Compliance: Let’s Talk about FARA

Overview

The Foreign Agents Registration Act “(FARA”) was enacted in 1938. FARA requires certain agents (see definition below) of foreign principals (see definition below) who are engaged in political activities or other activities specified under the statute to make periodic public disclosure of their relationship with the foreign principal, as well as activities, receipts, and disbursements in support of those activities.  Disclosure of the required information facilitates evaluation by the government and the American people of the activities of such persons in light of their function as foreign agents. The FARA Unit of the Counterintelligence and Export Control Section (CES) in the National Security Division (NSD) is responsible for administering FARA.

FARA is an important tool to identify foreign influence in the United States and address national security threats.  The central purpose of FARA is to promote transparency with respect to foreign influence within the United States by ensuring that the United States government and the public know the source of certain information from foreign agents intended to influence American public opinion, policy, and laws, thereby facilitating informed evaluation of that information.  FARA fosters transparency by requiring that persons who engage in specified activities within the United States on behalf of a foreign principal register with and disclose those activities to the Department of Justice.  The Department of Justice is required to make such information publicly available.

A FARA violation can lead to criminal liability with serious consequences:  A willful failure to register, a willfully false statement of a material fact, or a willful omission of a material fact is punishable by up to five (5) years of imprisonment and a fine- See Penalties below. Determining whether registration is required necessitates understanding whether there is a “foreign principal” involved and, if so, whether there is an “agent” who is engaged in the covered activities. The next step will be to determine if one of the exemptions applies.

Political activities can encompass more than it seems at first glance. When people hear the term political activities, they may think of lobbying Congress because that has been the traditional focus of political activities. It also refers to meetings with people in the executive branch, meetings with regulators, and other activities.

Definitions

An “agent of a foreign principal” is any person who acts as an agent, representative, employee, or servant, or otherwise acts at the order, request, or under the direction or control of a “foreign principal” and does any of the following:

  • Engages within the United States in political activities, such as intending to influence any U.S. Government official or the American public regarding U.S. domestic or foreign policy or the political or public interests of a foreign government or foreign political party.
  • Acts within the United States 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 within the United States.
  • Represents within the United States the interests of a foreign principal before U.S. Government officials or agencies.

A “foreign principal” can be a foreign government, a foreign political party, any person outside the United States (except U.S. citizens who are domiciled within the United States), and any entity organized under the laws of a foreign country or having its principal place of business in a foreign country.  It can also include a foreign faction or body of insurgents whose legitimacy the United States government has yet to recognize.

Focus

The DOJ’s focus on FARA enforcement seems to stem from a recent surge in new registrants and foreign principals under the statute.  Actually, according to the Report to Congress, there were twice as many in 2019 compared to 2016 and nearly double the number of short-form registrants. FARA did not see much action for some time, and this new environment changes the risk landscape for entities that may be engaging in activities that require registration.

“We are not going back to the historic era that preceded this enforcement surge when there was a more relaxed enforcement posture by the department toward regulated industries,” David Laufman, a partner at Wiggin & Dana, said. “I don’t see the toothpaste going back in the tube here.”

Amy Jeffress, a partner at Arnold & Porter and former prosecutor, agreed. “I do not expect the Biden administration will be backing down on FARA.” The interest in FARA has increased among her clients recently. “We are seeing a lot of companies seeking our advice on how exactly they need to proceed to comply with FARA, whether they need to change the nature of the activities they are doing so that they do not have a registration obligation, or whether they need to register or have an agent register on their behalf,” she explained. “In the last year and a half, I have been doing more FARA presentations for clients at their request than before.”

Some Recent FARA Cases

  • In 2021, in the Central District of California, Imaad Shah Zuberi was sentenced to 12 years in prison—including the statutory maximum of five years on the FARA charge—and ordered to pay $15.7 restitution and a criminal fine of $1.75 million. Zuberi had pleaded guilty in 2019 to violating FARA, tax evasion, and making almost $1 million in illegal campaign contributions, including money from foreign entities, used to influence U.S. elections. Zuberi subsequently pleaded guilty to obstruction of justice in 2020 in the Southern District of New York. Between 2013 and 2017, Zuberi solicited foreign nationals and representatives of foreign governments with claims he could use his contacts to change U.S. foreign policy to benefit his clients. As part of his efforts to influence public policy, Zuberi hired lobbyists, retained public relations professionals, and made campaign contributions that gave him access to high-level U.S. officials, whom Zuberi then lobbied to act in support of his clients. In relation to the FARA charge, Zuberi admitted to submitting false registration statements that concealed his role in a lobbying effort on behalf of the Government of Sri Lanka, his political contributions, and the millions of dollars he received.
  • In 2020, in the District of Columbia, Elliott Broidy pleaded guilty to one count of conspiracy to violate FARA. In exchange for millions of dollars, Broidy and his co-conspirators agreed to secretly do the bidding of foreign principals by lobbying senior U.S. Government officials on pending matters at the Department of Justice. Broidy admitted to his role in a covert campaign to influence the U.S. Government on behalf of Chinese and Malaysian interests. Broidy sought to lobby the highest levels of the U.S. Government to deport a dissident of the People’s Republic of China (PRC) living in the United States and to drop proceedings related to 1Malaysia Development Berhad (1MDB), one of the largest fraud and money laundering prosecutions ever brought – all while concealing the foreign principals he represented. Among other actions, Broidy tried to arrange meetings for a PRC Minister with the Attorney General, the Secretary of Homeland Security, and other high-level officials during the PRC Minister’s visit to the United States; provided talking points to the Secretary of State referencing the 1MDB investigation in advance of a meeting with the Malaysian Prime Minister, and pushed the White House Chief of Staff for a golf game between the U.S. President and the Malaysian Prime Minister to discuss resolution of the 1MDB matter. Despite Broidy’s and his co-conspirator’s efforts, the lobbying campaign was unsuccessful as to the individuals mentioned above. Of the $9 million Broidy was paid for his role in the conspiracy, he paid roughly $2.4 million to co-conspirator Nickie Lum Davis, who pleaded guilty to one count of aiding and abetting violation of FARA in 2020 in the District of Hawaii. As part of their plea agreements, both Broidy and Davis agreed to forfeit proceeds realized by their offensive conduct.
  • In 2018, Elena Alekseevna Khusyaynova, a Russian national, was charged by a criminal complaint in the Eastern District of Virginia for her alleged role in a Russian conspiracy to interfere in the U.S. political system, including the 2018 midterm election. The complaint alleges that Khusyaynova conspired to defraud the United States by impairing, obstructing, and defeating the U.S. Department of Justice’s lawful functions to administer and enforce FARA, among other offenses.
  • In 2018, after being convicted at trial in the Eastern District of Virginia on bank fraud and tax charges, Paul J. Manafort, Jr., pleaded guilty in the District of Columbia to two counts: (i) conspiracy to commit multiple offenses, including violating FARA by failing to register and by providing false statements in a document filed with FARA, and laundering money; and (ii) conspiracy to obstruct justice by tampering with witnesses. Manafort failed to register under FARA as an agent of the Government of Ukraine, the Ukrainian Party of Regions, and former Ukrainian President Yanukovych. Manafort was sentenced to 73 months’ imprisonment, including the statutory maximum of 60 months for the conspiracy to violate FARA (Manafort is due to serve an additional 17 months stemming from his conviction in the Eastern District of Virginia).
  • In 2018, W. Samuel Patten pleaded guilty in the District of Columbia to violate FARA by engaging in lobbying and political consulting in the United States on behalf of the Opposition Bloc, a Ukrainian political party registering under FARA. Patten contacted members of Congress, the executive branch, and the news media; drafted talking points for a Ukraine oligarch for meetings with members of Congress and congressional staff; and helped the oligarch draft articles targeted at the U.S. press. Patten cooperated with and provided substantial assistance to the government and was sentenced to 36 months of probation.
  • In 2018, Nisar Ahmed Chaudhry pleaded guilty in the District of Maryland for failing to register under FARA as an agent for the Government of Pakistan, including its military, intelligence, and diplomatic officials.

Penalties

The penalty for a willful violation of FARA is imprisonment for not more than five years, a fine of up to $250,000, or both.  Certain violations are considered misdemeanors, with penalties of imprisonment of not more than six months, a fine of not more than $5,000, or both.  There are also civil enforcement provisions that empower the Attorney General to seek an injunction requiring registration under FARA (for applicable activities) or correcting a deficient registration statement.

Closing

The DOJ’s increased focus is real.  Why?  Brandon L. Van Grack is now leading the FARA enforcement unit,  a high-profile prosecutor who stated compliance is fact- and entity-specific. Furthermore-

It is dependent on the entity, the relationship that foreign entity has with the foreign government, the relationship the foreign entity has with the domestic entity, how the engagement will occur, the type of engagement, the purpose of the engagement and the beneficiaries of the engagement. There are so many variables that, while constructing guardrails for FARA compliance is possible, there is not a one-size-fits-all solution.

I welcome your thoughts and comments.

Best-

Jonathan T. Marks, CPA, CFF, CFE

Attribution

DOJ

Anti-Corruption Report

 

protecting-us-covert-foreign-influence (1)

 

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