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Registering As A “Foreign Agent:” Advisors to Foreign Entities Risk Criminal and Civil Penalties as DOJ Doubles Down on FARA Enforcement

There have been a lot of comments lately, both politically and in the media, regarding the activity of foreign agents, including foreign governments, engaged in what can be construed as political activism or political activities in the United States.

What can be done to increase the amount of current information about those activities and who is involved?

And how will such efforts apply to private parties, especially to the activities undertaken by law firms and other professional service businesses, on behalf of foreign clients?

First, a little history and context. Congress enacted the Foreign Agent Registration Act (“FARA”) in 1938 to require certain agents of foreign principals engaged in political activities in the US, especially activities supporting the Nazi government of Germany, to make public disclosures of their relationship(s) with their foreign principals. This included activities in furtherance of the principals’ goals, and the receipts and disbursements related to supporting those activities. Those required disclosures enable the Department of Justice (“DOJ”) to evaluate the activities of registered foreign agents. (22 USC Section 611 et. seq. and 28 CFR Part 5). At its inception, the Act was administered by the Department of State. Since 1942 FARA has been administered by the FARA Unit of the Counterintelligence and Export Control Section in the National Security Division of DOJ.

The DOJ has an impressive enforcement toolbox under FARA, including (i) criminal penalties (22 USC Section 618(a) and 18 USC Section 3571); (ii) civil enforcement, including injunctive relief (22 USC Section 618(f)); and (iii) restrictions applicable to public officials (18 USC Section 3571).

Criminal Penalties

The DOJ provides detailed guidance on its website regarding the scope of its FARA authority, including but not limited to criminal penalties of no more than $250,000 or imprisonment for no more than five years on conviction for willfully violating any provision of FARA or its related regulations. Those violations include any registration statement or supplement filed with or furnished to the DOJ under the provisions of FARA that contains any willful statement or omission of any material fact or willfully omits a copy of a material document necessary to make the included statements and documents not misleading. The DOJ considers any failure to file a registration statement or related supplements as required by FARA to be a continuing violation so long as that failure continues to exist, regardless of any contrary statute of limitations. (22 USC Section 618(e)).

One criminal complaint was filed in 2018 against Elena Alekseevna Khusyaynova, a Russian national, who was charged for her alleged role in a Russian conspiracy to interfere in the US political system, specifically the 2016 Presidential and the 2018 midterm elections.

Allegations included conspiracy to defraud the United States by interfering, impairing, obstructing, and defeating the lawful functions of the DOJ to administer and enforce FARA. The charges were filed after she had returned to Russia. She has not yet been tried.

Similarly in 2018, Paul J. Manafort Jr., a former campaign manager for President Trump, pled guilty to multiple counts of conspiracy to violate FARA by failing to register and by providing false statements in a document filed with FARA, as well as to money laundering and conspiring to obstruct justice by witness tampering. His erstwhile associate, Richard Gates, also pled guilty to two counts: conspiracy to commit multiple offenses, including failure to register with FARA; and providing false statements, both in a document filed with FARA and in a statement made to the FBI. Gates and Manafort had lobbied on behalf of Ukraine without registering with FARA.

Civil Enforcement

The Attorney General and the United States Attorney for the several federal districts can obtain injunctive relief available through the U.S. District Court if the DOJ determines that a person is engaged in or about to engage in any acts that constitute or may constitute a FARA violation. The scope of that relief applies to any agent of a foreign principal who fails to comply with FARA or its regulations, including both (i) the right to apply for injunctive relief seeking to enjoin such acts, and (ii) the ability to seek injunctive relief to bar such person from continuing to act as an agent for the foreign principal. (22 USC Section 618(f)). If the DOJ determines that a registration is deficient, it will provide written notice to the registrant specifying the deficiencies; it is unlawful for the agent to act as an agent of the foreign principal at any time ten days or more after the receipt of the notice without filing an amended registration statement in full compliance with FARA. (22 USC Section 618(g)). For example, the DOJ used its authority under FARA in 2018 to order the state-run China Global Television Network to register as a foreign agent of the Chinese government.

In 2019, the U.S. law firm Skadden, Arps, Slate, Meagher & Flom LLP entered into a settlement agreement to resolve its liability for violations of FARA. According to the agreement, Skadden acted as an agent of the government of Ukraine by contributing to a public relations campaign directed at select members of the U.S. news media in 2012. In response to inquiries from the FARA Unit about Skadden’s role in that campaign, a then-partner made false and misleading statements to the FARA Unit. Those statements led the FARA Unit to conclude in 2013 that the law firm was not obligated to register. The facts, when later uncovered, showed that Skadden had been required to register in 2012. The firm then registered, admitted it made false and misleading statements in response to inquiries from the FARA Unit, disgorged over $4.6 million in fees, and agreed to maintain formal, robust procedures for responding to inquiries concerning its conduct from any federal government entity. Further, Skadden undertook to ensure that it would comply with FARA in connection with any future engagements on behalf of foreign clients.

The Skadden episode is a cautionary tale for all attorneys, but perhaps especially for BigLaw firms that may find themselves undone by acting in the US on behalf of a foreign client much the same as the firm would represent a US client in a domestic matter.

Most law firms know very well that they must abstain from certain foreign clients (i.e. those that raise concerns about money laundering, terrorism financing, etc.) or risk running afoul of the regulations of the Office of Foreign Asset Controls in the Department of State. An attorney should be similarly cautious about their legal responsibility when taking on a foreign client. Attorneys are used to representing clients from a position of professional distance and independence. Yet if an attorney takes on a foreign client and represents that client both zealously and creatively, the attorney may him- or herself, become the subject of a distinct federal regulatory regime. So it is particularly important that the attorney assess at the outset, ideally before taking on a foreign client, whether that representation will require the attorney to register as a foreign agent under FARA.

An exemption from registration is available under FARA for serving as an attorney for a foreign client.

But that exemption is more technical and narrower than might be expected. In one case U.S. lawyers were to represent a foreign government in civil litigation in the U.S., and also to assist that government in public relations activities related to the litigation. When the lawyers sought reassurance from the DOJ that they need not register under FARA, they were told that representation in the litigation did not require them to register, but assistance with the related public relations activities did. There is a somewhat comparable exemption from registration available to other professional firms for “private and non-political activities” on behalf of a foreign client. But that has similarly proven to be relatively narrow and technical.

A consulting firm representing a foreign bank before U.S. bank regulatory agencies had to register, as did another consulting firm representing a foreign company before a US agency.

Restrictions on Public Officials

A public official in any of the three branches of the U.S. government or in any agency of the federal government, including the District of Columbia, who is or who acts either as an agent of a foreign principal required to register under FARA (whether or not in fact registered), or as a lobbyist required to register under the Lobbying Disclosure Act of 1995 in connection with the representation of a foreign entity (as defined in Section 3(6) of that Act), is subject to fines of not more than $250,000, or imprisoned for not more than two years, or both. (18 USC Section 219l 18 USC Section 3571).

If one is to have foreign clients, one MUST determine whether that relationship will make one a “foreign agent” under FARA, and, if so, one MUST register.

©2020 Norris McLaughlin P.A., All Rights ReservedNational Law Review, Volume X, Number 241

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About this Author

Robert Gabrielski International Business Lawyer Norris McLaughlin Law Firm
Member

Robert C. Gabrielski, a member in the firm’s Management Committee, and Chair of its International Business and Tax Planning Group, devotes his practice to business and international transactions, e-commerce, and taxation.

Bob has over 30 years of experience in advising both corporate and entrepreneurial businesses on such matters as business and tax planning, business acquisitions, divestitures, and reorganizations, both domestically and internationally.  His experience is also instrumental from the inception of an idea to the exit strategy for entrepreneurs and closely-held...

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Peter D. Hutcheon Corporate Governance Lawyer Norris
Of Counsel

Peter D. Hutcheon practices primarily in the areas of business governance, commercial transactions, securities, banking, and finance.

Peter counsels management of public and private companies and banking institutions on governance matters.  He also has particular expertise with respect to indemnification and insurance issues affecting directors and officers.  Peter has represented parties in major public-private partnership financings.  He also represents clients seeking investment capital from private placements, venture capital, and private equity deals, as well as firm commitment underwritten offerings of securities.  Peter is experienced with securities matters ranging from stock options to dividend reinvestment plans.  He possesses extensive familiarity with bank regulatory matters and has worked on mergers and acquisitions in the banking industry.  Peter has considerable experience in corporate and financing transactions and has represented both buyers and sellers in public and private corporate acquisition transactions in deals involving some $2 billion.

Peter is a long-time member of the American Bar Association’s Section on Business Law, Partnerships and Unincorporated Business Organizations Committee, and for 16 years was the editor of its newsletter, the PUBOGRAM.  He is the 2005 recipient of the Martin I. Lubaroff Award for his lifelong service to this Committee.  He was a director for 22 years, including two years as chair, of the New Jersey State Bar, Corporate & Business Law Section.  He also chaired the State Bar’s Banking Law Section.  He was chairman of the New Jersey Corporate & Business Law Study Commission from its inception in 1989 to 2002, where he provided reports and suggestions on business law developments to the New Jersey Legislature and the Governor.  Peter chaired the New Jersey Securities Advisory Committee appointed by the Attorney General from 1995 to 2001 and has served as the American Bar Association’s Liaison to the New Jersey Bureau of Securities for over 38 years.  He also served as chair of the ABA’s Section of Science and Technology and is on the Editorial Board of their quarterly journal, Jurimetrics.  Hutcheon also previously served as Associate Editor and Editor-in-Chief of Jurimetrics.

Peter is listed in the Corporate Law, Mergers & Acquisitions Law, Securities Law, and Securities Regulation sections of the current edition of The Best Lawyers In America.  He also has been selected for inclusion on the list of New Jersey Super Lawyers in the Business/Corporate section every year since its inception in 2005 to 2016.  Additionally, he has authored numerous articles on various business-related law topics, including limited liability companies, securities, and directors and officers liability.

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