Closing the Loophole on Foreign Influence

How Reform Could Bring Clarity to Shadowy Foreign Influence Law

Michael Flynn
Former National Security Advisor Michael Flynn cited an "uncertain standard" as the reason he initially—and incorrectly—filed his work for foreign clients under the domestic lobbying disclosure law instead of under the Foreign Agents Registration Act. (Photo: DIA / Kristyn Ulanday)

It is no secret that lobbying in Washington, DC, is big business. But often overlooked is how two laws that regulate lobbying in the United States overlap to create a loophole readily exploited by those representing foreign interests. A bipartisan effort in Congress to close that loophole has put a spotlight on how poor legal wording can allow improper foreign influence to slip through the cracks or unintended capture of public interest groups.

U.S. lobbying is regulated by two laws: the Lobbying Disclosure Act (LDA), which requires disclosure of domestic lobbying, and the Foreign Agents Registration Act (FARA), which requires disclosure of lobbying and other forms of influence by foreign governments and political parties.

The FARA disclosures call for significantly more detail than do LDA disclosures, including copies of the contracts, detailed lists of meetings and contacts, and even all political contributions made by the lobbyists.

But in 1995 FARA was amended to exempt those who represent foreign companies or individuals if the work is not intended to benefit a foreign government or political party. These lobbyists may register under the far less transparent LDA. The result was a dramatic drop in FARA registrations, according to a 2016 audit by the Justice Department Inspector General.

Unfortunately, the intersection between FARA and the LDA is a confusing grey area and can be easily exploited or misunderstood.

This is perfectly exemplified by President Trump’s former National Security Advisor Michael Flynn’s failure to register his work for foreign clients. In his disclosure documents, Flynn cited an “uncertain standard” as the reason he initially filed his work promoting Turkish interests under LDA instead of FARA. And he’s not wrong. Though not included in the law itself, Department regulations state that if the “principal beneficiary” of the work is a foreign government or political party, the lobbyist must register under FARA even if that foreign government isn’t the actual client. But the term “principal beneficiary” is not well defined, and the Department has not released administrative guidance on how they interpret the term or the LDA exemption in general.

There are other problems with the LDA exemption as well. One is the fact that foreign governmental and commercial interests are not always as distinct from one another as they are in the United States. And unlike FARA requirements, the LDA allows those with lobbying income or expenses below a certain threshold to forgo registering. So, if a lobbyist representing foreign commercial interests falls below the LDA threshold, they are exempt from registering under either statute.

Furthermore, weak oversight of compliance with the laws leaves them open to abuse. The Justice Department relies on FARA registrants to voluntarily comply with the law and lacks significant investigative authority to determine potential rule breaking. And Congressional staff charged with overseeing LDA compliance do not perform inspections of registrants to determine if they should actually be registering under FARA. Poor oversight combined with such a broad loophole means all kinds of improper foreign influence could be falling through the cracks leaving the public and Congress unaware of who is working to influence United States policy.

With foreign influence and Flynn’s case in particular thrust into the national spotlight, Congress is stepping up to close the LDA loophole. Both the Disclosing Foreign Influence Act, introduced by Senator Charles Grassley (R-IA) and Representative Mike Johnson (R-LA), and the Foreign Agents Registration Amendments Act, introduced by Senators Dianne Feinstein (D-CA), John Cornyn (R-TX), Jeanne Shaheen (D-NH), and Todd Young (R-IN), would eliminate the LDA exemption. This move is supported by the Justice Department and civil society groups including Project On Government Oversight, Demand Progress, and Public Citizen.

But efforts to reform FARA, including closing the LDA loophole, have highlighted how the lack of clarity in the law raises other concerns. The definition of what constitutes an agent of a foreign principal was purposefully worded to be broad enough to capture all foreign governmental efforts to influence U.S. policy and public opinion.  Unfortunately, that vague and broad definitional language, combined with the Department’s failure to provide public guidance on its enforcement strategy, has made it incredibly unclear what activities and relationships trigger a FARA registration requirement.

The law states that a foreign agent is anyone who acts at the request or under the control of a foreign government or party. But the Department of Justice has not provided guidance on the scope of the term “request.” The International Center for Nonprofit Law has illustrated how seemingly routine interactions between American organizations and foreign governments could be captured by FARA.

“Take an issue as mundane as a U.S.-based non-profit engaged in anti-human trafficking advocacy that has a foreigner on their board of directors. Under the text of the Act the organization would arguably have to register as a ‘foreign agent’ because the organization is, at least in part, directed by a foreigner and also may act at their ‘request’ in ways covered by the Act,” Doug Rutzen and Nick Robinson wrote in Just Security.

Similarly, the law states that any person or entity whose activities are financed in whole or in “major part” by a foreign government or political party is considered a foreign agent. But the Justice Department has not defined what “major part” means exactly.  Similar disclosure requirements under the Higher Education Act specify that all colleges and universities disclose any gifts or donations from foreign sources that total $250,000 or more. But FARA does not include such specifics.

This lack of clarity led to a 2014 New York Times article on think tanks that receive multi-million dollar donations from foreign governments, which raised questions about whether those relationships would trigger a FARA registration requirement. The Justice Department has not provided any official, publicly available guidance on their interpretation. 

The common threads of the last four FARA criminal investigations were: millions of dollars in receipts or expenditures by the prospective defendants; ‘core’ violations of FARA with jury appeal; and evidence of willfulness.

Instead the Department typically reviews potential FARA violations on a case-by-case basis. If an organization’s representative thinks their activities may require registration they can request a formal advisory opinion from the Department. Unfortunately, these opinions are not publicly available despite how useful they could be in determining what the Department considers a FARA case.

Historically speaking, however, capturing these kinds of relationships has not been the goal or purpose of FARA.

Examples of past enforcement—few and far between, as the Department rarely pursues criminal or civil charges when the law is broken—serve to demonstrate what the Justice Department looks for in a prosecutable FARA case. “The common threads of the last four FARA criminal investigations were: millions of dollars in receipts or expenditures by the prospective defendants; ‘core’ violations of FARA with jury appeal; and evidence of willfulness,” the U.S. Attorneys’ Manual states. These common threads set a high bar and show the purpose of FARA is not to serve as a gotcha law. In fact, when the Department finds a person or organization engaging in activity that may violate FARA they will do everything they can to encourage the entity to register before pursuing any kind of charges.

Further several court cases have helped illuminate what kind of agreements and financial relationships meet the threshold for FARA registration. A 1982 decision by the Second Circuit Court of Appeals determined that a specific person must be asked to take a specific action on behalf of a foreign government for the action to require FARA registration. “The Second Circuit cautioned against broadly construing the agency relationship to include instances in which a person merely acts at the ‘request’ of a foreign principal, explaining that ‘[s]uch an interpretation would sweep within the statute’s scope many forms of conduct that Congress did not intend to regulate,’” the Congressional Research Service reported.

Another decision by the Third Circuit Court of Appeals determined that there must be a mutual understanding between both parties before the relationship meets the agent-foreign principal threshold under FARA.Although these decisions make it clear that the Justice Department has not traditionally used FARA to require registration and disclosure from the entities engaging in the kind activities raised by the International Center for Nonprofit Law, the lack of official guidance leaves the door open for the law to be used that way. And it’s unclear if capturing those kinds of relationships was Congress’s intent.

Even the Department itself seems unsure about what the purpose of FARA is. The 2016 audit by the Justice Department Inspector General found that the different offices in charge of enforcing the law do not agree on what constitutes a prosecutable FARA case and recommended the Department develop a comprehensive strategy for enforcement.

As the Justice Department works to develop their FARA enforcement strategy, they should make public all advisory opinions that have led to a FARA registration and release official guidance to clarify several terms in the law. And all legislative efforts to reform FARA should make clear that the purpose of the legislation is not to crush dissent or civil society, or to otherwise be used as a political tool to undermine U.S. citizens’ first amendment rights. Together, the Department of Justice and Congress can bring transparency and clarity to the murky world of foreign influence.

lydia dennett

By: Lydia Dennett, Investigator

Lydia Dennett is an investigator for the Project On Government Oversight. Lydia works on safety and security of nuclear weapons and power facilities, foreign lobbying and influence, and works with Department of Veterans Affairs whistleblowers.

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