Washington's FARA Frenzy Spurs New Legal Business

Several other investigations are underway. The cumulative effect is causing sleepless nights for lobbyists, lawyers and consultants alike.

The FARA feeding frenzy had already been building in recent years, but it gained traction in the months since Manafort's indictment last fall.

FARA began in 1938 as part of an effort to fight Nazi propaganda, but it may be just entering its heyday in the latter half of the 2010s. Between 1966 and 2015, the Justice Department “only brought seven criminal FARA cases,” according to a 2016 Justice Department Inspector General's report.

There are two main schools of thought about the future of FARA business, says Joshua Rosenstein, a member of Sandler Reiff Lamb Rosenstein & Birkenstock who advises clients on foreign-agent regulation. The first says that when Special Counsel Robert Mueller's probe ends, FARA will no longer be a hot-button issue. The second school of thought, which is where Rosenstein lands, says that the FARA uptick that predated Mueller will continue even after the Russia probe fades from the public eye.

Several other leading FARA practitioners, such as Tessa Capeloto of Wiley Rein, express a similar outlook, predicting plenty of work in the years ahead for lawyers beyond regulatory compliance because FARA violations can result in civil and criminal penalties.

The uptick in FARA activity coincided with the arrival of David Laufman as chief of the National Security Division's Counterintelligence and Export Control Section at the Justice Department in December 2014. Laufman, who oversaw the probes of Russian influence in the 2016 election and Hillary Clinton's private email and server, says he had responsibility for the department's enforcement of FARA “in as appropriately muscular fashion as we were obligated to do.”

Laufman, who returned to private practice in February 2018, acknowledges that the Justice Department “considerably stepped up” FARA enforcement during his tenure, just as the inspector general's 2016 report found fault with the National Security Division and says there was a “lack of a comprehensive department enforcement strategy on FARA.”

Justice Department officials have maintained that the increasing FARA enforcement does not evidence a reinterpretation of the FARA statute. As part of its enforcement efforts, Laufman says DOJ lawyers “weren't restricting ourselves” to looking only at lobbyists and public relations firms because the statute did not restrict FARA enforcement to only lobbyists and PR firms.

Covington's Kelner is an expert FARA practitioner whose defense of Michael Flynn, former national security adviser to Trump, helped raise Covington's profile as a firm well-equipped to handle foreign lobbying issues. After his 2017 ousting from Trump's administration, Flynn registered as a foreign agent for lobbying work involving the Turkish government and later pleaded guilty to lying to the FBI.

Now, Kelner says he is increasingly being retained by other law firms seeking to understand FARA, as the core FARA bar is exceedingly small. He thinks it is clear the FARA unit has taken a “narrower” view of exemptions to FARA in recent years.

“The problem with FARA is that it's a woefully vague statute,” Kelner says. “It's arguably unconstitutionally vague.”

Such ambiguity has prompted confusion within the legal profession, according to King & Spalding partner Tom Spulak. He says misunderstandings persist about the interpretations of differing requirements for registration under the Lobbying Disclosure Act as compared to registration under FARA.

Legislative proposals to address and reform FARA from both Republicans and Democrats in Congress are on “life support,” Laufman says, because the Trump administration has not shown interest.

Still, Laufman thinks there is a “heightened awareness” of the Justice Department's acute focus on FARA. According to Laufman, some lobbying shops were taking advantage of the commercial exemption to FARA, which exempts “private and nonpolitical activities in furtherance of the bona fide trade or commerce.” He also thinks that lobbying firms began reassessing their registration requirements before Laufman left the DOJ and have continued to do so in the months since his departure.

Kelner, however, thinks the increased FARA enforcement has done little to rein in lobbyists' behavior, at least so far. “I don't think it's changed behavior very much because I think we're still pretty early in this enforcement initiative,” Kelner says. “I think there would have to be much more aggressive enforcement than we're seeing now to get industry's attention.”

Kelner compares the situation to heightened enforcement of the Foreign Corrupt Practices Act, under the administrations of Presidents George W. Bush and Barack Obama, suggesting it would take at least five years of aggressive enforcement before a major impact is felt.

In the meantime, Kelner says FARA is becoming an element of more firms' white-collar practices, whereas it was previously viewed as part of a regulatory, international trade or political law practice.

Alongside white-shoe firms and K-Street lawyers, the new crop of lawyers interested in FARA will also have to compete for business with Laufman. Since leaving the Justice Department, he has reopened his solo practice specializing in government investigations, white-collar criminal defense, and corporate compliance — especially regarding FARA.

“I wrestled for months after I left with whether to return to a big firm along the lines of where I'd worked before or whether to return to my own practice,” Laufman says. “And ultimately I came down on the side of seeking to maximize my independence and autonomy.”

He misses his colleagues and noted the FARA unit has his total and unequivocal support. That is, he joked, unless they pursue one of his clients.

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Ryan Lovelace is based in Washington, D.C., and covers the intersection of law firm business, lobbying and the federal government for ALM. He can be reached at [email protected], and on Twitter @lovelacery.