOJ may argue that TMC's failure to maintain adequate pricing controls contributed to the perpetuation of the alleged conspiracy.
• Compliance-Training Gap. The fact that TMC's antitrust compliance training lapsed after approximately 2018, and that TMC had no specific protocols for monitoring trade-association interactions, was noted by the DOJ and may be cited in the NPA negotiations as a basis for imposing more extensive compliance-enhancement obligations. This gap is particularly problematic because it encompasses the majority of the relevant period (2018–2021), during which the alleged price-fixing conduct is alleged to have continued.
C. Next Steps
Based on the foregoing assessment, the following next steps are recommended:
1. Eriksen Proffer Preparation. Continue preparation for the proffer session of Thomas Eriksen, Regional Sales Manager, Western Region, which is scheduled for April 22, 2023. Particular attention should be devoted to Eriksen's NASMC conference attendance, his interactions with competitor personnel, and the ambiguity identified during the internal investigation regarding the extent of Eriksen's knowledge of Holt's activities. Eriksen's proffer presents greater risk than Chu's, given the unresolved questions about his involvement, and will require more extensive preparatory work.
2. Supplemental Cooperation Submission. Finalize the supplemental cooperation submission, targeted for May 1, 2023, which should incorporate the Chu proffer session as evidence of TMC's ongoing cooperation with the DOJ. The submission should highlight Chu's cooperativeness, the consistency of her testimony with TMC's cooperation narrative, and TMC's continued commitment to making employees available for the government's investigation.
3. Forensic Economics Analysis. Coordinate with Hargrove Forensic Advisory LLC (Dr. Vanessa Tremblay, lead engagement partner) regarding the affected-commerce analysis and the economic rebuttal to the pricing-correlation data presented by the DOJ. Dr. Tremblay's team should be provided with a detailed summary of the DOJ's pricing-correlation charts (to the extent we can reconstruct them from our notes) and should be asked to prepare an analysis of alternative explanations for the observed pricing patterns, including independent responses to common cost and demand factors.
4. Enhanced Compliance Program. Continue development of the enhanced antitrust compliance program with Meridian Compliance Partners LLC (Claudia Ferraro) to address the specific compliance gaps highlighted by the DOJ's questioning. The program should be designed to satisfy the DOJ's evaluation criteria for corporate compliance programs and should be ready for submission to the DOJ in connection with the NPA negotiations. Priority components include: annual antitrust compliance training for all commercial personnel; trade-association interaction protocols and monitoring; pricing-decision documentation requirements; whistleblower and reporting mechanisms; and periodic auditing and testing of compliance controls.
5. Holt Monitoring. Continue to monitor developments regarding Gavin Holt's status. Holt's assertion of Fifth Amendment rights through Briarcliff Law Group PLLC (Patrick Dunleavy) before the grand jury on June 14, 2022, means that the DOJ cannot compel his testimony absent an immunity grant. This may result in the DOJ focusing additional pressure on TMC's cooperation as the primary source of factual testimony regarding the alleged conspiracy. We should be prepared for the possibility that the DOJ may seek to leverage TMC's cooperation obligations to obtain testimony or evidence that it cannot obtain directly from Holt.
IX. PRIVILEGE AND CONFIDENTIALITY NOTICE
This memorandum is prepared for the sole use of Calderwood & Harkness LLP attorneys and staff working on Matter No. 1039-00001, In re Grand Jury Investigation No. GJ-22-0194, U.S. District Court, Northern District of California, San Francisco Division. It is not intended for distribution to any person or entity outside of Calderwood & Harkness LLP.
This memorandum reflects the mental impressions, conclusions, opinions, and legal theories of counsel and constitutes attorney work product prepared in anticipation of litigation, protected from disclosure under Federal Rule of Civil Procedure 26(b)(3), its criminal analogue, and applicable case law, including Hickman v. Taylor, 329 U.S. 495 (1947), and Upjohn Co. v. United States, 449 U.S. 383 (1981). The memorandum is also protected by the attorney-client privilege to the extent it reflects confidential communications between Calderwood & Harkness LLP and its client, Torchlight Mining Corp.
This memorandum must not be distributed to the client, Torchlight Mining Corp., or to any third party, without the express written authorization of the Responsible Partner, Elaine Forsythe. In the event that this memorandum or any portion thereof is authorized for transmittal to the client, such transmittal should be made under a cover communication that expressly preserves the attorney-client privilege and work-product protection, and the client