Merck KGaA unit avoids DOJ prosecution after exposing scheme to divert drugs to China

Merck KGaA’s North American life science division, MilliporeSigma, has made U.S. legal history thanks to its swift and voluntary efforts to expose a multimillion-dollar scheme to divert biochemical products to China.

The U.S. Department of Justice (DOJ) on Wednesday announced that Florida residents Pen Yu, 51, and Gregory Muñoz, 45, each pleaded guilty to one count of wire fraud conspiracy for their roles in a scheme to “fraudulently procure deeply discounted products” from Sigma-Aldrich and ship them to China using faked export documents.

MilliporeSigma, the U.S. and Canada life sciences business of Merck KGaA, operates through myriad legal entities, including Sigma-Aldrich, EMD Millipore Corporation and Cerilliant Corporation, the subsidiary notes on its website.

MilliporeSigma has since fired Muñoz, a company spokesperson confirmed over email. Muñoz had served as a salesperson for the company, according to the DOJ.

“DOJ’s favorable resolution of this matter with MilliporeSigma reflects our company values and steadfast commitment to a strong culture of compliance that protects our customers, employees, and business,” MilliporeSigma's spokesperson said.

The DOJ’s National Security Division decided not to prosecute MilliporeSigma given that the company voluntarily disclosed the scheme in a timely manner and has fully cooperated with the government’s investigation, according to a Justice Department release. The MilliporeSigma imbroglio marks the first time that the National Security Division has declined to prosecute a company under its enforcement policy.

According to court documents cited by the Justice Department, Yu’s scheme kicked off at least as early as July 2016 and continued through at least May 2023. During that stretch, Yu ordered biochemical products from MilliporeSigma with help from Muñoz by falsely suggesting that Yu was connected with a biology research lab at a “large Florida university," the DOJ said.

This act of deceit helped Yu obtain more than $4.9 million in discounts and other benefits from MilliporeSigma, according to the Justice Department. In return, Yu gave Muñoz “thousands of dollars in gift cards” for his part in the deal, the U.S. agency contends.

Once those illicitly obtained products arrived at the university stockroom, a stockroom "co-conspirator" diverted the goods to Yu, who repackaged and shipped them to China, according to court filings. The Justice Department claims Yu made false statements about the value and contents of the shipments in export documents in order to avoid further scrutiny.

All told, Yu attempted to export nearly $14 million worth of cocaine, fentanyl and other substances to Chinese labs, according to Bloomberg Law.

The scheme continued until MilliporeSigma compliance workers tagged certain orders as suspicious, which convinced the company to enlist outside counsel. MilliporeSigma’s legal representatives then disclosed the misconduct to the Justice Department’s National Security Division just one week later, according to DOJ’s release.

“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,” Lisa Monaco, the U.S. deputy attorney general, said in a statement. “That’s exactly what MilliporeSigma did in the first-ever corporate declination under our National Security Division’s voluntary self-disclosure program.”