Recent cases arising from Special Counsel Robert Mueller’s investigation and other Department of Justice (DOJ) investigations have brought new attention to the Foreign Agents Registration Act of 1938 (FARA or the Act).
Prior to the July 2018 indictment of Maria Butina and the October 2017 indictments of Paul Manafort and Richard Gates, FARA was virtually unknown outside of the circle of Washington lobbyists, and even there it was little more than an afterthought. In the months following the indictments of Manafort and Gates on criminal charges, including the knowing and willful failure to comply with FARA, the number of new FARA registrations surged, marking increased attention and deference to FARA’s long-standing requirement that agents acting for or on behalf of foreign principals register with the DOJ.
While these recent FARA prosecutions may, at first glance, seem like outliers of little concern to the business community at large, there are several points worth noting.
First, FARA is a broad and loosely worded statute, the requirements of which extend beyond the prototypical K Street lobbyist representing the interests of a foreign government. In fact, a person or entity may be required to register as a foreign agent even if they have no foreign government clients, even if they have no written contract with their client, and even if no fees were paid by the client.
Acting on a simple request from a foreign person or entity for assistance in setting up a meeting with a U.S. government official, or for advice on how to influence U.S. policy or public opinion, could be enough to require registration under FARA.
Compounding the difficulty in navigating FARA’s broad language are its numerous exemptions, and the limited, and sometimes contradictory, guidance offered in the DOJ’s advisory opinions. And given the historical paucity of FARA enforcement, it is unsurprising that FARA is something of a blind spot for many companies, including those with industry-leading anti-corruption and export controls compliance programs.
Second, even prior to the October 2017 indictments, there were indications that FARA enforcement was becoming a priority at the DOJ. A 2016 audit of FARA enforcement by the DOJ’s Office of the Inspector General undertook a review of the department’s policies and procedures with regard to FARA (the OIG Audit Report), noting the tension between the growing appetite for developing FARA cases on the part of FBI agents and AUSAs in the field, and the National Security Division’s (NSD) reluctance to approve FARA charges.
Having recently been taken to task for its perceived inaction, and with increased attention on foreign involvement in domestic politics, the NSD may be charting a new course on FARA enforcement going forward, particularly as foreign efforts to influence U.S. politics and public opinion have become a significant public concern.
Finally, the DOJ quite recently released a tranche of past FARA advisory opinions, dating back to the 1980s. Taken together, these opinions underscore the lack of bright-line rules with regard to the registration requirements, indicating that DOJ engages in a fact-specific inquiry.
While only time will tell whether FARA enforcement is on the rise, this article offers an overview of what you need to know about FARA.
History of FARA
The Act (22 U.S.C. §611 et seq.), as amended, requires that “agents of foreign principals” register with the DOJ and file periodic disclosure reports, along with copies of any “informational materials” that are distributed within the United States.
FARA was enacted by Congress in 1938, in large part to combat the proliferation of political propaganda activity by European fascist and communist governments. (The OIG audit of the NSD’s enforcement and administration of the Act, September 2016; p. 2) The DOJ successfully prosecuted 23 criminal FARA cases during the WWII era. (USAM, Criminal Resource Manual, 2062)
Early on, the DOJ developed the practice of sending letters advising suspected foreign agents of the existence of FARA and notifying them of their potential disclosure obligations. (Id.) In addition to increasing compliance with FARA’s disclosure obligations, receipt of such a letter could be used by the DOJ as evidence of a foreign agent’s willful failure to register. (Id., citing United States v. Frank (23 F.R.D. 145, DDC 1959))
In 1966, the Act was amended to focus instead on maintaining the integrity of the U.S. Government decision-making process by shining light on agents seeking economic or political advantage for their foreign clients. (Id.) The 1966 amendments narrowed the scope of FARA to agents acting “for or on behalf of” a foreign principal, thus increasing the government’s burden of bringing a criminal case. The 1966 amendments also introduced a civil injunctive remedy, and an outlet for issuance of advisory opinions. (Id.)
The last significant amendment to FARA coincided with the enactment of the Lobbying Disclosure Act of 1995 (LDA). At that time, Congress created an exemption whereby certain foreign principals who register under the LDA are not required to also register under FARA This exemption is discussed in more detail below.
In the years after the 1966 amendments, criminal FARA prosecutions decreased, and FARA issues were increasingly resolved via civil and administrative actions. (Id.) In fact, between 1966 and 2015, the DOJ brought only seven criminal FARA cases. (OIG Audit Report at 8.)
During the same period, the DOJ brought 17 civil cases seeking injunctive relief, 10 of which were successfully litigated, and seven of which were resolved by consent decree. (USAM, Criminal Resource Manual, 2062.) The DOJ has indicated that a far greater number of cases were concluded with administrative resolutions. ( Id.) It is worth noting, however, that the DOJ has not sought civil injunctive relief under FARA since 1991. (OIG Audit Report at i.)
There are indications, however, that FARA enforcement is ripe for a resurgence.
The OIG Audit Report, issued in September, 2016, was quite critical of the NSD’s historical enforcement of FARA, citing a decline in the number of active registrations (Id. at 5-6), the dearth of prosecutions and civil actions (Id. at 8), and the perception on the part of law enforcement that NSD is reluctant to approve FARA prosecutions. (Id. at 10.) The OIG Audit Report called for the DOJ to develop a comprehensive enforcement strategy on FARA to be integrated into its overall national security efforts. (Id. at 21) In its response, NSD concurred with this recommendation, citing FARA’s importance in “promoting detection of, discouraging, and neutralizing undisclosed foreign messaging and forcing disclosure of foreign efforts to influence United States domestic and foreign policy, as well as public opinion.” (Id. at 33)
Who is an Agent of a Foreign Principal?
As stated above, FARA requires that “agents of foreign principals” register with the DOJ and file periodic disclosure reports, along with copies of any “informational materials” that are distributed within the United States. (22 U.S.C. §612(a))
A foreign principal is defined to include:
- a foreign government or political party,
- an individual outside of the United States, except where that individual is a citizen of and domiciled within the United States, or
- a partnership, association, corporation, or organization organized under the laws of a foreign country, or having its principal place of business in a foreign country. (22 U.S.C. §612(b))
It is worth emphasizing that the definition of foreign principal is quite broad, essentially including any foreign individual or entity. Extending far beyond foreign governments, the Act’s definition of foreign principal applies, for example, to the foreign parent company of a U.S. subsidiary, or even to a U.S. corporation with its principal place of business in a foreign country.
FARA defines the term “agent” to include “any person who acts as an agent, representative, employee, or servant, or any person who acts in any other capacity at the order, request, or under the direction or control” of either a foreign principal, or a person or entity whose activities are directed, controlled, or financed, in whole or in major part, by a foreign principal. (22 U.S.C. §612(c)(1)) Registration is required under FARA, subject to certain enumerated exceptions, to the extent that such person engages in any of the following types of activities in the United States, for or in the interests of a foreign principal:
- engages in political activities;
- acts as a public relations counsel, publicity agent, information service employee, or political consultant;
- solicits, collects, disburses, or dispenses contributions, loans, money, or other things of value; or
- represents the interests of the foreign principal before any agency or official of the U.S. government. 22 U.S.C. §612(c)(1)-(iv)
While there is scant case law interpreting FARA, courts have held that a contractual relationship is not necessary to establish that an agent is working for, or in the interests of, the foreign principal. (See United States v. German-American Vocational League Inc., 153 F.2d 860, 863-64 (3d Cir. 1946) (“We find nothing in [FARA] warranting the contention that it contemplated only agencies created by an express contract.”))
And while some early case law applied a common law standard to determine agency ( see, e.g., Id. at 864), more recent interpretations have favored an interpretation more consistent with the language of the Act, stating that “[i]n determining agency for purposes of [the Act, the] concern is not whether the agent can impose liability upon his principal but whether the relationship warrants registration by the agent to carry out the informative purposes of the Act.” (See Attorney Gen. of the United States v. Irish N. Aid Comm., 668 F.2d 159, 161 (2d Cir. 1982) (holding that the agency relationship must be determined within the context of FARA, rather than in accordance with common law principles of agency, which contemplate power on the part of the agent to bind the principal))
In Irish N. Aid Comm., the Second Circuit acknowledged that a degree of discretion is necessary when evaluating whether a person is acting at the request of a foreign principal, such that the requirement to register as a foreign agent is triggered. (Id.) (“The exact perimeters of a “request” under the Act are difficult to locate, falling somewhere between a command and a plea.”) The court explained: “When members of a large religious, racial, or ethnic group respond to pleas for contributions or generalized political support, they do not thereby become “agents” under the Act.” (Id.) Instead, agency may be created under the FARA where “a particular individual, or a sufficiently limited group of identifiable individuals, is asked to act.” (Id.)
Finally, the specificity of the request is relevant to the analysis, with a general request for political or financial support less likely to give rise to an agency relationship than a more specific instruction. (Id., at 161-62)
Recent DOJ advisory opinions suggest that the agency determination is highly fact-specific, with similar scenarios sometimes resulting in different outcomes.
For example, in an advisory opinion dated Dec. 6, 2017, the DOJ analyzed the submission of a U.S. company that had entered into agreements with two other U.S. firms to provide specified services to those two firms in connection with the two firms’ representation of a foreign government. (Op. Nat. Sec. Div., Dec. 6, 2017) The two U.S. firms were registered under FARA, and the U.S. company’s role was “limited to providing meeting coordination, relationship facilitation, and cross-cultural communications clarification.” The U.S. company’s contracts with the two U.S. firms specifically provided that the U.S. company would not engage in political activity, undertake publicity work, or appear before U.S. government officials on behalf of the foreign government.
The DOJ concluded that, under the facts represented, no agency relationship existed between the U.S. company and the foreign government. In reaching this conclusion, the DOJ noted that the U.S. company’s contracts were with the U.S. firms, and not with the foreign government, and that the U.S. company’s interactions with the foreign government were limited to scheduling, coordination, and facilitating communications.
Standing in contrast is the DOJ’s Feb. 9, 2018 advisory opinion, in which the DOJ reached a seemingly contradictory conclusion. (Op. Nat. Sec. Div., Feb. 9, 2018)
In this instance, a U.S. company contracted with a U.S. law firm to provide services in connection with the U.S. firm’s representation of a foreign state bank. Under the arrangement, the U.S. firm was to provide legal advice and services concerning compliance with anti-money laundering requirements to the foreign state bank, and the U.S. company was to provide services to assist the U.S. firm in providing such legal advice and services. The U.S. company indicated that it expected to participate with the U.S. firm in limited interaction with officials of U.S. federal regulatory agencies and financial institutions, but noted that such services would not include advocacy or efforts to influence U.S. government policy.
Despite the fact that the U.S. company was providing services to a U.S. firm, and not directly to the foreign state bank, the DOJ concluded that the U.S. company did have an agency relationship with the foreign principal. It further concluded that the U.S. company was not exempt from FARA registration under the commercial activity exemption and was thus required to register as a foreign agent.
While the FARA definitions of “foreign principal” and “agent” are very broad, a number of statutory exclusions and exemptions exist, relieving certain categories of individuals and entities of the obligation to register as a foreign agent. FARA exempts officials of foreign governments, and diplomatic or consular officers and their staff acting within the scope of their positions from the registration requirement. (22 U.S.C. §613(a)-(c))
Several other noteworthy exemptions are highlighted below.
- News Organizations. The term “agent of a foreign principal” expressly excludes “any news or press service or association organized under the laws of the United States,” or any publication that is distributed for “bona fide news or journalistic activities.” To qualify for this exclusion, the news organization must be at least 80% owned by United States citizens, and its officers and directors must be United States citizens. Additionally, the news organization cannot be “owned, directed, supervised, controlled, subsidized, or financed” by any foreign principal. (Id. §611(d))
- Private and Nonpolitical Activities. Foreign agents may be exempt from FARA’s registration requirement if they are only engaged in (1) “private and non-political activities in furtherance of the bona fide trade or commerce of such foreign principal,” (2) “other activities not serving predominately a foreign interest,” or (3) soliciting or collecting funds or contributions for use in medical aid and assistance, or to relieve human suffering. (Id. §613(d)) The registration exemption for private and non-political activities is particularly ill-defined, and the DOJ has issued limited, and sometimes conflicting, administrative guidance regarding its scope. For instance, in an Oct. 18, 2017, advisory opinion, a U.S. company consulted for a foreign company and country to help the foreign company obtain Customs and Border Protection (CBP) pre-inspection services at a foreign airport, and to help promote the project with CBP by “engag[ing] with officials from CBP, and officials from other United States government agencies.” (Op. Nat. Sec. Div., Oct. 18, 2017) In that case, the DOJ held that registration was not required because the DOJ said the goal was not to change CBP policy but to work within existing CBP policy.
- In contrast, consider the Feb. 9, 2018, advisory opinion discussed above. In that opinion, the DOJ determined that a company engaged in limited outreach to U.S. financial institutions and regulatory agencies for the purpose of demonstrating a foreign state bank’s suitability for partnership was not merely “private and non-political activities in furtherance of the principal’s bona fide trade or commerce” under §613(d)(1). In the former instance, the requester highlighted the private and nonpolitical aspect of the work, but nevertheless acknowledged direct outreach to the U.S. government with the goal of building support on “both sides of the [two countries’] border.” In the latter instance, despite the requester’s similar emphasis on nonpolitical, commercial aspects of the activity, the DOJ found that the requester’s goal was to promote the interests of the foreign principal.
- Practicing Attorneys. Practicing attorneys representing a disclosed foreign principal are exempt from registration, provided that the legal representation “does not include attempts to influence or persuade agency personnel or officials other than in the course of judicial proceedings, criminal or civil law enforcement inquiries, investigations, or proceedings, or agency proceedings required by statute or regulation to be conducted on the record.” (22 U.S.C. §613(g))
- Lobbying Disclosure Act. An agent of a foreign principal other than a foreign government or political party who is registered under the LDA (2 U.S.C. §1601 et seq.), in connection with the same representation, need not register under FARA. (Id. §613(h)) An agent acting on behalf of a foreign government or political party must always register under FARA, irrespective of any parallel registration requirement under the LDA.
Penalties and Enforcement
While the focus of FARA historically has been on encouraging voluntary compliance, any person who willfully violates the Act is subject to criminal penalties upon conviction. Willful failure to register as a foreign agent constitutes a violation, as does a willful false statement or omission of a material fact in documents submitted pursuant to the Act. (Id. § 618(a))
Criminal penalties include up to five years’ imprisonment and fines of up to $10,000. (Id.) The government may also pursue civil injunctive relief, seeking an order from the appropriate U.S. district court enjoining the defendant from continuing to act as an agent of a foreign principal, or ordering the defendant to comply with FARA registration requirements. (Id. § 618(f))
The DOJ has indicated that “[t]he threshold for a criminal investigation is the presence of reason to believe that a significant FARA offense has been committed and that sufficient evidence should be available to prove this.” (USAM, Criminal Resource Manual, 2062) Criminal prosecutions under FARA must be approved by the DOJ’s Criminal Division, and in practice must first be approved by the appropriate U.S. Attorney’s Office. (Id.)
The DOJ does not track the number of FARA cases it declines to prosecute, or the reasons for such declinations. (OIG Audit Report at 8)
The DOJ’s stated threshold for bringing a civil action is “sufficient credible evidence of a significant violation for which the civil injunctive remedy is judged appropriate in light of all the circumstances because time is of the essence or for some other reason.” (USAM, Criminal Resource Manual, 2062) Past civil actions have typically arisen out of issues uncovered during the routine inspection of the books and records of FARA registrants, and the DOJ has not pursued injunctive relief in a FARA case since 1991. (Id. ) (Pursuant to 22 U.S.C. §615, registrants are required to keep and preserve books and accounts related to the agent’s activities on behalf of the foreign principal, and to make those records available for inspection upon request.)
The DOJ’s historical approach to FARA enforcement has resulted in the Act going largely unnoticed, but it is possible that a convergence of forces—the critical OIG review of FARA administration and enforcement, concerns over concealed attempts on the part of foreign actors to influence U.S. public opinion, and legislative interest in FARA reform—may mark the beginning of a new era in FARA enforcement.
Thus, the time is ripe for companies with FARA risk factors to institute appropriate policies and procedures to ensure compliance and to determine whether any remediation is necessary.
Steven A. Tyrrell is the managing partner of Weil’s Washington, D.C., office and co-head of the firm’s global White Collar Defense, Regulatory and Investigations practice. His practice focuses on white collar criminal defense, regulatory enforcement matters, and internal investigations.
Eileen Hren Citron is an associate in the Litigation Department of Weil’s Washington, D.C., office. She routinely advises clients on regulatory concerns related to compliance with applicable anti-bribery laws including the Foreign Corrupt Practices Act.