1 CORNELL INTERNATIONAL LAW JOURNAL RECENTLY PROPOSED REFORMS TO THE FOREIGN AGENTS REGISTRATION ACT PHILIP J. PERRY Reprinted from CORNELL INTERNATIONAL LAW JOURNAL Volume 23, Number 1, Winter 1990 Copyright 1990 by Cornell University
2 Recently Proposed Reforms to the Foreign Agents Registration Act Introduction Inspired by the words of Pogo, "We have met the enemy and he is us," Senator Heinz recently suggested, "Now it appears we have met the enemy, and he sounds like one of us, but we have no idea who he really is." 1 Concerned about the effects of foreign influence on the American government and the American public, Senator Heinz has proposed amendments to the Foreign Agents Registration Act of ("FARA"). FARA attempts to prevent advocates of foreign interests from misleading the American government and the public. 3 It requires certain agents representing foreign interests to register with the Department of Justice and to disclose their activities. FARA requires people disseminating foreign propaganda to indicate the source of the material. The Act neither prohibits representation of foreign interests in the United States nor prevents dissemination of foreign propaganda. Rather, the Act focuses the "spotlight of pitiless publicity" on the foreign agency effort, allowing the American public to fairly assess the information, fully aware of its origin.4 Originally, Congress intended FARA to uncover Nazi and Communist subversive activity in the 1930s and 1940s. 5 In 1966, Congress expanded FARA to monitor foreign agent activity which attempted to GONG. REC. 814,925 (daily ed. Oct. 6, 1988) (statement of Sen. Heinz). 2. Foreign Agents Registration Act of 1938, ch. 327, 52 Stat. 631 (codified as amended at 22 U.S.C (1982)). 3. FARA's purpose was clearly stated in a 1942 amendment to the Act: It is hereby declared to be the policy and purpose of this Act to protect the national defense, internal security, and foreign relations of the United States by requiring public disclosure by persons engaging in propaganda activities and other activities for or on behalf of foreign governments, foreign political parties, and other foreign principals so that the Government and the people of the United States may be informed of the identity of such persons and may appraise their statements and actions in the light of their associations and activities. Act of Apr. 29, 1942, ch. 263, 56 Stat (current version at 22 U.S.C. 611 note (1982)). See generally ]. PATTISON &J. TAYLOR, THE REGISTRATION OF FOREIGN AGENTS IN THE UNITED STATES: A PRACTICAL AND LEGAL GUIDE (1981) (detailed discussion of Act's purpose and legislative history). 4. GONG. RES. SERVICE, 95TH GONG., IST SESS., THE FOREIGN AGENTS REGISTRA TION ACT 1 (Comm. Print 1977) [hereinafter CRS REPORT]. 5. J. PATTISON & J. TAYLOR, supra note 3, at (1981). 23 CORNELL INT'L LJ. 133 (1990)
3 134 Cornell International Law Journal Vol. 23 influence American economic policies. 6 Since the 1960s the United States' open markets and open investment policies have permitted a substantial increase in foreign investment in the U.S. economy. 7 The corresponding increase in foreign agent activity now demands that FARA function successfully in a wider range of situations than foreseen by Congress in its 1966 amendments. 8 In 1977, a Congressional Research Service report ("CRS Report") evaluating FARA began with the familiar biblical phrase, "Ye shall know the truth, and the truth shall make you free."9 Unfortunately, experience "indicate[s] that neither biblical promise nor congressional expectations have been fully realized." 10 The Act has not effectively revealed the extent to which foreign agency relationships influence American government and the public. 11 Despite attempts to improve the effectiveness of the Act over the past two decades, significant problems remain. 12 In an attempt to mitigate FARA's deficiencies, Senator Heinz proposed five changes to the Act. 13 The Senator proposed significant reforms, including the elimination of FARA's registration exemption for lawyers representing foreign principals before courts and administrative agencies. Although Senator Heinz's proposals may increase the Act's effectiveness, they do not adequately address all of FARA's shortcomings. A truly comprehensive reformulation should respond more precisely to FARA's particular problems. This Note will analyze the Act's present insufficiencies, evaluate Senator Heinz's suggested solution, and propose a more precise set of FARA amendments. Section I sketches the statutory structure of the Act. Section II outlines the central problems with FARA's administration, while Section III sets out Senator Heinz's proposed reforms. Section IV assesses the Senator's proposals and suggests that his proposals do not adequately remedy the Act's insufficiencies. Section IV also advances a more precise solution to FARA's problems. This solution incorporates a clarification of FARA's broadly inclusive definitions, a less intrusive approach to the administration of FARA exemptions, a redefinition of FARA's terminology to alleviate the Act's stigmatic effects, and several other measures to improve the Act's administrability. 6. Id. at GONG. REG. 814,925 (daily ed. Oct. 6, 1988) (statement of Sen. Heinz). 8. See infra note 112 and notes 83-85, and accompanying text. 9. CRS REPORT, supra note 4, at Id. 11. See GEN. Acer. OFF., REPORT ON IMPROVEMENTS NEEDED IN THE ADMINISTRA TION OF FOREIGN AGENT REGISTRATION (1980), reprinted in 134 Gong. Rec. 514,933 (daily ed. Oct. 6, 1988) [hereinafter 1980 GAO REPORT]. 12. See infra notes and accompanying text. 13. See infra notes and accompanying text.
4 1990 Reforms to the foreign Agents Registration Act 135 I. Structure of the Foreign Agents Registration Act When a foreign company desires either to create a more favorable economic climate for its business in the United States or to maintain a currently favorable position under United States law, the foreign company may take a variety of actions to advance its interests. The company probably would hire Americans to represent its interests before Congress, government agencies, and in the courts. The company might also conduct a public relations campaign, attempting to sway the American public to its viewpoint. The Foreign Agents Registration Act ostensibly compels the foreign company to reveal its presence in many of these activities. Congress has structured the Act to uncover attempts by foreign governments, political groups, businesses, and individuals to influence federal government policy and American public opinion. FAR A strives to "protect the integrity of the U.S. Government's decision-making process and the public's right to know the source of foreign propaganda, whether or not subversive." 14 Under FARA, an "agent of a foreign principal" must register and comply with the Act's recordkeeping and disclosure requirements 15 unless the agent falls under one of several exemptions. 16 For FARA's requirements to apply, an agent must both have a specified relationship with a foreign principal and undertake certain political or quasi-political activities in representation of that principal. 17 Agents violate the requirements of FARA by: (1) failing to adequately disclose sources of payment or describe expenditures; (2) failing to properly label propaganda; or (3) inadequately reporting the nature and extent of their activities. 18 This section provides background for discussion of Senator Heinz's proposals. It first focuses on the statutory definitions of "foreign principal" and "agent of a foreign principal." It then considers several important exemptions from the Act and addresses FARA's registration and disclosure requirements. Finally, this section describes the administration and enforcement of the Act. A. Foreign Principal The Act defines "foreign principal" as: (1) a foreign government or political party; (2) an individual outside the United States, unless both 14. J. PATTISON & J. TAYLOR, supra note 3, at U.S.C. 615 (1982). See infra note 61. The Act addresses, inter alia, who must register as a foreign agent, how agents must register and report their activities, and how political propaganda may be disseminated by the agents. The Act also requires the agents to keep records of their activities. CRS REPORT, supra note 4, at U.S.C. 613(a)-(g). See infra notes and accompanying text U.S.C. 611(b)-(d). 18. Note, The Foreign Agents Registration Act: When is Registration Required?, 34 S.C.L. REV. 687, (1983) [hereinafter Note, Registration}. See also Note, Regulating Nondiplomatic Activities of Representatives of Foreign Governments in the United States, 31 GEO. WASH. L. REV. 977, (1963) (examples of evasions and omissions in registration).
5 136 Cornell International Law Journal Vol.23 domiciled in and a citizen of the United States; or (3) a nonindividual entity which is either organized outside the United States or has a principal place of business in a foreign country. 19 The statutory definition of "foreign principal" is thus very broad, covering nearly all foreign political organizations as well as a wide range of international companies conducting business within the United States. 20 The Justice Department further broadened the statutory definition to include "a person any of whose activities are directed [sic] or indirectly supervised, directed, controlled, financed, or subsidized in whole or in major part by a foreign principal...." 21 This expanded definition attempts to prevent agents from falsely claiming they represent only domestic entities when they are in fact controlled by foreign interests. 22 B. Agent of a Foreign Principal FARA's registration requirements will not apply unless an agent representing a foreign principal meets two criteria. 23 An agent must have a particular relationship with the "foreign principal" and also undertake certain specified activities in representation of that principal U.S.C. 611(b). 20. The Act defines "foreign political party" to include any formal or informal group playing or seeking to play a political role in a foreign country. 22 U.S.C. 61 l(f). The definition of "foreign government" extends to any group exercising de facto or de jure political jurisdiction over a foreign country, including insurgency movements not recognized by the U.S. 22 U.S.C. 611(e). The Act's definition of "foreign principal" covers a wide range of entities which engage in international business. 22 U.S.C. 61 l(b)(2), (3). An entity either organized under a foreign country's laws or with a principal place of business in a foreign country qualifies as a "foreign principal." Thus, a corporation incorporated in the U.S. could qualify as a foreign principal under the definition. Two commentators suspect that intergovernmental organizations would also qualify as foreign principals. J. PATTISON &J. TAYLOR, supra note 3, at C.F.R (a)(9) (1988) (emphasis added). See also 22 U.S.C. 612(a)(3) (1966). FARA allows the Attorney General to prescribe, amend, and rescind rules and regulations necessary to carry out the provisions of the Act. 22 U.S.C. 620 (1982). 22. See J. PATTISON & J. TAYLOR, supra note 3, at 47. These commentators divide possible uses of an intermediary to conceal a foreign principal into two categories. A foreign principal might contract with a domestic agent through a domestic shell organization, attempting to avoid registration entirely. Or, a foreign principal might interpose a separate foreign private organization as principal, with its agent registering representation under the separate organization. Id. at 49. See also Note, Enforcement of the Foreign Agents Registration Act: A New Emphasis, 9 LAW & POL'Y INT'L Bus. 985, 991 (1977). 612(a)(3) of FARA attempts to deal with both problems by requiring registration of the concealed controlling foreign principal. See]. PATTISON &J. TAY LOR, supra note 3, at 50 n.29 (discussion of the Justice Department's remedial powers where domestic shell is involved). 23. See 22 U.S.C. 611(c)(l) (1982). See also]. PATTISON &J. TAYLOR, supra note 3, at 43 n.l, 47 n.17. FARA does not cover news media. CRS REPORT, supra note 4, at U.S.C. 611(c)(l). Expect [sic] as provided in subsection (d) hereof, the term "agent of a foreign principal" means-
6 1990 Reforms to the foreign Agents Registration Act, Relationship with a Foreign Principal A person has the specified agency relationship with a foreign principal when that person acts, or purports to act, under the direction or control of a foreign principal or a person connected with a foreign principal. 25 The agent-principal relationship arises where "agency in fact" exists, regardless of whether the parties have formally contracted. 26 The necessary degree of control exerted by the foreign principal over an agent to qualify under the definition, however, remains unclear. The Justice Department's definition of "control," stressing the foreign principal's ability to affect the policies or activities of another, fails to flesh out a clear standard. 27 (1) any person who acts as an agent, representative, employee, or servant, or any person who acts in any other capacity at the order, request, or under the direction or control, of a foreign principal or of a person any of whose activities are directly or indirectly supervised, directed, controlled, financed, or subsidized in whole or in major part by a foreign principal, and who directly or through any other person- (i) engages within the United States in political activities for or in the interests of such foreign principal; (ii) acts within the United States as a public relations counsel, publicity agent, information-service employee or political consultant for or in the interests of such foreign principal; (iii) within the United States solicits, collects, disburses, or dispenses contributions, loans, money or other things of value for or in the interest of such foreign principal; or (iv) within the United States represents the interests of such foreign principal before any agency or official of the Government of the United States; and (2) any person who agrees, consents, assumes or purports to act as, or who is or holds himself out to be, whether or not pursuant to contractual relationship, an agent of a foreign principal as defined in clause (1) of this subsection. Id. 25. Id. 26. United States v. German-American Vocational League, Inc., 153 F.2d 860, 864 (3rd Cir. 1946), cert, denied, 329 U.S. 760 (1946). See also]. PATTISON &J. TAYLOR, supra note 3, at 55. Like FARA's definition of "foreign principal," the agency definition addresses the possibility of an intermediary between the principal and agent. Thus, an agent of a "person" controlled in whole or in major part by a foreign principal will fall under FARA's requirements. The statutory term "person" includes any "individual, partnership, association, corporation, organization, or any other combination of individuals." 22 U.S.C. 611(a) (emphasis added). The definition should cover those agents representing or controlled by any of the above entities which is in turn controlled by a foreign principal. 27. As used in the Act, the term "control," and its variants, includes the possession or exercise of power to directly or indirectly determine the policies or activities of a person, whether through the ownership of voting rights, by contract, or otherwise. 28 C.F.R (b) (1988). See also]. PATTISON & J. TAYLOR, supra note 3, at The Justice Department has further specified that a representative need not be paid or subsidized by the foreign interest to qualify as a foreign agent but that payment or subsidy might prove direction or control. CRS REPORT, supra note 4, at 129. If a large percentage of an agent's funding came from a foreign principal, FARA's registration requirements would presumably apply. S. REP. No. 875, 88th Cong., 2d. Sess. 8 (1964). See also J. PATTISON &J. TAYLOR, supra note 3, at 56.
7 138 Cornell International Law Journal Vol Specified Agency Activities FARA specifies four types of agent activities which require compliance with the Act.28 The specific activities are: (a) political activity formulating, adopting, or changing the domestic or foreign policies of the U.S.;29 (b) action as a public relations counsel,30 publicity agent,31 information-service employee,32 or political consultant33 in the interests of a foreign principal; (c) solicitation or collection of money for the foreign principal; 34 or (d) representation of the foreign principal before a U.S. The use of consent decrees in adjudicating controversies under the Act has prevented the judiciary from fully interpreting the Act's terms. See id. at U.S.C. 61 l(c)(l). FARA applies if the activity of the agent occurs in the U.S. and the requisite agency relationship exists. Id U.S.C. 611(o). Regulations specify that "formulating, adopting, or changing" policies includes the use of influence to maintain an existing policy. 28 C.F.R (e). See also]. PATTISON &J. TAYLOR, supra note 3, at 60. "Domestic or foreign policies" implicate decision making at a legislative level. Id. at 61 n.28. See also S. REP. No. 143, 89th Gong., 1st Sess. 8-9 (1965); H. R. REP. No. 1470, 89th Gong., 2d Sess. 6-7 (1966). Influencing "policies," under the definition, "would not include routine contacts by an agent of a foreign principal with a Government employee or official for the purpose of inquiring about current policies, or to seek administrative action on a matter where the basic policy is not in question." J. PATTISON & J. TAYLOR, supra note 3. at 61 n.28. Under this conception, representation before a court would not involve a "political activity" since, arguably, courts only interpret and apply existing policy and do not engage in legislative action. 30. "Public relations counsel" includes any person who informs, advises, or represents a foreign principal regarding political or public interests, policies, or relations of the principal. 22 U.S.C. 611(g). 31. "Publicity agent" has a broad definition covering nearly any type of publishing activity. S^ id. 611(h). 32. An "information-service employee" furnishes, disseminates, or publishes material with respect to certain aspects of foreign governments, nations, or political parties. Id. 611(i). 33. The definition of "political consultant" under the Act requires a detailed explanation. The plain meaning of the definition indicates that any activity informing or advising a foreign principal would suffice as a qualifying activity: "[t]he term 'political consultant' means any person who engages in informing or advising any other person with reference to the domestic or foreign policies of the United States or the political or public interest, policies, or relations of a foreign country or of a foreign political party." Id. 61 l(p). See also]. PATTISON &J. TAYLOR, supra note 3, at Legislative history, however, limits the application of the section. Congress did not intend the provision: to apply to cases in which a lawyer merely advises a client concerning the construction or application of an existing statute or regulation, as for example, whether a contract bid meets a Government agency's specifications. Where, on the other hand, the advice is mainly concerned with the U.S. policy behind a given law, or where the purpose of the persuasion is to effect a change in existing policy, the provisions are intended to apply. S. REP. No. 875, 88th Gong., 2d Sess. 9 (1964). 34. FARA specifies that a foreign agent soliciting, collecting, disbursing, or dispensing contributions, loans, money, or other things of value within the United States for a foreign principal will fall under its requirements. 22 U.S.C. 611(c)(l)(iii). Legislative history indicates some situations where Congress intended this provision to apply, namely:
8 1990 Reforms to the Foreign Agents Registration Act 139 Government agency or official. 35 C. Exemptions from Registration under the Act FARA provides a list of eight exemptions which limit the pervasiveness of the Act. 36 Unfortunately, ambiguity in the statutory language obscures the scope of the exemptions. 37 The first three exemptions exclude foreign government officials and diplomatic and consular staff from the Act's registration requirements. 38 The fourth exemption, the commercial exemption, addresses private representational activities which do not involve questions of governmental policy. 39 The fifth exemption excuses agents engaging in religious, scholastic, or scientific pursuits,40 and the sixth exemption focuses on activities involving the defense of a foreign government vital to the United States defense.41 The seventh exemption, the lawyer's exemption, excuses attorneys when engaged in certain activities.42 In addition to the above exemptions, the Attorney General also has discretion to exempt an agent from any requirements of the act. 43 The remainder of this subsection focuses on the texture of the commercial exemption and the lawyer's exemption, both of which play important roles in administration of the Act. the purchase of a large number of subscriptions to, or reprints of, a magazine which could not otherwise cover its costs; the sale to a film distributor for inadequate consideration of valuable rights in a propaganda film; the providing of free transportation, lodging, and the reimbursement of the expenses of newsmen in a foreign country; the giving of grants and subventions to affiliated groups without which they could not operate.... S. REP. No. 875, 88th Gong., 2d Sess. 7 (1964) U.S.C. 611 (c)(l)(iv). Congress also meant FARA to regulate "the person who deals directly with Government officials on behalf of his clients on matters which do not constitute questions of policy but rather affect the administration of the law." S. REP. No. 875, 88th Gong., 2d Sess. 7 (1964). Along with requirements that a foreign principal exercise a specified degree of control over the agent, 61 l(c) aims at agents performing potentially significant acts in the formation and administration of federal policy. The terms "agency" and "official" include committees and members of Congress. 28 C.F.R (c), (d) (1958). Section 611(c) applies widely to the activities of attorneys, but attorneys may escape the registration requirements under the lawyer's exemption. See 22 U.S.C. 613(g) (1982) U.S.C. 613 (a)-(g)(1982). 37. Thejustice Department, in administering the Act, has determined that "[t]he burden of establishing the availability of an exemption from registration under the Act shall rest upon the person for whose benefit the exemption is claimed." 28 C.F.R (1988) U.S.C. 613(a)-(c). The subsections also exempt the staffs and employees of foreign diplomats, officers, and government officials as long as they are working within the scope of official duty. Id. 39. Id. 613(d). 40. Id. 613(e). 41. Id. 613(f)- 42. Id. 613(g). 43. Id. 612(f)- The Attorney General may either completely excuse registration or limit the information necessary for filing. Id The Attorney General has, for example, instituted various short form registration procedures. See 28 C.F.R , (1988).
9 140 Cornell International Law Journal Vol The Commercial Exemption The commercial exemption applies to a significant range of activities.44 The exemption excuses: Any person engaging or agreeing to engage only (1) in private and nonpolitical activities in furtherance of the bona fide trade or commerce of such foreign principal; or (2) in other activities not serving predominantly a foreign interest; or (3) in the soliciting or collecting of funds and contributions within the United States to be used only for medical aid and assistance, or for food and clothing to relieve human suffering, if such solicitation or collection of funds and contributions is in accordance with and subject to the provisions of the Act of November 4, 1939, as amended (54 Stat. 4), and such rules and regulations as may be prescribed thereunder.45 When an agent's activities fall under any of the three clauses, FARA's registration requirements will not apply. The scope of the first clause of the exemption rests on definitions of "private," "nonpolitical," and "bona fide trade or commerce." The Justice Department has specified that activities shall be considered "private," despite foreign government ownership of the principal, as long as the activities do not directly promote the foreign government's public or political interests.46 In assessing the "private" nature of an activity, the Justice Department considers, among other items, the terms of the contractual relations between the agent and the principal and the significance of the trade to the foreign country.47 To qualify as "nonpolitical," the agent's activities must not be intended to influence government policy.48 "Bona fide trade or commerce" allows participation in all legitimate commercial activities including "the exchange, transfer, purchase, or sale of commodities, services, or property of any kind."49 The second clause exempts an agent of a foreign principal engaged in activities "not serving predominantly a foreign interest." This clause attempts to prevent FARA's registration requirements from applying where the agency interest is predominantly domestic. 50 Suffering from U.S.C. 613(d) (1982). 45. Id C.F.R (b) (1988). Companies partially owned by a foreign government may not qualify for an exemption under the first clause if the products or services which the companies sell invoke the political or public interests of a foreign government. South American coffee, Japanese textiles, and Cuban sugar are examples of products deemed political and not private. Activities of Nondiplomatic Representatives of Foreign Principals in the United States: Hearings Before Senate Comm. on Foreign Relations, 88th Gong., 1st Sess. Pt. 1 at 154 (1963). See also]. PATTISON &J. TAYLOR, supra note 3, at 83; Note, Attorneys, Propagandists, and International Business: A Comment on the Foreign Registration Act of 1938, 3 GA. J. INT'L & COMP. L. 408, 423 (1973). 47. S. REP. No. 143, 89th Gong., 1st Sess. 12 (1965); H. R. REP. No. 1470, 89th Gong., 2d Sess. 10 (1966). See also]. PATTISON & J. TAYLOR, supra note 3, at J. PATTISON & J. TAYLOR, supra note 3, at C.F.R (a) (1988). 50. See S. REP. No. 143, 89th Gong., 1st Sess. 12 (1965).
10 1990 Reforms to the Foreign Agents Registration Act 141 ambiguity, the "predominantly foreign" distinction is difficult to jl apply. 51 FARA takes a small step toward relieving the ambiguity in situ- '! ations where a U.S. corporation with a foreign affiliate employs the agent. 52 Section 61 l(q) specifies that registration requirements will not apply if the foreign affiliate is independent of foreign political control, if the entity discloses its foreign affiliation to the U.S. governmental officer or agency involved, and if the agent is substantially engaged in furtherance of the interests of the domestic subsidiary. 53 The third clause, dealing with solicitation and collection of funds for charitable purposes, has not raised scope or ambiguity problems. 54 Thus, the commercial exception should apply to agents making only routine contacts with governmental officials on matters not concerning policy formulation; 55 an agent who attempts to influence Government policy would be subject to FARA's registration requirements Addressing the clause's "predominantly foreign interest" language, Pattison and Taylor quote the following explanation: [T]he question of a U.S. parent's ability to repatriate profits earned by its foreign subsidiary is predominantly in the interests of the parent rather than the oversea [sic] subsidiary. Likewise, questions arising under the National Labor Relations Act affecting the domestic subsidiary of a foreign parent would probably be predominantly in the interests of the local subsidiary to resolve. Where, on the other hand, the local subsidiary is concerned with U.S. legislation enlarging the U.S. market for goods produced in the country where the foreign parent is located (as in the case of sugar quota legislation, for example) the predominant interest is foreign. Likewise, where the foreign subsidiary of a U.S. parent is concerned with U.S. legislation facilitating investment or expansion of production abroad the locus of the interest will, also, as a general rule, be predominantly (even if not ultimately) foreign. J. PATTISON & J. TAYLOR, supra note 3, at (quoting S. REP. No. 875, 88th Gong., 2d Sess. 12 (1964)). A Senate report mentions the Justice Department's readiness to answer hypothetical problems posed by interested parties in order to ease the ambiguity problem. S. REP. No. 143, 89th Gong., 1st Sess., 12 (1964). To date, the Justice Department has not taken such action U.S.C. 611(q) (1982). 53. Id. Although section 611(q) attempts to clarify the scope of "predominantly... foreign" in the second clause, its language "substantially in furtherance of the... interests of such domestic person" seems no less ambiguous. See]. PATTISON &J. TAYLOR, supra note 3, at See]. PATTISON & J. TAYLOR, supra note 3, at Note, Registration, supra note 18, at "For example, a lawyer arranging a loan for a private corporation, or arranging a contract for the sale of wool by a private foreign entity to an American textile mill, or arranging for the incorporation of a domestic subsidiary of a private foreign corporation would be exempt." Id. See also Note, supra note 46, at Note, Registration, supra note 18, at 698. The author argues that the following situations involve policy formulation: "negotiations over government contracts; communications regarding proposed agency regulations; and discussions with government officials concerning changes in informal practices and procedures... A person otherwise excused from registration would sacrifice that status as soon as he undertook to influence government agencies or officials on matters of domestic or foreign policy." Id.
11 142 Cornell International Law Journal Vol The Lawyer's Exemption FARA Section 613(g) exempts from registration: Any person qualified to practice law, insofar as he engages or agrees to engage in the legal representation of a disclosed foreign principal before any court of law or any agency of the Government of the United States: Provided, That for the purposes of this subsection legal representation does not include attempts to influence or persuade agency personnel or officials other than in the course of established agency proceedings, whether formal or informal. 57 The exemption applies only as long as the agent confines his activities to formal or informal proceedings. "Once an attorney's activities go beyond sanctioned proceedings, the exempt status ceases."58 The lawyer's exemption should not be read to exclude attorneys from use of the commercial exemption. 59 D. Registration and Disclosure Requirements FARA currently functions through self-policing. Agents who determine they fall within an exception to the Act need not register. Agents have no affirmative obligation to apply for an exemption.60 An agent of a foreign principal not exempted by any FARA provision must register and maintain certain records. 61 Regulations currently require a regis U.S.C. 613(g) (1982). The Justice Department has clarified parts of the lawyer's exemption. The exemption's second clause, limiting its application by excluding from exemption "attempts to influence... agency personnel or officials other than in the course of established agency proceedings," makes the exemption unavailable only when the agent attempts to influence government officials regarding U.S. domestic or foreign policies or regarding foreign government or political party interests, policies, or relations. 28 C.F.R (a) (1988). "[A]gency personnel and officials" includes members of Congress and the executive branch. 28 C.F.R (c) (1988). FARA commentators have concluded (in the administrative or executive context) that the phrase "established agency proceedings, whether formal or informal" encompasses: (i) rulemaking proceedings, (ii) adjudication proceedings, (iii) agency investigations, and (iv) negotiations with agencies regarding government contracts. J. PATTISON & J. TAYLOR, supra note 3, at The phrase would probably not cover informal contacts (such as phone conversations) not in the course of one of the encompassed proceedings. Id. 58. Note, Registration, supra note 18, at 701. When an agent's actions exceed the scope of an exemption, no activities of that agent qualify as exempt. Id. at J. PATTISON & J. TAYLOR, supra note 3, at CRS REPORT, supra note 4, at U.S.C. 615 (1982). The CRS Report summarized the registration process: The Act and implementing regulations require a foreign agent to file with the Department an initial registration statement together with required exhibits, within ten days after the agency relationship is established but before the agent acts. Thereafter, for as long as the relationship continues, the agent is required to file supplemental statements within thirty days after the close of each six month period. Similarly, within ten days after the relationship is established, a short form registration statement must be filed by each partner, officer, director, associate, employee, and agent of the registrant who engages directly in furthering the interest of the registrant's principal. However, employees and
12 1990 Reforms to the foreign Agents Registration Act 143 tering agent to preserve: (1) all communications regarding the agent's activities on behalf of his foreign principal, (2) all communications concerning his or the foreign principal's political activities, (3) all written contracts with the principal, (4) records containing the names and addresses of persons to whom the agent sent political propaganda, and (5) all financial records relevant to his services for the principal. 62 The Attorney General may prescribe that agents preserve specified records for a period of three years following termination of the agency relationship. 63 The attorney-client privilege may protect lawyers from FARA's disclosure provisions in some circumstances.64 In FARA-related matters, the attorney-client privilege is narrowly construed and is determined on a case-by-case basis; the privilege will not protect subjects only tangentially related to legal matters. 65 In the face of an assertion of attorneyclient privilege, a court considering a FARA matter may conduct an in camera inspection, evaluating privilege claims as to all pertinent documents. 66 E. Administration and Enforcement of the Act Current enforcement is limited to powers of inspection and injunction. The Justice Department has the power to inspect an agent's records at any time.67 FARA administrators, however, currently have no authority to summon individuals to appear, testify, or produce records.68 Senator Heinz suggests that adding such powers would help convince the business community to consider FARA's requirements more seriously69. The Act imposes criminal sanctions for willful violations and authoagents of the registrant who render indirect services, such as clerical or secretarial services, are exempt from filing. Finally, the agent must file a final statement of activities within 30 days after the agent principal relationship is terminated. CRS REPORT, supra note 4, at C.F.R (a)(l)-(5) (1988). If a registrant is a corporation, partnership, association, or other combination of individuals, it must maintain records of all minute books and names and addresses of employees and agents, along with the required bookkeeping and financial information. Id (a) (6)-(8). 63. CRS REPORT, supra note 4, at See Attorney General v. Covington & Burling, 411 F. Supp. 371 (D.D.C. 1976), aff'don rehearing, 430 F.Supp (D.D.C. 1977). 65. See Note, supra note 22, at See also Note, Registration, supra note 18, at 706. See generally J. PATTISON &J. TAYLOR, supra note 3, at Attorney General v. Covington & Burling, 430 F. Supp (D.D.C. 1977). (court will determine confidentiality of a document through in camera inspection). See also Note, Foreign Agents Registration Act Attorney-Client Privilege Exception to Disclosure Requirements, 19 HARV. INT'L LJ. 329, (1978). Comment, Attorney General v. Covington & Burling, 3 BROOKLYN J. INT'L L. 308, 310 (1977) U.S.C. 615 (1982) GONG. REG. 814,926 (1988) (remarks by Senator Heinz). 69. Id. See J. PATTISON & J. TAYLOR, supra note 3, at 362. See also 1980 GAO REPORT, supra note 11. Government officials in all branches of government should be aware of FARA's requirements and should report suspected violations to the Justice Department. Various studies have suggested that government officials are generally
13 144 Cornell International Law Journal Vol.23 rizes an injunctive remedy for inadequate compliance. 70 FARA administrators, however, rarely use the Act's criminal penalties because of the difficulty of proving intent. 71 Consequently, administrators have increasingly relied upon civil remedies. 72 Section I has set out the important elements of FARA and has provided a background for discussion of FARA's shortcomings and proposals for improvement. Section II will focus on how the various provisions of FARA fall short of their desired and designed effects. II. Problems in the Administration and Effectiveness of the Act A. Overview Deficiencies in FARA prevent the Act from becoming truly effective. FARA was last amended in 1966 in response to changing needs of government and the proliferation of foreign agents working to further economic goals. 73 The 1966 amendments and the Justice Department's ensuing interpretations have not been wholly successful in achieving the Act's purpose. 74 The administration of the Act requires more attention since it is apparent that persons are acting as foreign agents without registering, registered agents are not fully disclosing their activities, and officials in the executive branch are often unaware of the Act's requirements. Thus, the Act's goal of providing the public with sufficient information on foreign agents and their activities is not being completely fulfilled. 75 In 1974, 1977, and 1980, governmental studies cited several deficiencies in the Act. 76 Many of these deficiencies continue to hamper FARA's effectiveness. FARA's problems fall into three general areas. First, the administrators of FARA are dangerously insensitive to the extent of current violations and to the number of potential violators. Second, the structure and administration of FARA produce various disincentives for compliance with the Act. Third, FARA fails to set bright-line rules specifying unaware of FARA's existence and are therefore no help in enforcing the Act's purposes. Id. 70. J. PATTISON & J. TAYLOR, supra note 3, at 362. One author has characterized FARA prosecutions as "less than harsh": Once a suit is brought by the Attorney General against an agent for alleged FARA violations (usually failure to register), the defendant registers before or soon after the indictment is handed down and then enters a plea of nolo contendere. Fines are relatively light, with suspended confinement and possible probation. Note, Registration, supra note 18, at 710 (footnotes omitted). See Note, supra note 46, at GONG. REC. 814,926 (daily ed. Oct. 6, 1988) (statement of Sen. Heinz) GAO REPORT, supra note 11, at 814, See generally J. PATTISON &J. TAYLOR, supra note 3, at See supra note 3 and accompanying text GAO REPORT, supra note 11, at 814, See generally CRS REPORT, supra note 4; 1980 GAO REPORT, supra note 11.
14 1990 Reforms to the Foreign Agents Registration Act 145 who must register and who is exempt. Two recent incidents highlight the disfunctional effects of the Act's problems. 1. The Toshiba Lobbying Campaign In 1987, Congress considered imposing sanctions on Toshiba and other foreign entities for violating U.S. export control rules. 77 Toshiba undertook an extensive lobbying campaign. The lobbying effort focused on defeating a pending bill that would have imposed retroactive sanctions. 78 Toshiba spent approximately $3,000,000 on the lobbying effort, hiring many attorneys and former government officials. 79 The lobbying succeeded, and Congress "substantially narrowed" the retroactive sanctions. 80 A year later, on the date of Senator Heinz's speech to the Senate, FARA's administrators had yet to form a complete list of Toshiba's agents. 81 FARA failed to yield timely and accurate information on the level of foreign agent activity during the lobbying effort AWACS Sale to Saudi Arabia FARA deficiencies may have affected Congressional approval of the Airborne Warning and Control System radar plane ("AWACS") sale to Saudi Arabia. American businesses with Saudi Arabian contracts lobbied for approval of the AWACS sale. 83 One author has argued that the lobbying actions persuaded congressmen of an "ostensibly grass roots corporate endorsement of the AWACS sale." 84 Under such an impression, Congress approved the sale GONG. REC. 814,925 (daily ed. Oct. 6, 1988) (statement of Sen. Heinz). The companies had earlier sold advanced milling machinery to the Soviet Union which "significantly enhanced that nation's ability to manufacture quiet submarines." Id. 78. Id. at 814,929. Among others, Toshiba hired a former member of the House of Representatives and a former Deputy Trade Representative as lobbyists. Toshiba's agents spoke with Secretary of Defense Caspar W. Weinberger as well as former Secretary of State George Shultz. Id. 79. Id. 80. Id. at 814, Id. 82. See generally id. at 814,927 (regarding Japan's clout in the United States). 83. Emerson, The American House of Saud: I. An Investigative Report. The Pentrodollar Connection, THE NEW REPUBLIC, Feb. 17, 1982, at 18. For further discussion of the FARA issues involved, see Note, Registration, supra note 18, at 710. Various actions by American corporate officials taken at the request of the Saudi government may have violated the requirements of FARA. These activities included: contact with U.S. Senators and Representatives at the request of Saudi officials, contact of such officials under threat or inducement of losing or gaining lucrative Saudi contracts, distribution of Saudi propaganda by companies, or espousal of Saudi interests by American corporate officers as their own before U.S. government officials. Emerson, supra. 84. Note, Registration, supra note 18, at 711. It is not clear how FARA could reach this situation other than 618's prohibition on agency fee arrangements based upon the contingent success of a lobbying effort. 22 U.S.C. 618 (1982). Emerson, supra note 83, argues that hard evidence exists indicating the Saudis held up final contract negotiations with American firms, thus creating a contingency arrangement. Ideally, FARA should require disclosure of this sort of arrangement.
15 146 Cornell International Law Journal Vol.23 In both of these examples, the Act failed to serve its purpose. 85 iduring the Toshiba lobbying effort, congressmen had insufficient notice of hidden foreign influence. In gaining support for the AWACS sale, the Saudis interposed a screen of domestic entities between themselves and their agents, secretly forwarding Saudi interests. The Toshiba effort and the AWACS sale reveal that FARA administrators are not sufficiently aware of foreign agents' relationships and activities to effectively enforce the Act. B. Three Problems with FARA's Functioning FARA's shortcomings can be categorized as follows. First, FARA's structure does not facilitate the perception of foreign agent activity. Second, the stigma of FARA registration discourages foreign parties from voluntarily complying with the Act. Third, FARA's lack of brightline rules hampers effective administration the Act. I. Structural Insensitivity FARA's administrators cannot currently assess the number of unregistered agents who should fall under FARA's registration requirements. As of 1980, FARA registrants numbered approximately The 1980 GAO report reflected the Justice Department's concern that this number represented only "the tip of the iceberg" and that many nonexempt agents were functioning without detection. 87 Officials have no data with which to estimate the number of agents currently violating the Act. 88 The FARA administrators' dangerous insensitivity to the number and identity of improperly unregistered agents stems principally from the self-policing nature of FARA's exemptions. 89 Agents who qualify 85. See supra note GAO REPORT, supra note 11, at 514, Id. 88. Id. 89. Other reasons for insensitivity include a failure to communicate with other agencies, failure to adequately train support people, and a general lack of resources. See id. at 14,934; CRS REPORT, supra note 4, at As of 1980, the administrators of FARA made neither scheduled reviews of relevant executive agency records nor periodic inquiries of government agency officials about foreign agent activities. Few government personnel were aware of FARA's requirements. In 1980, the GAO contacted the Departments of State and Commerce, the International Trade Commission ("ITC"), the Securities and Exchange Commission, the Office of the U.S. Trade Representative, and the military services, inquiring about the possibility of sharing helpful information of activities of foreign entities with the administrators of FARA. The GAO reported that "[s]ince the agencies are not required to take any particular action, their awareness of the Act was limited or nonexistent, and only at ITC did we find any records which could be used for verification." 1980 GAO REPORT, supra note II, at 814,933. Likewise, the CRS Report noted that the Justice Department and State department failed to cooperate, explaining that the Justice Department had no authority to compel other departments or agencies to supply information. CRS REPORT, supra note 4, at 21. After citing several incidents of non-cooperation by the State Department, the CRS Report stressed the necessity of a free flow of information between agencies,
16 1990 Reforms to the. Foreign Agents Registration Act 147 under one of the exemptions need neither register nor make a formal claim of exemption.90 The exemption is self-determined. If the activities of such an agent never attract the attention of the FARA administrators, the legitimacy of the self-determination is never challenged. 91 Successful implementation of FARA rests on knowledge of who is violating the Act. Without imposing an affirmative duty on agents to notify FARA's administrators of reliance on an exemption, the short-staffed registration unit cannot possibly enforce FARA's objectives Adverse Incentives The stigma associated with registration as a "foreign agent" discourages those who should register from objectively determining whether they fall within the purview of the Act. FARA began in 1938 as a measure to deal with pre-world War II subversive agents and propagandists.93 Though the 1966 amendments "intended to shift the focus away from subversion and to spotlight foreign interest lobbying,"94 the anti-subversive stigma remains.95 The 1977 CRS Report recognized the seriousness of the stigma problem, concluding that "[t]his 'remnant' of the thus permitting the FARA Registration Unit to function effectively despite its limited size. Id. at 23. The report suggested that Congress amend FARA to require that other governmental agencies administer their programs and activities in a manner to further FARA's purposes, including furnishing relevant information. Id. The report explained: Among other possible benefits flowing from the enactment of such a provision is the fact that such language may move other departments and agencies to inquire of persons who participate in their proceedings whether they represent foreign principals and if so, whether they are registered, and ultimately to furnish information thus acquired to the Registration Unit. Id. 90. CRS REPORT, supra note 4, at Id GAO REPORT, supra note 11, at 814,933. See also CRS REPORT, supra note 4, at See generally supra note 89 (examining the lack of cooperation by other governmental agencies with the FARA administrators). FARA also lacks adequate resources to monitor compliance with the Act. The problem stems from a failure to adequately train paralegals to conduct inspections and a failure of the reporting forms to require the type of information that might easily fit a data processing effort GAO REPORT, supra note 11, at 514,934. The number of annual inspections steadily fell from ninety-three in 1974 to eight in Id. Though the decrease in inspections was partly due to a shift in focus to lawyerlobbyist agents, the central reason for the decline seems to have been a general lack of resources. Id. Without an adequate inspection program, FARA administrators will have great difficulty maintaining the records necessary to provide relevant and accurate information on levels of agent activity. The value of FARA to government may depend not only on the identification of individual agents but on the compilation of data as to the extent of the foreign agent effort. 93. CRS REPORT, supra note 4, at Id. at Note, supra note 46, at 427. Due to the original criminal/subversive/"traitor" aura surrounding the Act and due to the psychosocial stigma which must attach to being known as a "foreign agent," any attorney or businessman would probably be hesitant to register under the Act if it could be avoided. This factor might well account for the flurry of reluctant registrations which seems to follow almost any liti-