(Bloomberg) -- The indictment of Gregory Craig, a politically connected lawyer accused of concealing his firm’s work for Ukraine, delivered a warning shot to those who’ve made a business of representing foreign governments and companies.
The increasing crackdown on people who fail to register their activities on behalf of foreign clients is prompting some professionals to turn down opportunities and spurring more to formally disclose their work.
The Foreign Agents Registration Act, a measure that was previously lightly enforced, is in the spotlight following Special Counsel Robert Mueller’s investigation into Russian interference in the 2016 election.
Thursday’s indictment of Craig, a former partner at Skadden Arps Slate Meagher & Flom LLC and former White House counsel under President Barack Obama, follow the conviction of Paul Manafort, Donald Trump’s former campaign chairman, for his work for the Ukranian government and a guilty plea by Manafort’s former deputy, Rick Gates.
Craig, the first high-profile Democrat to be charged as a result of Mueller’s investigation, was indicted on two counts for making false statements and concealing his activities for the Ukrainian government.
The charges stem from work that Manafort arranged on behalf of the Ukrainian government in 2012, as part of an elaborate lobbying scheme for which Manafort ultimately pleaded guilty. According to court filings, Manafort arranged for Skadden to produce a report examining the legitimacy of the prosecution of former Prime Minister Yulia Tymoshenko, who was a rival of Manafort’s client, Viktor Yanukovych, then the country’s president.
Craig’s lawyers said in a statement Thursday that the allegations were unfair since their client had no interest in misleading the FARA unit because he hadn’t done anything that required him to register.
Scrutiny of compliance with the FARA law, which is enforced under a special unit of the U.S. Justice Department, is unlikely to diminish under new Attorney General William Barr. Barr has recently put a seasoned prosecutor who worked for Mueller in charge of the unit. Brandon Van Grack, who took part in the prosecution of Manafort, will run a team of investigators looking for FARA violations.
“The Justice Department isn’t messing around when it comes to FARA enforcement,” said Joshua Rosenstein, a lawyer who’s been advising a steady stream of clients on whether their work for foreign entities is covered by the act. He says even risk-taking firms he advises are hesitant about taking on new work that requires registration or that falls into a legal gray area.
Even before the Mueller investigation, Congress had been pressuring Justice to do a better job enforcing the act, said Rosenstein of Sandler Reiff Lamb Rosenstein & Birkenstock P.C. in Washington.
But the indictments that came out of the Mueller investigation were like “an accelerant thrown onto a smoldering fire,” he said. That led firms to file as foreign agents with the Justice Department rather than risk civil or criminal penalties for noncompliance.
There are 446 organizations or individuals currently registered with the Justice Department to represent 675 foreign clients, according to the Center for Responsive Politics, which tracks lobbying data. That’s up from 322 registrants with 454 foreign clients on May 16, 2017, the day before Mueller was appointed special counsel.
The increased number of filings includes clients recently acquired by firms as well as “retroactive” filings, said the center’s Anna Massoglia, who researches filings under FARA. Many of the old disclosures include work for foreign travel and tourism boards, with some of them documenting a project in a gray area of disclosure that occurred more than a decade ago, she said.
If you work with foreign governments but believe work doesn’t trigger registration, the indictment “might make you rethink where the line is,” said Ben Freeman, director of the Foreign Influence Transparency Initiative at the Center for International Policy in Washington.
“The statute is so vague,” Freeman said. “Even someone like Craig, who’s an experienced lawyer, they’re not sure.”
Critics of the law note that the language in the act, written in 1938 in response to efforts by Nazi Germany to spread propaganda through a U.S. public relations firm, uses imprecise language, refers to typewriters and copying presses, and is also unclear on who has to register.
“If read literally, the FARA statute would require tens of thousands of people and entities to register,” said Craig Engle, a partner at Arent Fox. He says his clients have contacted to him to make sure they’re complying with the law, but adds that there are some foreign agents that should have registered but didn’t. “Those are the people that are probably working the hardest with attorneys in Washington to get into compliance.”
Congress is considering toughening the act. The government ethics reform bill that House Democrats passed as a centerpiece of their 2019 agenda would increase FARA enforcement and disclosure requirements. Republican Senate Majority Leader Mitch McConnell has said he would not allow a vote on the measure.
Last year in the Senate, then-Judiciary Committee Chairman Chuck Grassley of Iowa introduced his own bill that would extend registration requirements to agents of foreign businesses and individuals and reform the law in other ways. He would have to reintroduce the bill to pass it.
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