Lobbying Disclosure Exemption Allows for Continued Foreign Influence in U.S. Politics

The sun sets on the U.S. Capitol Dome, October 2019.

Concerns about safeguarding U.S. democracy from foreign influence are certainly not new. Yet, in the wake of the 2016 presidential election and amidst the ongoing presidential impeachment proceedings, the federal government is paying more attention to the influence of foreign agents in American politics—an issue that has, historically, been overshadowed in mainstream political conversation. Specifically, concerns from Congress and the U.S. Department of Justice (DOJ) have emerged over existing laws that have allowed foreign governments to hide behind a lobbying disclosure loophole granting them discrete channels of influence in U.S. politics. It is time for these laws to be updated in order to better safeguard our democracy and protect against corruption.

Overview of the Foreign Agents Registration Act and Lobbying Disclosure Act

Congress passed the Foreign Agents Registration Act (FARA) in 1938 with the intent of curbing foreign influence in American politics. FARA requires all foreign agents—defined as those performing specific activities on behalf of or in the interests of “foreign governments, political parties, other entities, or individuals outside the United States”—to register with the DOJ and disclose the full details of their influence-based work. As current Assistant Attorney General John C. Demers stated, “FARA helps protect the integrity of American democracy by combatting covert foreign government influence in our political process.”

However, FARA fails to capture all instances of foreign lobbying influence. Another existing law, the Lobbying Disclosure Act (LDA)—passed in 1995—acts as an indirect exemption from FARA, allowing foreign governments to employ lobbying firms without the need to register them as foreign agents. This so-called “commercial exemption” also allows lobbyists to withhold significant details of their work, such as disclosing meetings with foreign government officials; filing activity reports every six months; and submitting materials distributed by foreign principals. Thus, the public is unable to learn the full range of relevant information regarding specific foreign influence that may be taking place.

In a political climate in which foreign actors are being more heavily scrutinized, it is not hard to see why lobbyists working on behalf of foreign governments might prefer filing under the LDA exemption instead of the more rigorous and transparent FARA registration.

A more rigorous approach in the enforcement of FARA

For years it was an open secret in Washington that the federal government did not strictly enforce FARA. A 2016 DOJ Inspector General (IG) report concluded that FARA compliance rates were unacceptable. The IG’s report criticized the DOJ’s lack of a “comprehensive FARA enforcement strategy,” proposing a series of recommendations to improve its practices.

While it did not happen overnight, the IG’s report did not fall on deaf ears. Beginning with the Skadden settlement in January 2019, which required that the high-profile law firm register under FARA and pay a $4.6 million fine, FARA enforcement was noticeably on the rise.

The House of Representatives’ passage of sweeping democracy reform legislation, known as H.R. 1, further addressed significant FARA deficiencies by requiring a dedicated FARA enforcement unit at the DOJ and the expansion of DOJ enforcement powers to include the ability to impose civil fines. Subsequently, the DOJ restructured its practice and Assistant Attorney General Demers vowed to increase enforcement of foreign lobbying disclosures, with a particular emphasis on pursuing unregistered agents. He also appointed a new FARA unit chief, Brandon Van Grack, who had worked as prosecutor for Special Counsel Robert Mueller’s investigation into Russian interference in the 2016 election.

With the exception of a few setbacks, such as the dismissal of two high-profile FARA prosecution cases in September 2019, the DOJ showed that it was becoming more serious about rooting out undisclosed foreign lobbying influence in U.S. politics. In the last three years since the IG’s report, FARA prosecutors have initiated more prosecutions than in the 50 years prior.

The DOJ is setting a dangerous precedent with LDA exemptions

In a controversial move in March 2019, the DOJ issued a legal advisory opinion exempting Motiva Enterprises, a Texas-based subsidiary of state-owned Saudi Aramco, from registering its lobbyists under FARA. In May, Motiva employed the Nickles Group to lobby Congress on its behalf. In line with its guidance from the DOJ, the Saudi-owned company registered under the LDA. As a result, Motiva was able to take advantage of the LDA exemption that allows the company’s lobbyists the ability to mask the full extent of their influence in the United States.

The main concern in this case is that Motiva’s parent company, another Aramco subsidiary, is registered under FARA as representing the Saudi Arabian government. Given the potential influence of the Saudi government in the United States through ownership shares in American companies such as Uber—which has spent millions of dollars on local and statewide ballot initiatives—this dangerous precedent that the DOJ set forth has not gone unnoticed.

In fact, the legal opinion was met with a sharp rebuke from the U.S. House Committee on Appropriations. In a congressional report, the committee expressed its concerns with the DOJ’s March advisory opinion and its permission for some state-owned enterprises to use the LDA loophole rather than register under FARA. It has yet to be seen if these congressional concerns will prompt any change in position from the DOJ or if this precedent will cause a slippery slope that could lead to further exploitation of the LDA loophole by foreign-owned U.S. companies looking to influence American politics and policies.

Legislative efforts to reform the LDA exemption

Many members of Congress continue to recognize the need for FARA reform. For example, there is high-profile, bipartisan legislation to reform FARA pending in the Senate, led by Judiciary Committee Chairman Charles Grassley (R-IA). However, unlike previously introduced legislation, the current version does not aim to eliminate the LDA loophole altogether, instead only calling for an audit of the exemption.

With federal elections looming in less than a year, it is imperative that Congress considers reforms to close the LDA loophole to require a greater degree of foreign agent registration under FARA and fuller disclosure of the details of their work on behalf of foreign governments and companies. With foreign interference in the 2016 elections already confirmed, lawmakers should be taking steps to safeguard our political system from further foreign influence.

Yet, the unfortunate reality is that the exploitation of the LDA loophole is just one of many ways by which foreign agents can potentially influence the U.S. political system. As discussed at length in a recent Center for American Progress report, many U.S. companies with substantial levels of foreign ownership not only employ lobbyists to further their political agendas but also use loopholes in existing law to spend huge sums of money directly from their corporate treasuries to influence U.S. elections.

As this country prepares itself for what promises to be yet another contentious election cycle, Americans deserve to know that their government functions with their best interests at heart rather than in the interests of foreign agents, corporations, and governments.

Kai Bernier-Chen is an intern with the Democracy and Government Reform team at the Center for American Progress.