Bogus University Lab Export Scheme Conviction

A Taiwanese national was sentenced August 2nd to three years and eight months in prison, followed by three years of supervised release, for conspiracy to commit wire fraud in association with a scheme to purchase biochemical products for resale to China.

Pan Yu pleaded guilty on May 2. Co-conspirator Gregory Muñoz pleaded guilty on May 9, and co-conspirator Jonathan Thyng pleaded guilty on July 23.

According to court documents, Pen Yu ordered biochemical products from MilliporeSigma, a subsidiary of multinational science and technology company Merck KGaA, Darmstadt, Germany, with help from Gregory Muñoz, 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 Muñoz 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.  The Justice Department 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 (NSD Enforcement Policy).

The NSD Enforcement Policy creates a presumption that companies that (1) voluntarily self-disclose to NSD potentially criminal violations arising out of or relating to the enforcement of export control or sanctions laws, (2) fully cooperate, and (3) timely and appropriately remediate will generally receive a non-prosecution agreement, unless aggravating factors are present.