DOJ Announces First ‘Near Miss’ Non-Prosecution Agreement Under Its Corporate Enforcement Policy

On October 27, 2026, the U.S. Department of Justice (DOJ) announced a non-prosecution agreement (NPA) with Extreme Networks, Inc. (Extreme), a Morrisville, North Carolina-based network equipment and software company, to resolve an investigation into sanctions and export control offenses. DOJ described the resolution as its first NPA in a “near miss” case under the 2026 Corporate Enforcement and Voluntary Self-Disclosure Policy (the Policy) (i.e. a case involving full cooperation and appropriate remediation that nonetheless did not qualify for a declination of prosecution). The NPA was entered with the National Security Division’s Counterintelligence and Export Control Section and the U.S. Attorney’s Office for the Eastern District of North Carolina, and was executed on October 21, 2026.

Between approximately March 2018 and March 2022, a small group of employees at Extreme’s Russia-based subsidiary sold networking equipment and services, through a distributor, to Moscow Machinery Building Plant Avangard (MMZA), a primary producer of the S-300 and S-400 anti-aircraft missile systems. MMZA was owned by JSC Concern Almaz-Antey, which the Treasury Department’s Office of Foreign Assets Control (OFAC) added to the Specially Designated Nationals and Blocked Persons List in July 2014. The employees disguised MMZA as a purported customer called “DEMZ,” causing Extreme to file electronic export information that misidentified the ultimate consignee. The products exported were valued at approximately $487,860.92. The relationship was inherited through Extreme’s acquisition of another company’s Russian networking business, which closed in March 2018. In signing the NDA, Extreme admitted willful violations of the Export Control Reform Act and the International Emergency Economic Powers Act, knowingly filing false export information under 13 U.S.C. § 305, and smuggling under 18 U.S.C. § 554.

Key Terms of the Non-Prosecution Agreement

• Monetary penalties. A criminal fine of $487,860.92 and forfeiture of $487,860.92, for a total criminal penalty of $975,721.84. The fine is half the statutory maximum and reflects a discount for cooperation and self-disclosure. Separately, the company agreed to pay $1,529,685 in OFAC administrative penalties—roughly $2.5 million in total. No tax deduction, reimbursement, or indemnification may be sought for the penalties.
• Three-year term; no monitor. The obligations run for three years, extendable by up to one year upon a breach. DOJ did not require an independent compliance monitor, finding the company’s compliance program effective in practice. Instead, the company will submit an initial report and at least two follow-up reports to DOJ on its compliance program.
• Continuing obligations. Full cooperation with ongoing investigations; prompt reporting of credible evidence or allegations of export control or sanctions violations; maintenance of a compliance program meeting specified minimum elements; and CEO and Trade Compliance Manager certifications at the end of the term.
• Breach and change of control. A breach exposes the company to prosecution using its own admissions, with the statute of limitations tolled. Any sale, merger, or transfer of a substantial portion of the business during the term must bind the purchaser to the NPA, with 30 days’ prior notice to DOJ.

Why This Matters

A late self-disclosure can still earn meaningful credit. Extreme received a whistleblower report in April 2022 and investigated in good faith with outside counsel. It disclosed to DOJ only in October 2022, after an investigative journalist sought comment on new facts about potentially willful misconduct just days before the article ran. Because the disclosure was made under an imminent threat of public disclosure, DOJ found it untimely under the Policy. DOJ nonetheless gave “significant weight” to the company’s earlier good-faith investigative efforts and treated the matter as a “near miss.”

The result illustrates the practical middle ground the Policy now offers: not a declination, but an NPA rather than a plea or deferred prosecution agreement, a 50% fine reduction, a three-year term, and no monitor. The price, however, remains real: admissions of multiple criminal offenses, full disgorgement of proceeds, a parallel OFAC penalty, and three years of reporting, cooperation, and certification obligations. For companies weighing whether and when to disclose, the lesson is twofold: (1) the clock may effectively start running once credible allegations surface, and (2) a well-documented, good-faith internal investigation can preserve significant credit even if events overtake the timing of a disclosure.

Mitigating circumstances counted. DOJ emphasized that the misconduct was committed by a small group of employees at a foreign subsidiary who actively concealed it from U.S.-based compliance personnel, that the subsidiary had been acquired from another company and has since been shut down, and that the conduct generated less than half a million dollars in revenue.

Lessons for distribution, procurement, and M&A practices. The NPA’s Statement of Facts reads as a catalogue of red flags that compliance controls missed. Extreme remediated the gaps by terminating the distribution agreement, expanding end-user diligence and screening, adopting daily rescreening of counterparties, and implementing M&A diligence procedures. Companies should use this matter to strengthen their own compliance and specifically consider:

• Distributor and reseller agreements. Include export control and sanctions representations and undertakings, end-user disclosure obligations, audit rights, and termination rights for breach (elements now expressly reflected in the NPA’s compliance requirements).
• End-user certificates and screening. Treat end-user certificates as a diligence tool, not a formality; verify that names, addresses, domains, and letterhead are consistent across the order record, and document the basis for releasing any compliance hold.
• Acquisitions. Conduct risk-based export control and sanctions diligence on targets’ customers, distributors, and inherited contracts, and integrate acquired businesses into the compliance program promptly. Here, the problematic relationship and personnel arrived with the acquired Russian business.
• Deals involving companies under an NPA. Buyers and merger partners should note successor-binding provisions like the one in this NPA, under which a transaction that omits the required provisions is null and void.

The Extreme Networks NPA is an early data point on how DOJ will apply the Policy’s “near miss” category, and it signals that DOJ will reward genuine cooperation and remediation even where a disclosure falls short of the timeliness standard. It is equally a reminder that front-line third-party and acquisition diligence remains the first line of defense.

Ballard Spahr lawyers in the White Collar Defense and Investigations Group are available to assist clients with export control and sanctions compliance reviews, distribution and procurement contract terms, transactional diligence, and voluntary self-disclosure decisions.

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