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Enforcement Edge
December 12, 2023

FARA Bar and DOJ Officials Meet for ACI’s 5th National Forum on FARA

Enforcement Edge: Shining Light on Government Enforcement

The FARA Forum Headlines

  • DOJ resources are focused on corporate FARA enforcement
  • Foreign litigation funding and sovereign wealth funds are under scrutiny
  • DOJ’s FARA Unit has new grand jury authority
  • DOJ previewed a sweeping change to its interpretation and application of the so-called “commercial exemption”

On December 1, we gathered with fellow members of the FARA bar for ACI’s 5th National Forum on the Foreign Agents Registration Act. As in previous years, practitioners swapped insights and heard from current and former government officials about the FARA Unit’s recent work and enforcement priorities. Three current U.S. Department of Justice (DOJ) officials with responsibility for FARA and related matters addressed the conference: Eun Young Choi, Deputy Assistant Attorney General for DOJ’s National Security Division (NSD); Jennifer Gellie, Acting Chief of the Counterintelligence & Export Control Section (CES) and former Chief of the FARA Unit; and Evan Turgeon, current Chief of the FARA Unit.

Our Key Takeaways

FARA enforcement remains a top priority for DOJ. DOJ officials at the forum reaffirmed the department’s continued desire for statutory reform, including civil investigative demand (CID) and civil monetary penalty authorities, as well as a repeal of the Lobbying Disclosure Act registration exemption. Several new items at this year’s forum stirred debate among practitioners — most notably, DOJ’s debut of a new regulatory interpretation of 18 U.S.C. § 613(d), known as the “commercial exemption.”

Year in Review. There are currently 538 FARA registrants, over 50% of which are corporations, marking the fifth consecutive year that the number of FARA registrants has exceeded 500. Over the past year, the FARA Unit conducted 25 inspections, its highest number of annual inspections since 1985, consistent with the trend of increasing inspections year over year. The FARA Unit is adding one analyst and one civil enforcement attorney to its staff, in addition to the 25 new criminal prosecutors being hired by NSD.

DOJ officials and practitioner-panelists, including Arnold & Porter’s Amy Jeffress, examined several recent high-profile FARA and related enforcement cases. For example, U.S. Senator Robert Menendez was charged with violating 18 U.S.C. § 219 — a criminal statute which bars federal public officials from engaging in actions that would trigger FARA registration — for allegedly acting as an agent of Egypt. This marks the first time that this criminal statute has ever been enforced in court. Practitioners also discussed the trial and conviction of Prakazrel “Pras” Michel, as well as the ongoing legal battle over casino magnate Stephen Wynn’s purported retroactive obligation to register under FARA, discussed further below.

Enforcement Priorities. Chief Turgeon identified two areas ripe for enforcement scrutiny. First, Turgeon identified covert litigation funding by foreign entities as a national security risk, given that such funding could be used to burden U.S. businesses through costly proceedings and potentially promote domestic divisions on contentious policy questions. Turgeon also noted that such funding is often undiscoverable in litigation, can give foreign parties a competitive advantage over domestic entities in U.S. courts, and potentially allows foreign parties access to domestic entities’ sensitive and proprietary information through discovery. Second, Turgeon identified sovereign wealth funds as another area of concern, because such funds often serve as an alter ego of a foreign government rather than as purely commercial ventures. Turgeon indicated that the unit would be carefully examining these funds’ activities for conduct that may require FARA registration.

Turgeon also explained that, as of this year, in addition to receiving a surge in attorney resources, the FARA Unit has been granted independent authority to issue criminal grand jury subpoenas in the District of Columbia for FARA matters. Turgeon noted, however, that the unit will continue to “partner” with U.S. Attorneys’ Offices in most criminal investigations. This development may lead to an uptick in criminal cases and raises the question whether, in the absence of statutory grants of civil subpoena and monetary penalty authorities, CES may be tempted to use the grand jury to compel the production of documents or testimony in cases that would otherwise have been handled administratively.

Additionally, a recurring theme across the DOJ officials’ statements at the forum — consistent with DOJ policy pronouncements over the past few years — was the need for responsible corporate self-policing in national security matters. DOJ officials emphasized their focus on corporate compliance and enforcement, specifically with respect to violations of sanctions and export controls laws. In fact, as discussed in our recent Advisory, this year has seen a marked increase in government policymaking to address the national security implications of corporate activities. FARA is just one of many tools in DOJ’s toolkit to uncover and potentially prosecute foreign malign influence within the United States.

Civil Remedies. DOJ officials continued to lament the absence of statutory CID and administrative monetary enforcement authority, which leaves only the option of compulsory registration in the absence of “willful” criminal activity. As part of a broader discussion about potential changes to the agency’s FARA regulations, discussed further below, DOJ officials appeared inclined to propose civil penalties for failure to register and deficiencies in registrations, with penalties to be determined on a sliding scale based on egregiousness.

Speaking of registration, DOJ officials also addressed a topic of much discussion at last year’s conference (including during a panel presentation by Arnold & Porter’s Murad Hussain): whether DOJ can require retroactive FARA registration, after the foreign agency relationship has ended. This issue is currently playing out in the case Attorney General of the United States v. Wynn, which is on appeal to the U.S. Court of Appeals for the D.C. Circuit. The Wynn case concerns whether casino magnate Stephen Wynn must retroactively register as a foreign agent for engagement with the Trump administration benefitting the People’s Republic of China. In October 2022, Judge James Boasberg of the U.S. District Court for the District of Columbia, relying on the 1987 D.C. Circuit case United States v. McGoff, ruled that Wynn did not have any obligation to register retroactively. DOJ maintains that Wynn was wrongly decided, and members of the FARA bar have been anxiously awaiting the D.C. Circuit’s ruling on DOJ’s appeal. At the conference, DOJ officials claimed that their hands are not necessarily tied by Wynn or McGoff, because even if the D.C. Circuit were to affirm Wynn, DOJ still may pursue retroactive registration outside the D.C. Circuit. DOJ officials also floated potential legislative proposals — referenced throughout the forum as the “McGoff fix” — which would codify a retroactive registration requirement.

Potential Regulatory Changes. DOJ officials previewed several potential changes to the agency’s FARA regulations but did not commit to a release date. The comments that caused the most stir among practitioners involved a possible overhaul of DOJ’s current interpretive gloss of Section 613(d)’s exemptions, which we refer to here as the “commercial exemption.”

Specifically, Acting Chief Gellie announced DOJ’s view that Section 613(d)(1) is the “real” commercial exemption, in that it exempts from registration private and nonpolitical activities in furtherance of a foreign principal’s bona fide trade or commercial interests. Gellie then referred to Section 613(d)(2) — which is not limited to commercial activities — as the “domestic interests” exemption. In response to questions, Gellie clarified DOJ’s position that the “domestic interests” exemption would cover other activities, whether political or nonpolitical, that predominantly benefit U.S. interests. Under this new interpretation, if an individual or entity were engaged in activities predominantly benefitting foreign interests, this exemption would not apply. Practitioners were left wondering how a test that turns on whether an activity’s “predominant benefits” are felt domestically would hold up in complex and nuanced real-world situations where domestic and foreign interests are often similar, intertwined, or even wholly aligned.

Advisory Opinions. Finally, the FARA Unit continues to strive to include more substance in its publicly available (yet highly redacted) advisory opinions. Acting Chief Gellie pledged that the FARA Unit would be clearer when drafting opinions, including by better articulating which exemption applies to the conduct at issue. So far this year, the FARA Unit has released over a dozen advisory opinions, many of which concern the “commercial exemption” under Section 613(d). Practitioner-panelists noted that while this latest crop featured lengthier opinions, the analysis appeared formulaic in a way that raised concerns about overbreadth. Specifically, these practitioners ventured that a formulaic approach to analyzing discrete fact patterns presented the risk of ignoring the nuances presented by complex cases. Arnold & Porter’s Deborah Curtis also offered insights on a panel parsing the FARA Unit’s interpretation of the term “political consultant,” including its embrace of legislative history that effectively reads the term out of the statute altogether.

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Our FARA team provides proactive advice to clients on their registration obligations. We also represent clients in responding to requests for information from the FARA Unit, filing initial and supplemental registration forms, preparing for inspections by the FARA Unit and FBI, and navigating criminal investigations. For questions about FARA, please reach out to the authors or any of their colleagues in Arnold & Porter’s White Collar Defense & Investigations practice group.

© Arnold & Porter Kaye Scholer LLP 2023 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.