Foreign lobbying law open to exploitation

Foreign lobbying law open to exploitation
© Camille Fine

Washington’s foreign agents are able to operate in a legal gray zone thanks to ambiguities in the law and less-than-stringent enforcement.

Foreign lobbying has come to the forefront due to special counsel Robert Mueller’s investigation of Russia and the Trump campaign. Mueller has already indicted campaign aides Paul Manafort and Richard Gates over their lobbying work, and former White House national security adviser Michael Flynn is under scrutiny as well.

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People who work for foreign government clients are subject to the Foreign Agents Registration Act (FARA), a World War II-era law enacted to stop Nazi propaganda from entering the United States by providing more transparency about the work these firms do.

Unlike domestic lobbying, requirements for FARA registration are broad, covering anyone who engages in lobbying or public relations for a foreign government-connected client. Communications with media, government officials and staff and think tank experts must be disclosed every six months.

Even consultants who simply advise a foreign government, political party or government official — without making any contacts on their behalf — have to file paperwork with the Justice Department if their work involves U.S. policy.

Firms can earn upwards of $100,000 per month for such work, which can take the sting out of the paperwork requirements.

But to a large extent, the foreign agent disclosure rules operate on what essentially amounts to an honor system.

The FARA Unit in the National Security Division of the Justice Department doesn’t have the ability to issue subpoenas, so officials generally learn about potential violations through media reports.

Last year, the Justice Department’s inspector general released a report that highlighted the unit’s issues and the rampant problems with compliance.

The FARA office is notoriously understaffed and underfunded despite being tasked with policing the hundreds of registrants who file — and those who don’t.

More individuals are reportedly filing as foreign agents out of an abundance of caution in the wake of the Mueller indictments, but it’s uncertain whether the trend will continue.

“I do think you will probably see an uptick in FARA registrations in the short term, because people will watch what just happened” with Manafort and Gates, said Matt Miller, a former Justice Department spokesman.

“In the long term, I don’t think we’ll see an increase in enforcement. Mueller has a lot of resources to throw at the people he’s looking at, and he’s looking at them for other things than FARA. The FARA Unit doesn’t have those same resources,” he said.

The Hill spoke with more than a dozen lawyers and current and former foreign agents for this story; all of them emphasized that a majority of firms want to operate within the law.

But the Justice Department has only brought seven criminal cases under FARA over the last 50 years, raising questions about how much lobbyists fear violating it.

The FARA Unit is “housed in a division that’s set up to fight terrorism; FARA is only a small part of what the division does, and not the highest priority by far,” said Miller. “Trying to convince someone whose job it is to catch terrorists and spies to spend more time on FARA enforcement is pretty hard.”

What’s more, a firm generally only gets into trouble if they “willfully” evade the law, meaning a foreign agent can wait months or years to declare work that they’ve done; they’re in the clear so long as they file the required paperwork eventually. More than half of the registrants examined by the Justice Department inspector general had filed disclosures late.

The absence of subpoena power for the FARA unit also makes conducting investigations extremely difficult, the inspector general report said.

One former foreign agent recalled being notified that the Justice Department was coming to his office for a random audit. The agency told the firm that they could either set out the files it wanted the department to inspect, the person told The Hill, or have officials go through the files themselves.

This person said the firm had records that would have raised red flags, so it offered to pull files for the Justice Department — but only the ones that were above board.

“If you look at the sheer number of people registered versus the number of employees the FARA Unit has, we’ve got them outdone,” the person said. “It’s like PR people and reporters, we’ve got them outnumbered in this town by 50 to 1.”

There are also gray areas in the FARA rules.

Thomas Spulak, of King & Spalding, notes that the law says even being “indirectly supervised, directed, controlled, financed or subsidized” in “whole or major part” would trigger registration, but others say there may be some confusion about what that entails.

A person has to register as a foreign agent if the “principal beneficiary” is a foreign government-connected entity, but that term is not defined, nor is the definition of “whole or major part” made clear, said Joshua Ian Rosenstein, a lobbying compliance attorney at Sandler Reiff Lamb Rosenstein & Birkenstock.

For example, several lawyers said one ambiguous area in the disclosure law is lobbying work for a private foreign company, or its U.S. subsidiary, when there is a foreign government official sitting on its board.

The lawyers all indicated that the Justice Department has the authority to craft new rules detailing more specific instructions and there are bills on Capitol Hill that aim to put more teeth into the law’s enforcement.

FARA has failed to keep pace with the rise of more sophisticated lobbying and public relations campaigns and present-day political landscape.

“The problem is, FARA is not a statute with many clear bright lines. There are some, but there is so much ambiguity and so much vague language used in FARA that it can be a real challenge in the face of modern lobbying campaigns when someone may need to register,” said Caleb Burns, a lobbying and campaign finance compliance attorney at Wiley Rein.

One current foreign agent said that “there is a significantly greater likelihood that someone will propose to you something that’s illegal” while working for foreign clients versus domestic ones.

“[It’s] because they don’t understand U.S. law or because they know what they’re doing, they don’t care, and are happy to find a consultant who feels the same.”

A person could set up a U.S. nonprofit funded by foreign cash. The entity could then register under domestic lobbying laws, policed by Congress, which impose far fewer disclosure requirements. The contract still falls under FARA if the money originates from a foreign government or political party. Current and former foreign agents say, however, that it can be difficult to tell where funding for a prospective client is coming from.

“We call them ghost ships. Sure, there’s a ship, but there [aren’t] any souls on it,” said a second former foreign agent.

It is a problem seen in the situation unfolding with the men in Trump’s orbit.

In one case, Manafort and two Washington firms worked for a Brussels-based nonprofit that had been connected to a pro-Russia Ukrainian political party, but had signed affidavits swearing it had no foreign influence. They retroactively filed disclosures with the Justice Department, which suggests the work had actually meant to serve Ukrainian government interests.

Flynn, the former national security adviser, had worked for a wealthy businessman in Turkey, but had to retroactively register upon further inquiry by the Justice Department. The work is thought to have been to the benefit Turkey’s government.

The second former foreign agent, who is still on K Street, said he had been offered four times his current salary to come to a firm and do FARA work, but turned it down.

“For the most part, it’s impossible to track where this money is coming from anymore. … The tip of the iceberg, that is just the part you see,” the person said.