Propaganda by Proxy

How High-Powered Lobbying and PR Firms Launder Influence for Foreign Governments

Related Content: Foreign Lobbying
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January 29, 2018 | Andrea Peterson
Puppeteer controls a man
(Photos: Shutterstock; Illustration by POGO)

When foreign governments need help navigating the DC swamp, there’s a whole host of high-powered DC lobbying and well-connected public relations firms eager to help them—for a hefty fee. Lax enforcement of the Foreign Agents Registration Act or FARA, a law designed to shed light on when foreign actors are trying to sway U.S. policymakers and public opinion, can make that influence difficult to trace.

Adding to the challenge is that foreign influence can be funneled through proxies. Just as money is laundered through foreign bank accounts and dummy corporations, foreign influence is being laundered—often through U.S. firms and intermediaries that use tactics like targeting experts and placing op-eds without disclosing that they’re peddling propaganda for a foreign power.

Recommendations

  • Proactively publicly release FARA advisory opinions.
    • Making advisory opinions publicly available will help inform the public and potential foreign agents what qualifies as a registration requirement.
  • Support Senator Grassley’s legislation aimed at improving FARA compliance.
    • The Disclosing Foreign Influence Act (S.2039 and H.R. 4170) would significantly improve the Justice Department’s ability to enforce FARA and increase transparency and accountability, but could be improved by including additional enforcement mechanisms and requiring administrative guidance on how FARA is interpreted.
  • Increase staffing in DOJ’s FARA unit.
    • A lack of resources and staff at the FARA Enforcement Unit within the Justice Department has contributed to delays in the public’s access to information.

A prime example garnered widespread news coverage last fall after former Trump campaign chair Paul Manafort and his longtime business partner Richard Gates were hit with a grand jury indictment. The government alleges the pair violated FARA during the decade they worked on behalf of a since-deposed Ukrainian President with ties to the Russian government. The charges emerged out of Special Counsel Robert Mueller’s investigation into Russian meddling in the 2016 U.S. presidential election.

The pair pleaded not guilty. But according to the indictment, they went to great lengths to obscure who was pulling the strings in their work for the Ukrainian politician, Viktor Yanukovych, and his party—including using a “front” nonprofit called The European Centre for a Modern Ukraine, or ECFMU. That group was then used to hire two major DC fixer firms to promote Yanukovych’s agenda in Washington, the government alleges.

The firms, widely reported to be Mercury LLC and the Podesta Group, are now facing scrutiny for their own apparent lack of compliance with FARA. New reporting by POGO has also uncovered apparent oversights in retroactive FARA paperwork filed by Mercury last year.

Yet they are far from alone. There have been a number of high-profile cases where U.S. firms working through intermediaries have been accused of running afoul of FARA.

In December 2016, American-born investor-turned-activist William Browder submitted a formal complaint with the Justice Department alleging that research firm Fusion GPS violated the law’s disclosure requirements. Fusion GPS, which has been in the headlines for its role in the production of a dossier outlining President Trump’s alleged ties to Russia, dug up information for a U.S. law firm working on behalf of a company owned by the son of a prominent Russian government official. The company, Prevezon, was being sued by the U.S. government for alleged fraud. Browder’s tax accountant, Sergei Magnitsky, died in Russian police custody after uncovering the alleged wrongdoing—leading Browder to successfully campaign for sanctions against Russian officials thought to be involved in Magnitsky’s death.

The lawsuit was settled last year, with Prevezon agreeing to pay nearly $6 million but not admitting wrongdoing. Fusion GPS’s role has come under fire from some on Capitol Hill, including Senator Chuck Grassley (R-IA), chairman of the Senate Judiciary Committee.  Fusion GPS declined to comment for this story, but in a statement to Fox News last year, the group’s lawyer said it “complied with the law and was not required to register under FARA.”

BakerHostetler, the firm that hired Fusion GPS and is also mentioned in Browder’s complaint, appears to have been relying on a “lawyer’s exemption” in FARA to explain why it did not register under FARA for work related to the Prevezon suit. Mark Cymrot, who was the lead attorney, pointed Politico to that exception when asked about the situation in late 2016. Cymrot did not respond to a request for comment. (BakerHostetler was later disqualified from the case due to a conflict: it had previously represented Browder’s hedge fund.)

However, both Cymrot and Fusion GPS have acknowledged doing some media relations activities as part of their work on the Prevezon case. An advisory opinion summary posted by the FARA unit suggests that it does not consider the lawyer’s exemption to cover when lawyers or their subcontractors do activities traditionally covered under FARA, including public relations.

Just as money is laundered through foreign bank accounts and dummy corporations, foreign influence is being laundered—often through U.S. firms and intermediaries.

In 2015, Grassley also sent an inquiry to the Department of Justice asking it to investigate why two Clinton associates, Sidney Blumenthal and John Kornblum, hadn’t registered under FARA after news reports suggested the pair had privately lobbied then-Secretary of State Hillary Clinton on behalf of a Georgian political party. As of last July, Grassley said the Justice Department “never explained” why it did not compel Blumenthal or Kornblum to register. In an email to POGO, DOJ spokesperson Ian Prior said the agency “does not comment to third parties regarding any individual or entity’s possible obligation to register under FARA.” Kornblum declined to comment.

Blumenthal did not respond to a request for comment for this story, but in a letter to Grassley reported by The Washington Post, Blumenthal pushed back on the Senator’s assertions, saying he had “received no payment or benefit” for an email to Clinton in which he had shared a memo from Kornblum with a “without comment” caveat.

Conservative pundit Joshua Treviño was at the center of an effort to promote the ruling party in Malaysia—a regime accused of multiple human rights violations—noticed by BuzzFeed, between May 2008 and April 2011. In that instance, Treviño received nearly $400,000, some of which was paid to other conservative writers, for helping place commentary that attacked a Malaysian opposition figure.

Treviño belatedly filed with FARA in 2013, noting he had been subcontracted by several firms and including a list of writers he had paid. Among them were Rachel Ehrenfeld of the American Center for Democracy, who was paid $30,000, and blogger Ben Domenech, now the publisher of The Federalist, who was paid $36,000 according to Treviño’s filing. Ehrenfeld and Domenech did not provide comment in response to inquiries for this story.

Treviño declined to comment, but he previously told BuzzFeed he “only had an assumption of who” he was working for and had no contact with the “ultimate client”—instead getting marching orders from the companies that subcontracted him. Treviño and some of the writers who spoke to BuzzFeed said the commentators had editorial independence over what they wrote. However, several of the pieces—including at the Washington Examiner and Huffington Post—were pulled after the arrangement was revealed.

And then there’s General Mike Flynn, President Trump’s short-lived first national security advisor, who pleaded guilty in December to lying to the FBI in connection with the Russia investigation. Flynn also had an issue with not disclosing when he was being paid to provide commentary that benefited a foreign government. Last March, he retroactively filed as a foreign agent for work he did on behalf of a firm owned by a Turkish businessman with ties to the President of Turkey. An op-ed he had written echoing Turkish government positions published by The Hill in November 2016, which Flynn acknowledged in the filing was reviewed by the Turkish businessman’s company before it was submitted to the publication, now includes an editor’s note highlighting the conflict of interest.

And these are just examples we know about. As Grassley has written, “The FARA statute requires individuals to register with the DOJ if they act, even through an intermediary” on behalf of a foreign government or foreign political party. Yet some organizations and individuals subcontracted to do such work have claimed ignorance about who funded their efforts—raising questions about how the government is supposed to keep track of who is a foreign agent if even those agents aren’t sure.

How an Anti-Nazi Propaganda Law Falls Short

FARA was initially passed in 1938 as part of an effort to curb Nazi and Communist propaganda secretly routed through Americans that attempted to influence the public’s views on entering World War II. FARA doesn’t stop foreign governments or political groups from trying to sway U.S. policy, but it does require that those lobbying or trying to influence public opinion for such powers be upfront about what they’re doing. 

First, the organizations that do such work for foreign powers are required to register with the DOJ and send the agency a copy of their contracts with a foreign power within 10 days of sealing a deal. Individual employees who help carry out work on behalf of foreign powers are also supposed to file their own “short-form” registrations. These rules also apply to those subcontracted to do lobbying or PR by firms on behalf of foreign powers—so if a company is hired by a foreign government and they hire another company to help with that work, the other company is also supposed to register.

Some subcontracted to do such work have claimed ignorance about who funded their efforts—raising questions about how the government is supposed to keep track of who is a foreign agent if even those agents aren’t sure.

Second, those acting as agents of foreign interests are required to file semiannual reports detailing the specific work they performed on behalf of those clients (such as lobbying). Last, foreign agents must submit copies of documents distributed to more than one person on behalf of their clients—all of which are supposed to include a “conspicuous statement” disclosing that they were sent on behalf of a foreign power—within 48 hours of distributing them. The Justice Department now makes those filings available online.

All those requirements are there, at least in part, so that experts and policymakers know who is actually behind the information they rely on to make important policy decisions—and so the American public can know when they’re being fed propaganda rather than objective information. That’s why FARA has the potential to play a key role now that misinformation with far-reaching geopolitical consequences can be spread across the globe in just a few clicks.

“Given recent Russian and other efforts to influence our elections, this law has never been more important,” Senator Grassley explained in a statement last July. “We need to know who those foreign agents are and what they are trying to accomplish. Individuals who avoid disclosure undermine the purpose of the law.”

Yet DOJ rarely enforces the law. While willful violations of the law are a felony, the indictment against Manafort and Gates is one of only eight criminal cases brought under FARA over the last half century. Instead, the agency relies on a policy of “voluntary compliance” and routinely allows filers to retroactively disclose when foreign powers are helping pay their bills.

“The FARA unit’s position has been traditionally that even if disclosure is done late, that’s the goal of the law—to get you to disclose,” explained Josh Rosenstein, an attorney at DC law firm Sandler Reiff Lamb Rosenstein & Birkenstock, who advises clients on FARA compliance and other lobbying and ethics regulation.

There are several factors outside the FARA unit’s control that limit its options, according to Rosenstein. One is that, despite repeated requests to Congress, the FARA unit doesn’t have the power to compel the production of documents relevant to their investigations. Another is the small size of the unit: in 2016, it was made up of just eight employees, who faced the daunting task of enforcing what is essentially a key, national security-related statute with a broad mandate.

The end result of those enforcement barriers is dismal compliance with the law. An audit released by DOJ’s Inspector General in 2016 reported “widespread delinquencies” within the FARA registration system, with some 62 percent of the new registrations filed within the system coming in late. A similar percentage also failed to file informational materials they distributed on behalf of clients within the required 48-hour window. And those figures don’t even factor in people who should be filing under the law but ignore it altogether out of ignorance of the statute or a desire to keep their activities quiet.

To its credit, DOJ’s National Security Division agreed with all recommendations made by the Inspector General’s office. However, the agency was still working to implement many of them as of the last OIG update.

Delayed Disclosures

Neither Mercury nor the Podesta Group registered their relationship with the Centre—and thus through it, Yanukovych and his party—with DOJ under FARA when the deals were first struck in 2012. Instead, they relied on an exemption that allows some activity on behalf of foreign interests to be registered under a domestic lobbying law, the Lobbying Disclosure Act or LDA, with less rigorous disclosure requirements. However, that exception does not apply when the “principal beneficiary” of the work is a foreign government or political party—meaning they shouldn’t have been able to use it for their work on behalf of the Centre.

When the firms retroactively filed under FARA last April, their late registrations included a document signed by the head of the Centre dating back to the beginning of the agreements that stated the group was not under the control or direction of a foreign government or political party. Mercury’s registration also came with a note from their lawyers arguing the organization wasn’t required to file under FARA—an interpretation that appears at odds with the DOJ’s position in the charges against Manafort and Gates. Mercury did not respond to requests for comment for this story. The Podesta Group dissolved following reports about its alleged connection to the Manafort indictment. The group’s founder, Tony Podesta, did not provide a comment for this story.

The indictment against Manafort alleges that written communications to the companies made it clear that Yanukovych was calling the shots. For instance, in November 2012, the charges say that Gates wrote both companies that they needed to prepare a review of their efforts and future plans so that the “President” could be briefed by “Paul” as they looked ahead to 2013. A summary of work Mercury did on behalf of the Centre also shows that the organization did extensive outreach on behalf of Mykhaylo Okhendovskyy—a Ukrainian elections official with ties to Yanukovych and who has also been accused of corruption.

FARA doesn’t stop foreign governments or political groups from trying to sway U.S. policy, but it does require that they be upfront about what they’re doing.

Starting in the summer of 2012—in the run-up to the 2012 Ukrainian Parliamentary election—Mercury arranged for a series of meetings between Okhendovskyy with the House Eurasia Subcommittee Staff, members of the media, and independent experts, according to Mercury’s FARA filings.

The FARA form calls for filers to “describe in full detail” all the political activity they did on behalf of their client—including describing what policies they sought to influence and details about arranged media appearances. However, Mercury’s filings lack much of that detail—only listing the dates and attendees of meetings, not their subjects. And email correspondence shared with POGO by an individual contacted by Mercury on behalf of ECMFU shows that even that account is not complete: at one least interview arranged by Mercury on behalf of Okhendovskyy does not appear on the list.

That interview, which took place on September 17, 2012, via Skype, was with Professor Erik Herron—an academic who specializes in Eastern European elections and was then a U.S. government official with the National Science Foundation. During the interview, Herron says Okhendovskyy attempted to persuade him that looming Ukrainian Parliamentary elections Herron was set to observe would be fair and play down the exclusion of opposition leaders from the ballot.

Herron, now a political science professor at West Virginia University, published a summary of the exchange the next day on an elections blog he has run since 2008. The election was later widely considered by international observers as a step back for democracy in Ukraine, including Herron. (Disclosure: Herron was one of the reporter’s professors nearly a decade ago.)

The interview was arranged by a then-Mercury staffer, Lucy-Claire Saunders, who used her mercuryllc.com email address but only identified herself as representing ECFMU. To date, Saunders does not appear to have filed the Short Form registration generally required of someone who carries out that kind of PR work on behalf of a foreign power. Nor has Andrew Wright, another then-Mercury employee also included on the email chain. When reached for comment, Saunders referred questions about the FARA filings to Mercury. Wright did not respond to a request for comment.

These oversights are not unique to Mercury—full compliance with the law is the exception rather than the rule for many organizations that should be filing under FARA. And Mercury’s own lawyers acknowledge that there are likely gaps in their filings: “This is a retroactive filing dating back more than three years and some of the individuals who worked on the engagement are no longer employed by the registrant,” their submission noted. They added that the organization had “undertaken reasonable due diligence” in preparing their filings.

However, these problems highlight the difficulty of getting companies to make full and accurate filings even in situations when the filers are under intense scrutiny.

“Individuals who avoid disclosure undermine the purpose of the law," said Senator Chuck Grassley.

Mercury’s decision to attempt to influence Herron also speaks to a common tactic used by such campaigns: working to influence trusted experts and known commentators in an effort to leverage their credibility. In Herron’s case, his blog has a limited audience, but one that includes policymakers, election observers, and other academics who would be valuable in Ukraine’s efforts to argue its next election would be fair.

In an interview with POGO, Herron said he was aware of the Centre’s affiliation with Yanukovych when he agreed to do the Skype interview with Okhendovskyy. That affiliation, along with the “highly unusual” way he was emailed seemingly out of the blue with the opportunity, gave him pause he said. But ultimately, he considered it too good of a research opportunity to pass up.

“My recollection is that I took stock of it, asked myself if I should pursue it and I decided access to the official—knowing there was not going to be any money or any other tangible resources exchanged and that I was not being asked to promote a particular viewpoint—was worth it,” he said.

However, a 2013 report from BuzzFeed suggests that some people who wrote ostensibly independent commentary about Ukraine’s election after being contacted on behalf of the Centre did receive financial compensation. Libertarian political consultant George Scoville did outreach for the Centre to right-wing outlets and in at least one case paid a blogger $500 for a post that echoed Ukrainian government talking points, according to the report. Part of Scoville’s outreach included promoting an October 26, 2012, press call with Okhendovskyy, which appears to be an event arranged by Mercury, as noted in the company’s FARA filings.

It’s unclear if Scoville was working directly for the Centre or subcontracted by Mercury or some other agency. Either way, legally he should have registered as a foreign agent under FARA—as should anyone he paid to espouse the Centre’s message. Scoville did not respond to requests for comment.

It is “blatantly unethical” for op-ed writers to fail to disclose such conflicts, Dan Gillmor, a media scholar and professor at Arizona State University's Walter Cronkite School of Journalism, told POGO.

It’s hard to say how often such conflicts go unnoted in op-ed pages—in part because they may never be disclosed to editors. But when such incidents are exposed, it can undermine the credibility of the news outlet that ran the piece and fuel public cynicism, Gillmor said.

Shining a Brighter Light on Foreign Influence

Experts, including the DOJ Inspector General’s Office, have suggested that beefing up the FARA unit so it can perform more meaningful and consistent enforcement might prod those who carry out foreign influence campaigns to take learning the rules more seriously. Legislation introduced by Senator Grassley would also strengthen enforcement by giving DOJ the ability to compel the production of documents and testimony relevant to their investigations and eliminating the LDA exemption.

Providing further transparency on just what the rules are and how exemptions apply could also help: right now, some advisory opinions that can help spell out DOJ’s interpretation of the law are only available through Freedom of Information Act requests.

“Unfortunately, the most widely used exemptions are not well defined, DOJ’s publicly available regulations and advisory opinions interpreting them are extremely sparse, and there is essentially zero case law,” law firm Covington & Burling said in a white paper about FARA enforcement released earlier this month.

Proactively making existing opinions publicly available would provide those who should be registering under the Act more clarity. Rosenstein and other experts expected an increase in retroactive filings and amendments to previous filings in the wake of the Manafort indictment. And there has been an uptick since the charges were announced. More than twice the number of firms registered with the FARA unit from October 30, 2017, through the end of the year as had registered during the same period the year before—going from twelve to twenty-five, according to POGO’s review of the data. There was also a 55 percent increase in new Short Form registrants, with over 200 filing between October 30 and December 31, 2017, versus 131 during that period in 2016.

But even with more firms and individuals registering, there continue to be significant compliance problems with FARA.

For instance, a political consultancy run by former Missouri Senator Kit Bond belatedly registered under FARA a little over a week after the Manafort indictment. Per the filing, Bond is working on behalf of Mexico during North American Free Trade Agreement re-negotiations. The deal was struck back in September 2017, according to email correspondence attached to Bond’s filing—putting his November registration date well outside the 10-day window mandated by the law. And the firm didn’t file an amendment with the actual copy of the contract until December 29.

In another case, a subcontractor helping out former Attorney General John Ashcroft’s law firm with public affairs work on behalf of Qatar didn’t register as a foreign agent until mid-November 2017—despite being listed on the law firm’s initial FARA registration statement in June and submitting a contract for PR services that began August 1. That subcontractor, the Hawksbill Group, and Kit Bond Strategies have not responded to requests for comment.

POGO Investigator Lydia Dennett contributed research for this story.

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