Foreign Corrupt Practices Act

Advisory provided by DAVID H. LAUFMAN and SARAH YORK of Wiggin and Dana

Enforcement of the Foreign Agents Registration Act (FARA) by the Department of Justice (DOJ) is the most aggressive it has been in decades. But although criminal prosecutions for violations of FARA garner the headlines, they account for only a small fraction of FARA enforcement. DOJ’s enforcement of FARA is predominantly administrative in nature, not criminal, and it typically begins with a “Letter of Inquiry” (LOI) from the FARA Unit _[2] to an entity or individual to determine whether they should register under FARA._[3] Understanding how best to respond to an LOI is critical not only to helping clients avoid a determination by DOJ that they must register under FARA, but also to mitigating any risk that an administrative compliance inquiry might transform into a criminal investigation.

FARA is a federal statute which requires parties who come within the definition of an “agent of a foreign principal” _[4] to register with DOJ “and make periodic disclosures of their agency relationships and activities, as well as their receipts and disbursements in support of these activities.” _[5] Generally speaking, a party constitutes an “agent of a foreign principal” if it is acting on behalf of a foreign government or other foreign interest (even a commercial or other nongovernmental entity) and is engaged within the United States in one or more covered activities, such as trying to “influence public opinion or governmental action on political or policy matters.” _[6] Even if a party meets the threshold definition of an “agent of a foreign principal,” FARA includes several exemptions from registration_[7] — such as certain activities on behalf of foreign commercial interests and legal representation in government investigations or civil or criminal litigation — but the party claiming an exemption bears the burden _[8] of establishing their eligibility for it. Many organizations and individuals regard it as stigmatizing (as well as administratively burdensome) to have to register under FARA and risk being popularly branded as a “foreign agent,” _[9] especially since FARA registration and subsequent disclosure filings are publicly available on the website of the FARA Unit at www.fara.gov.

DOJ’S FARA ENFORCEMENT TOOLBOX

DOJ’s enforcement of FARA is aimed mostly at effecting compliance through registration and disclosure. The FARA Unit, however, currently has limited investigative tools to inform its judgment on whether to require a party to register. Although addressing foreign influence activities in the United States is a major policy priority for the National Security Division (NSD),_[10] NSD does not possess administrative subpoena authority (sometimes referred to as “civil investigative demand” authority) to compel testimony, responses to written interrogatories, or the production of documents. In criminal investigations, DOJ attorneys may use fact-finding tools such as grand jury subpoenas or search warrants; however, criminal investigations regarding FARA compliance generally materialize only in cases in which the government believes that a perceived FARA violation was “willful,” such as a knowing failure to register._[11]

DOJ does possess statutory authority to bring federal civil injunctive actions to compel a recalcitrant party to register, but DOJ affirmatively has initiated only one such action (a recent case against the casino magnate Steve Wynn) since 1991, and that case failed at the district court level. _[12] Thus, DOJ is particularly dependent on LOIs as a fact gathering mechanism to determine whether parties have an obligation to register.

LETTERS OF INQUIRY: WHAT TO EXPECT

Although LOIs are the primary investigative tool used by DOJ to effect compliance with FARA, neither the FARA statute nor its implementing regulations contain any mention of LOIs. Rather, in the FAQ section of the FARA Unit’s website, DOJ states that “[t]he FARA Unit may send a Letter of Inquiry to an entity or person if the FARA Unit obtains credible indications that a registration obligation may exist.”_[13] (Emphases added.) The FARA Unit’s decision to send an LOI may be triggered by open-source news media reports (either in the United States or overseas), a letter or complaint by a rival entity or watchdog organization, or a letter from Members of Congress (often based on news reporting). Justice Department officials have publicly maintained that the mere sending of an LOI is not indicative of a predetermined judgment that the recipient has an obligation to register.

In a typical LOI, the FARA Unit:

• States that it is seeking information to determine whether the recipient has an obligation to register under FARA for activities it “may have engaged in” on behalf of a specified foreign principal;
• Recites the basics of FARA regarding the legal standard for registration, required disclosures, and a “conspicuous labeling” requirement _[14] for “informational materials” disseminated within the United States;
• Explains that information has come to the attention of the FARA Unit indicating that the recipient may have an obligation to register;
• Recites the specific information of concern to the FARA Unit, with citations to news stories, social media, or other public sources;
• Sets forth multiple interrogatories for written responses, accompanied by multiple document requests;
• Asks for a response within 30 days.

As a matter of law, compliance with an LOI is voluntary, not compulsory. As a practical matter, however, noncompliance invites greater enforcement scrutiny, including potential criminal investigation, and enhances the likelihood that the FARA Unit will issue an adverse “Letter of Determination” informing the party that the FARA Unit has concluded the party must register.

BEST PRACTICES FOR RESPONDING TO AN LOI

The receipt of an LOI can be shocking to organizations and individuals, as they are often in disbelief that anyone, let alone the Department of Justice, could regard them as a “foreign agent.” Complying with an LOI, moreover, can be disruptive — especially for individuals and small organizations — as limited resources must now be allocated to assembling a response.

Many recipients of an LOI proceed directly to register with DOJ, without undertaking a substantive responsive to the LOI. Others, seeking to avoid the perceived stigma of registration, as well as the immediate and subsequent disclosure obligations of a FARA registrant, choose to respond robustly to an LOI in an effort to persuade the FARA Unit that registration is not required.

Receipt of an LOI should set in motion several actions by counsel retained to represent the recipient before DOJ. As a threshold matter, counsel must quickly obtain command of the relevant facts through persistent due diligence with the client. Counsel, in particular, should seek to determine as soon as possible if the client has any potential criminal exposure for a willful violation, as that risk would influence how to interact further with DOJ without creating or aggravating criminal jeopardy for the client. Collaterally, counsel should review and research the sources cited by the FARA Unit as grounds for sending the LOI. In that regard, counsel should speak to the client about any inaccuracies in the source material, any biases or “agendas” of the sources, and any other information that would undermine the credibility of the source material.

While seeking to assemble the relevant facts through communications with the client, counsel must simultaneously direct the client to undertake a comprehensive review of documents to comply with the LOI, including email, text messages, encrypted communications, and financial records. Assembling a detailed, sourced chronology — in addition to informing a superior understanding of the facts and relevant events — will also be an invaluable tool in evaluating how to structure the response to the LOI and what arguments to advance as to why the client should not be required to register.

As in any matter where representing a party in a government investigation, counsel should closely review the rough document set gathered by the client for potential production to the government. Counsel should cull from the production any materials that are not responsive to the document requests in the LOI, while also identifying any potentially privileged materials to excise from the production (for which a privilege log must be assembled). Conversely, counsel should work with the client to identify any documents not expressly within the scope of the LOI which might fortify any background discussion or arguments to be advanced in the response to the LOI.

Counsel has considerable latitude in how to structure a response to an LOI. Although any response inevitably must respond to the specific interrogatories posed in the LOI, counsel should use the response to an LOI as an opportunity to educate DOJ about the client in ways that may go beyond the explicit requests in the LOI. The additional information may beneficially influence DOJ’s judgment on whether to require registration. For example, it may be useful to discuss the history of the client and its activities in a broader perspective.

Counsel should consider the strongest argument possible, if available, that the client never had an obligation to register in the first instance because the client did not become an “agent of a foreign principal” — either because the client did not act on behalf of a foreign principal (if an argument can be made that the client acted on its own accord and initiation), or because the client’s activities In the alternative, counsel should explore the availability of an exemption from FARA registration. Counsel also should review written advisory opinions which the FARA Unit has published (in redacted form) on its website, as well as published determination letters, in search of prior cases to cite in support or distinguish.

Assembling a cogent response to an LOI can be a lengthy, iterative process requiring extensive back-and-forth with the client. Especially challenging is the circumstance where the FARA Unit is inquiring about activities which began several years ago, requiring a deeper historical search for responsive information and documents. The FARA Unit is typically amenable to granting a request for an extension, but it is important to keep them reasonably informed on timing as the process unfolds.

LOIs include a request for “a certification that the information discussed therein contains a true, correct, and complete disclosure with respect to the conduct under inquiry.” They also specify that this certification “should also include, subject to the penalties of Title 18, United States Code, Section 1001, and Title 22, United States Code, Section 618(a)(2), an affirmative statement that you have produced all of the information and documents within your possession, custody, or control that are in response to [the LOI].” Before submitting a response to the LOI, it is therefore essential that counsel obtain from the client, in writing, an affirmation that the information set forth in the response is accurate, and that all responsive documents available have been produced. Still, it is wise for counsel, not the client, to sign the response, and counsel should include their own certification, such as the following: “I certify that, to the best of my knowledge, information, and belief, the information set forth herein is accurate and complete, and that (except with respect to documents withheld on grounds of attorney-client privilege) we have produced all of the information and documents within our possession, custody, or control which are responsive to the FARA Unit’s request.”

WHAT HAPPENS NEXT?

FARA investigations vary in their scope and complexity, and there is no predictable timeline for DOJ’s resolution of an LOI. The process often can take several months, and it is not uncommon for the FARA Unit to have follow-up questions. If, ultimately, the FARA Unit makes an adverse determination that registration is required, it will send a “Letter of Determination” in which it explains its reasoning and analysis for requiring registration._[15] Neither the FARA statute nor FARA’s implementing regulations specify any mechanism of appeal, and in the absence of a substantial factual misunderstanding about something material, it is unlikely that the FARA Unit will reverse its decision requiring registration.

Most parties, upon receipt of an adverse Letter of Determination, choose to register, although their registration is sometimes accompanied by a statement indicating disagreement about the need for registration. Outright refusal to register risks the initiation of a federal lawsuit by DOJ pursuant to its civil injunctive authority under FARA,_[16] in which DOJ would seek a court order compelling the defendant to register. Refusal to register also could lead to the initiation of a criminal investigation.

CONCLUSION

Given the surge in FARA enforcement by DOJ, and the FARA Unit’s reliance on LOIs as its primary investigative tool, assisting clients in responding to LOIs is now a major component of FARA compliance practice for lawyers in this field. Understanding how to assemble the most cogent and credible response possible is essential to positioning the client for a favorable decision by DOJ that FARA registration is not required.

For more information about Wiggin and Dana’s FARA Practice Group, visit our website. For questions about this white paper, contact David Laufman 202.800.2477 or [email protected] or Sarah York at 202.800.2482 or [email protected].

1. David H. Laufman is a partner at Wiggin and Dana LLP (“Wiggin”), where he chairs the National Security practice and provides compliance counsel and investigative defense regarding the Foreign Agents Registration Act (“FARA”). From 2014-2018, he served as Chief of the Counterintelligence and Export Control Section in the National Security Division of the U.S. Department of Justice, where he closely oversaw the enforcement of FARA.
   Sarah York is an associate at Wiggin, specializing in international trade and FARA compliance.
2. Within DOJ, the FARA Unit within the National Security Division’s Counterintelligence & Export Control Section has primary responsibility for the administration and enforcement of FARA.
3. The topic of this article previously was the subject of a video conversation between co-author David H. Laufman and Brian J. Fleming, a partner at Steptoe & Johnson LLP, which the American Conference Institute recorded and broadcast in connection with its December 2022 4th National Forum on FARA, which Mr. Laufman co-chaired. The video broadcast may be accessed at text https://www.wiggin.com/services/litigation-and-regulatorycompliance/foreign-agents-registration-act/.
4. 22 U.S.C. § 611(c).
5. 86 Fed. Reg. 70787 (Dec. 13, 2021) (“Clarification and Modernization of Foreign Agents Registration Act (FARA) Implementing Regulations”).
6. Id.
7. 22 U.S.C. § 613.
8. 28 C.F.R. § 5.300.
9. American Bar Association, Task Force on the Foreign Agents Registration Act, FARA: Issues and Recommendations for Reform, at 2, 5 (July 2021) (co-chaired by David H. Laufman and Matthew T. Sanderson).
10. See https://www.justice.gov/opa/speech/assistant-attorney-general-matthew-olsen-delivers-remarks-countering-nation-state-threats; https://www.justice.gov/opa/speech/deputy-assistant-attorney-general-national-security-division-adam-hickey-delivers-remarks.
11. FARA itself is not a criminal statute, and criminal penalties attach for violations of FARA only if such violations were “willful.” 22 U.S.C. § 618(a).
12. Attorney General of the United States v. Wynn, No. CV 22-1372 (JEB), 2022 WL 7002845 (D.D.C. Oct. 12, 2022). The court did not rule on the merits of whether Wynn was an “agent of a foreign principal” and had an obligation to register. Rather, the court granted Wynn’s motion to dismiss after determining, as a matter of statutory construction, that FARA does not impose a “continuing obligation” to register when a party already has terminated its relationship with a “foreign principal.” Id. at *4. DOJ’s only other use of its civil injunctive authority in recent decades occurred in 2018, when it successfully counterclaimed in an action initiated by RM Broadcasting seeking a declaratory judgment that it did not have an obligation to register. See https://www.justice.gov/opa/pr/court-finds-rm-broadcasting-must-register-foreign-agent. The district court agreed with DOJ that RM Broadcasting was acting as an agent of a Russian state-owned media enterprise to facilitate the broadcast of “Sputnik” radio programming in the United States, and directed RM Broadcasting to register.
13. https://www.justice.gov/nsd-fara/frequently-asked-questions#13. An LOI sent to a party in September 2021 used slightly different language to describe the standard for sending an LOI, stating that “[w]here [public] information suggests that a registration obligation may exist, the FARA Unit sends a letter….” (Emphasis added.)
14. FARA requires that “informational materials” disseminated within the United States on behalf of a foreign principal include “a conspicuous statement that the materials are distributed by the agent on behalf of the foreign principal, and that additional information is on file with the Department of Justice…” 22 U.S.C. § 614(b). See 28 U.S.C. § 5.402. The term “informational materials” is not defined in the FARA statute or its implementing regulations. Rather, an FAQ on the FARA Unit’s website states: “Informational materials are items, in both physical and electronic form, that an agent disseminates in interstate commerce on behalf of the foreign principal.” https://www.justice.gov/nsd-fara/frequently-asked-questions#44.
15. Selected Letters of Determination, in redacted form, are posted on the FARA Unit’s website. See https://www.justice.gov/nsd-fara/letters-determination.
16. 22 U.S.C. § 618(f).

This publication is a summary of legal principles. Nothing in this article constitutes legal advice, which can only be obtained as a result of a personal consultation with an attorney. The information published here is believed accurate at the time of publication, but is subject to change and does not purport to be a complete statement of all relevant issues.