Earlier this month, former Obama White House counsel and veteran Washington lobbyist Greg Craig was acquitted on charges of making false statements to federal agents. His trial was an offshoot of the Paul Manafort case in Special Counsel Robert Mueller’s investigation. Craig’s victory followed the court’s order, issued on the eve of the trial, which dismissed a felony count that he made false statements under the Foreign Agents Registration Act (FARA).
Together, these decisions represent a widely anticipated litmus test of how much latitude the judiciary would accord the Justice Department’s emerging priority of holding U.S. actors engaged in political activity on behalf of foreign actors criminally liable.
Yet even in defeat, the Craig case demonstrates that the Department is willing to pursue actions against historically untouchable lobbying insiders, including K Street titans and their law firms. This week, Brandon Van Grack, the top Justice Department official responsible for FARA enforcement, signaled that combating foreign covert influence remains a “top priority.” Furthermore, it illustrates gaps that either the Justice Department or Congress could fill in order to pursue their interests in emboldened enforcement.
Even without enhanced enforcement techniques in place, DOJ’s more recently expansive view of the scope of FARA outstrips the operating assumptions of many lawyers, lobbyists, and companies with foreign ownership or client interests. As such, formal, proactive FARA compliance programs and robust, reactive due diligence programs for responding to letters of inquiry are both exceedingly rare and increasingly essential to mitigate legal and reputational risk.
FARA Enforcement Generally
As Just Security’s Steve Vladeck previously noted here, FARA is a World War II-era statute aimed at ensuring transparency regarding the identity of would-be influencers of U.S. policy on behalf of foreign “principals,” which includes foreign governments, foreign political parties, non-U.S. citizens located outside the United States, and entities having its principal place of business in, or operating under the laws of, a foreign country. Unless an exemption applies, the statute requires agents acting on behalf of foreign principals to register with DOJ and disclose all relevant agreements, income, and expenditures associated with the agent’s work for the foreign principal.
The FARA Registration Unit within the National Security Division at the Department of Justice is responsible for overseeing its litany of responsibilities. They include: (1) reviewing registration submissions, (2) engaging would-be registrants regarding deficiencies in submissions, (3) performing periodic formal inspections to assess the adequacy of registrant reporting and disclosure, (4) researching publicly available information to identify individuals and organizations that are obligated to register, and (5) providing advisory opinions upon request through the Rule 2 process. The DOJ Office of Inspector General noted during its 2016 audit of the FARA Unit that the full team consisted of only three attorneys (one of whom was the unit chief) and three support team specialists.
So, how do the instruments of enforcement operate to catch non-registrants? Historically, the FARA Unit relied on voluntary registration, either proactively or in response to its letters of inquiry. In a now-archived section of the Criminal Resource Manual 2062, DOJ guidance describes the circumstances giving rise to a letter of inquiry as well as its purpose and content:
If the Department receives credible information establishing a prima facie registration obligation, where evidence of intent is lacking, the Department usually sends a letter advising the person of the existence of FARA and the possible obligations thereunder. FARA, after all, is a malum prohibitum enactment not well known outside the legal/lobbying community. The letter usually cites or provides the information prompting the inquiry. In the Department’s experience, the vast majority of persons approached with an inquiry letter based on public source information respond within a reasonable amount of time and either register or convincingly explain their lack of agency status or the availability of an exemption.
In the event of an insufficient response to resolve the issues described in the letter of inquiry, counterintelligence FBI agents tasked with investigating FARA violations and federal prosecutors from local U.S. Attorney’s Offices manage further investigation and, if necessary, prosecution. However, according to Section 9-90.710 of the DOJ’s Justice Manual, approval from the National Security Division is required prior to the filing of charges for a FARA violation.
While historically FARA did not feature as a top DOJ enforcement priority, the landscape is changing. Congressional interest, Trump administration officials, and some independent reports demonstrate renewed interest in vigorous FARA enforcement. A 2016 OIG report highlighted the Department’s lack of a “comprehensive FARA enforcement strategy” and recommended 14 specific improvements to its enforcement efforts. In March 2019, the DOJ announced the appointment of Brandon Van Grack to lead the FARA Unit, arguing that the appointment demonstrates FARA is moving from “an administrative obligation…to one that is increasingly an enforcement priority.”
The Craig Trial
The latest example of DOJ’s implementation of that “enforcement priority” is Craig. The investigation and indictment of Craig arose as an outgrowth of Mueller’s investigation into Russian interference in the 2016 presidential election and, specifically, through its review of former Trump campaign chairman Manafort’s work on behalf of the Ukrainian government.
In its investigation, the FARA Unit sought clarification from Craig and his law firm, Skadden, regarding a 2012 report prepared for the Ukrainian government by the law firm analyzing the legitimacy of an opposition leader’s corruption conviction under “Western” legal principles. The Skadden report concluded that the balance of evidence supported the conviction of the opposition leader despite procedural irregularities that affected the leader’s due process rights. Notably, in order to avoid charges against the law firm, Skadden decided to settle with the U.S. government in January 2019 for $4.6 million (the amount of its fees earned from the report).
The government asserted that Craig, a lead lawyer in this effort for Ukraine, failed to register under FARA and made false statements to federal investigators through his omission of his involvement in offering the New York Times access to the Skadden report in advance of its publication. The district court threw out the government’s charges that Craig’s omissions amounted to a violation of FARA in advance of trial, leaving the government to rely on a one-count, Section 1001 charge of making false statements.
Meanwhile, Craig’s counsel pointed to the government’s lack of contemporaneous and credible testimony. Notes of the purportedly key meeting at which Craig reportedly failed to accurately describe his interactions with reporters? Nonexistent. The reporter from the New York Times with whom Craig spoke? Not called. Manafort, Craig’s referral for the report? Also unavailable.
The government did elect to call Rick Gates, Manafort’s one-time protégé turned Mueller target who pled guilty to FARA charges in February 2018. Gates testified that Craig offered to connect with a reporter at the New York Times, and that the media outreach strategy that Craig executed was successful in conveying a neutral assessment of the opposition leader’s treatment in Ukraine. Craig’s counsel attacked his credibility, labeling him a “congenital liar” while walking through the litany of crimes to which he had pled. Ultimately, the jury found in Craig’s favor that he had not deliberately misled DOJ officials during their investigation.
But Why Did the Government Lose?
The Craig outcome illustrates why government agencies might aim to pursue more “formal” means of communicating with investigation targets. The “informality” of communications between Craig, Skadden, and federal investigators led the court to conclude that — unlike the obligations that prohibit false statements under Section 1001 — there was no legal duty to be truthful with enforcement authorities assessing FARA registration obligations. One wonders how the same court might have treated the matter had the FARA Unit and the FBI been able to comprehensively track and document all statements from, and communications with, their investigation targets during the duration of the investigation.
The specter of faulty fact development also appears in the federal case against former national security adviser Michael Flynn’s business partner, Bijan Rafiekian, who was found guilty in July on two counts of acting as an unregistered foreign agent of the Turkish government, in violation of FARA. In ruling on Rafiekian’s motion for a new trial, U.S. District Judge Anthony Trenga held the government had not presented evidence of a “direct agreement” between Rafiekian and the Turkish government. Prosecutors presented evidence of communications between Rafiekian and a third party who, according to the government, acted on behalf of the Turkish government, as well as evidence that the third party had high-level contacts in the Turkish government. Judge Trenga’s further underscores the evidentiary burden that the government faces to establish the requisite relationship between agent and foreign state.
Craig and Rakiekian reflect the judiciary’s and jury’s dissatisfaction with the evidence presented to illustrate purported direct agreements between alleged foreign agents and their respective principals. But the question remains: What can the government do to create the robust factual record that the judiciary demands?
First, the government’s recent challenges reflect the inadequacy of the letter of inquiry process. As referenced above, the impotence of letter-writing is not new. The archived section of the Criminal Resource Manual states that the “Department has asked for authority to issue civil investigative demands (CID) to more effectively gather evidence” where responses to letters of inquiry are unsatisfactory.
Second, FARA enforcement may involve the involvement of the FBI earlier and more often in the process. Rather than holding informal discussions via phone with attorneys from the FARA Unit, FBI agents may end up conducting longer inquiries to tease out every possible avenue for establishing the “direct” agreement that Judge Trenga found lacking or to otherwise professionalize the documentation surrounding the official nature of the inquiry.
New tools may yet be on the horizon to further mobilize FARA enforcement, and future efforts to enforce other counterintelligence and counterespionage laws may serve as the functional equivalents to subpoena power in furtherance of an investigation into FARA violations. However, until that time, these recent cases represent the blueprint for how government investigators can remedy the deficiencies appearing in Craig. While the government gets its investigative house in order, many companies may seek to close the gap between the DOJ’s increasingly high priority of enforcement and the lobbying and public affairs industry’s relatively low level of compliance-program preparedness.