Bloomberg Law
Free Newsletter Sign Up
Bloomberg Law
Welcome
Go
Free Newsletter Sign Up

INSIGHT: Craig Acquittal Shows Uncertain Future for Aggressive FARA Enforcement

Sept. 30, 2019, 8:01 AM

It is safe to say that when the Department of Justice announces new enforcement initiatives, the white collar bar sits up and takes notice. That is exactly what happened earlier this year when the DOJ’s National Security Division announced it was stepping up its focus on the historically underutilized Foreign Agents Registration Act (FARA), and installed a new FARA chief freshly released from former Special Counsel Robert Mueller’s team.

But despite the DOJ’s newfound interest in the law, FARA has long been a highly imperfect tool for fighting the threat of foreign influence in the United States. And the recent acquittal of former Skadden Arps partner Greg Craig on FARA-derived charges further highlights the need to seriously rethink the FARA enforcement strategy before further encouraging prosecution under this vague and anachronistic law.

Background

Congress enacted FARA in 1938 to address the spread of Nazi and Communist propaganda in the United States. While the statute originally concentrated on surreptitious foreign information peddlers, it was later revised to focus on lobbyists and others looking to influence U.S. public policy and public opinion in broad daylight.

Today, the statute requires an “agent” who acts on behalf of a “foreign principal” to publicly register with the FARA Registration Unit within 10 days and comply with bi-annual and other reporting and recordkeeping obligations. An individual or entity that “willfully” fails to register under FARA could face criminal penalties which, while rarely used in past decades, prosecutors are now eager to pursue.

While this construct may seem straightforward, the devil is in FARA’s (lack of) details. Under the law, activities conducted by an “agent of a foreign principal” requiring registration encompass a wide range of actions including political engagement or consulting, public relations, making monetary disbursements, or otherwise representing the interests of a foreign principal before an agency or official of the U.S. government. It not limited strictly to lobbying.

It does not require fees to be paid or a formal principal-agent relationship to be formed—in fact, a simple “request” to arrange a meeting with a U.S. agency or official could qualify. In addition, what constitutes a “foreign principal” under FARA is extremely broad and includes foreign governments, political parties and officials, as well as private sector companies, individuals and nonprofits.

As a result, any non-U.S. person, corporation, or other legal entity, including arguably a foreign parent of a U.S. subsidiary, could be considered a foreign principal under FARA.

There are a few exemptions to FARA registration but they are limited in scope and can depend on highly fact-specific analyses. Attorneys representing a foreign client in court, at an agency proceeding, or before a Congressional investigation are exempt from registration, provided their work does not veer into lobbying, public relations, or other efforts to affect U.S. policy.

Activities conducted to further a foreign principal’s commercial interests are exempt from registration so long as they are not directed by, and do not promote the interests of, a foreign government. Per regulation, work for state-owned enterprises is exempt under FARA, but work for private companies closely aligned with a foreign state could be problematic.

Lobbyists who register under the less burdensome Lobbying Disclosure Act (LDA) may be exempt from FARA registration, but not if a foreign government or political party is the principal beneficiary of their activities.

Statutory Vagueness and Unintended Consequences

FARA’s sweeping concepts of what constitutes activity subject to registration, coupled with very few published DOJ opinions and even less case law precedent, means that the statute ostensibly over-regulates those it was not intended to. FARA has been stretched far beyond lobbyists to capture the activities of not-for-profits, environmental groups, schools, think-tanks, media companies, law firms and public relations firms.

At the same time, according to a 2016 DOJ Inspector General audit, prosecutors brought only seven criminal FARA cases between 1966 and 2015. There is a high likelihood this dearth of criminal enforcement actions was due to concerns that FARA’s provisions were unconstitutionally vague and would not withstand judicial scrutiny on due process grounds, or that prosecutors would struggle to prove that a FARA violation was done willfully.

These concerns came to a head in the case of Greg Craig, against whom FARA charges were initially declined by the Southern District of New York before being taken up by federal prosecutors in the District of Columbia.

Craig, while an attorney at Skadden Arps, helped prepare a 2012 report on behalf of the Ukrainian government regarding its prosecution of former presidential candidate Yulia Tymoshenko on corruption charges. Neither Craig nor the firm registered under FARA, the necessity of which Craig vigorously disputed.

But what became the issue of contention was Craig’s communications with U.S. media about the report, and whether that was sufficient to constitute a public relations campaign on behalf of a foreign government.

Ultimately, prosecutors charged Craig not with failing to register (due to the lapsing of the five-year statute of limitations) but with lying to the FARA Registration Unit. However the case ultimately fell apart, with one charge being dismissed by Judge Amy Berman Jackson due to ambiguity in the law regarding FARA’s registration requirements.

The other charge failed at trial when a District of Columbia jury acquitted Craig, saying they were unable to conclude he lied about a material fact regarding his Ukraine work.

Future Enforcement Outlook

With the 2020 presidential election around the corner, it is not surprising that regulators are on high alert for efforts by foreign governments to influence political discourse in the United States. But with their current track record and the recent Craig acquittal, the DOJ should seriously rethink its FARA enforcement strategy before further unleashing the dogs of war.

The currently over-stretched law should be scaled back to apply only to agents of a foreign government, not to private companies or overseas parents of U.S. companies. It should focus on lobbying and other activities designed squarely to influence U.S. policy, not on commercial activities.

And the parameters of what constitutes an “agent of a foreign principal” relationship should be clarified so that routine business of U.S. law, consulting and public relations firms do not become the basis for trumped-up criminal enforcement actions.

The case against Craig never should have happened, and a serious look at FARA and how it is enforced should be had before another such misguided prosecution is brought against anyone.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Joseph Moreno is a partner at Cadwalader, Wickersham & Taft LLP in Washington, D.C., in the firm’s white collar defense and investigations practice. Prior to re-joining the firm he was a federal prosecutor with the DOJ’s National Security Division, and served as a staffer to the FBI’s 9/11 Review Commission. He is a two-time U.S. Army combat veteran and has served as a military prosecutor in Europe, the Middle East, and Africa.