Following a series of executive orders issued by the Trump administration targeting DEI initiatives, many companies have made significant changes to their proxy statements this season. Disclosures relating to racial and gender diversity were once considered essential, and while proxy advisory firms continue to consider such disclosures when making voting recommendations, now many companies are skirting around the topic or eliminating any mention of diversity altogether. 

In a significant decision announced last week, the Department of Justice (DOJ) declined to prosecute a private equity (PE) firm after the firm voluntarily disclosed sanctions and export control violations committed by a portfolio company the firm acquired. This result, and the government’s joint enforcement actions against the portfolio company and its former CEO, offer several important takeaways:

• It is critical for PE firms to conduct robust, non-siloed due diligence for trade and other compliance both before and after acquisition.

• Sanctions and export controls enforcement remains a key government focus, as evidenced by the extensive behind-the-scenes coordination between Justice, Treasury, Commerce, and Homeland Security.

• It is not uncommon for private equity firms to acquire a company and then discover hidden problems. Firms that promptly investigate, self-report, cooperate, and remediate can avoid criminal prosecution, even for serious violations.

• The government continues to hold individuals personally responsible for violations of sanctions and export controls regulations.