WASHINGTON — A joint investigation has led to the guilty plea of a ringleader and a company insider for defrauding a biochemical company and falsifying exportation documentation to divert products to China, marking the first declination for prosecution for the National Security Division (NSD) under enforcement policy for a company that promptly disclosed misconduct and provided extraordinary cooperation.
The Homeland Security Investigations (HSI) Tampa, Defense Criminal Investigative Service, and Department of Commerce Bureau of Industry and Security joint investigation led the Justice Department to announce that Pen Yu, also known as Ben Yu, 51, of Gibsonton, Fla., and Gregory Munoz, 45, of Minneola, Fla., have each pleaded guilty to one count of wire fraud conspiracy for their roles in a scheme to fraudulently procure deeply discounted products from Massachusetts biochemical company Sigma-Aldrich Inc., doing business as MilliporeSigma, and export them to China using falsified export documents.
In addition, the Justice Department announced that it has declined the prosecution of MilliporeSigma after considering the factors set forth in the department’s Principles of Federal Prosecution of Business Organizations and the National Security Division Enforcement Policy for Business Organizations. The NSD Enforcement Policy creates a presumption that companies that voluntarily self-disclose to NSD potentially criminal violations arising out of or relating to the enforcement of export control or sanctions laws, fully cooperate, and timely and appropriately remediate will generally receive a non-prosecution agreement unless aggravating factors are present. This is the first time that NSD has declined the prosecution of a company under the NSD Enforcement Policy.
“When a business uncovers criminal wrongdoing within its ranks, the company is far better off reporting the violation than waiting for the Justice Department to discover it,” said Deputy Attorney General Lisa Monaco. “That’s exactly what MilliporeSigma did in the first-ever corporate declination under our National Security Division’s voluntary self-disclosure program. Because of MilliporeSigma’s timely disclosure and exceptional cooperation, a rogue company insider and his accomplice pled guilty to fraudulently diverting millions of dollars’ worth of biochemicals to China, and the company will not be prosecuted. As national security and corporate crime increasingly intersect, companies that step up and own up under the Department’s voluntary self-disclosure programs can help themselves and our nation.”
According to court documents, beginning in at least July 2016 and continuing through at least May 2023, Yu ordered biochemical products from MilliporeSigma, a subsidiary of multinational science and technology company Merck KGaA in Darmstadt, Germany, with help from Munoz, a MilliporeSigma salesperson, by falsely representing that Yu was affiliated with a biology research lab at a large Florida university. This fictitious affiliation led MilliporeSigma to provide Yu over $4.9 million worth of discounts and other benefits, such as free overnight shipping, not available to the public. Yu gave Munoz thousands of dollars in gift cards for facilitating these fraudulent discounted orders. When the products arrived at the university stockroom, a stockroom employee diverted the products to Yu, who repackaged them and shipped them to China. To avoid scrutiny, Yu made false statements about the value and contents of these shipments in export documents.
This scheme continued until MilliporeSigma compliance personnel identified certain orders as suspicious, prompting the company to retain outside counsel who voluntarily disclosed the misconduct to the Department of Justice’s National Security Division only a week later. MilliporeSigma made the disclosure well before its counsel had completed their investigation and understood the full nature and extent of the scheme. MilliporeSigma offered exceptional cooperation to the prosecution team, including by proactively identifying and producing documents to the department that established probable cause to search residences and electronic devices of culpable individuals. MilliporeSigma’s cooperation allowed investigators to quickly identify the individuals responsible for the scheme, including Yu and Munoz, and secure their felony guilty pleas. As a result of MilliporeSigma’s timely self-disclosure and extraordinary cooperation, MilliporeSigma will not be charged, despite the criminal wrongdoing committed by Munoz, a MilliporeSigma employee.
“When MilliporeSigma found evidence that one of its employees was diverting biochemical products to an unauthorized purchaser in China, they did not sweep the misconduct under the rug. Instead, the company made the early decision to cooperate with the Justice Department, resulting in the convictions of responsible individuals,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division. “Today’s announcement reflects the value for companies like MilliporeSigma to quickly self-disclose potential criminal activity and reaffirms our commitment to work in partnership with the private sector to root out conduct that violates the law and jeopardizes our national security.”
“When company and university insiders abuse the trust that their institutions place in them, they will be held accountable,” said U.S. Attorney for the Middle District of Florida Roger B. Handberg. “Here, Millipore Sigma’s prompt disclosures led to the uncovering of this multimillion- dollar criminal enterprise, and enabled law enforcement to disrupt the scheme and stop further illegal exports to China. These disclosures led to the seizure of multiple illegal shipments to China and the conviction of two of the most culpable participants in the scheme. Millipore Sigma’s prompt and full cooperation was essential in obtaining this result.”
“Faking an affiliation with an academic research lab to obtain controlled biochemical materials, and then sending those materials to China, is not only wrong, but illegal,” said Assistant Secretary for Export Enforcement Matthew S. Axelrod. “Today’s announcement provides yet another fact pattern for universities to beware of — the misuse of academic institutions by outsiders who seek to obscure the actual customer of controlled items.”
Assistant U.S. Attorney for the Middle District of Florida Daniel J. Marcet and Trial Attorney Garrett Coyle of the National Security Division’s Counterintelligence and Export Control Section are prosecuting the cases.