A Win for Wynn: Judge’s Dismissal of Civil Case Against Steve Wynn Could Fundamentally Change FARA Enforcement

On October 12, 2022, a federal district judge in the District of Columbia, Judge James E. Boasberg, dismissed a U.S. Department of Justice (DOJ) civil complaint against businessman Steve Wynn, which sought to compel Wynn to register under the Foreign Agents Registration Act (FARA) for work that he allegedly performed on behalf of two foreign principals, a former Chinese government official and the Chinese government itself. In a decision that potentially has far-reaching consequences for FARA enforcement, Judge Boasberg ruled that FARA does not empower DOJ to force entities to register after the termination of an agency relationship. If upheld on appeal and adopted by other circuits, the decision would mean that DOJ has no judicial remedy against a person who fails to register for past conduct aside from criminal prosecution, which requires a heightened showing that a failure to register is willful. We expect DOJ to appeal the ruling and to prioritize pursuing a legislative fix to clarify the FARA Unit’s civil enforcement authority. Given the likelihood of an appeal and the limited immediate impact of the Wynn ruling, we do not foresee a significant change in FARA enforcement in the short term.

I. The DOJ Complaint

FARA provides that any person who engages in certain activities at the request, direction, or control of a foreign principal, is an “agent of a foreign principal” and must register with DOJ. Willful failure to register is a criminal offense. As relevant here, FARA also empowers DOJ to seek injunctive relief “requiring compliance with any appropriate provision” of FARA, 22 U.S.C. § 618(f), which DOJ has historically used to compel persons to retroactively register for prior conduct.

As we discussed earlier this year, in May 2022, DOJ filed a civil enforcement action seeking to compel Wynn to register under FARA as an agent of the Chinese government. The complaint alleged that in 2017—at the request of a Chinese government official—Wynn conveyed to President Trump and other administration officials on at least eight occasions the Chinese government’s request for the United States to cancel the visa of a Chinese national who was charged with corruption in China and had sought political asylum in the United States. According to DOJ, although Wynn had no prior connection to the Chinese asylum-seeker or independent interest in his removal from the United States, Wynn conveyed these requests to protect his business interests in Macau, a special administrative region of China. Lobbying U.S. government officials on a matter of interest to a foreign government, at the request of the foreign government, can trigger a registration obligation under FARA. Importantly, the parties agreed that Wynn’s agency relationship with the Chinese government ceased in October 2017.

In July 2022, Wynn filed a motion to dismiss the complaint.

II. The District Court Decision

In his October 12 ruling, Judge Boasberg held that existing D.C. Circuit precedent compels the conclusion that the obligation to register under FARA as an agent of a foreign principal ends upon termination of the agency relationship. Because DOJ and Wynn agreed that any agency relationship between Wynn and the Chinese government ended by October 2017, Judge Boasberg concluded that Wynn no longer had a registration obligation in 2022 when DOJ filed the complaint seeking to compel Wynn to register. Thus, Judge Boasberg dismissed the case without determining whether Wynn was an agent of China.

Judge Boasberg explained that “while the issue is close,” he was bound by the 1987 D.C. Circuit decision in United States v. McGoff. McGoff addressed the issue of when the statute of limitations begins to run in a criminal prosecution for a FARA violation. Answering that question required the court to determine when the purported agent’s registration obligation ceased. In that case, the majority concluded that the “obligation to file expires when the agent ceases activities on behalf of the foreign principal,” despite DOJ’s reliance on statutory language that said there was a continuing registration obligation. The court thus held that the statute of limitations clock starts to run on the last day a person acts on behalf of the foreign principal.

Although Judge Boasberg felt bound by McGoff to conclude that injunctive remedies are not available once the agency relationship giving rise to a registration obligation has ended, he agreed with DOJ that the aim of the civil complaint against Wynn—“to compel disclosure to allow government officials as well as the public to evaluate Wynn’s activities as an agent of a foreign principal”—is consistent with the central goal of FARA. Through his own analysis of 22 U.S.C. § 612(a) and considering the majority and dissenting opinions in McGoff, Judge Boasberg appeared to invite the D.C. Circuit to reconsider its holding in McGoff if—or, more likely, when—DOJ appeals.

III. The Consequences

The ruling could fundamentally change FARA enforcement

If left unchanged and unchallenged, Judge Boasberg’s ruling would fundamentally change the ability of DOJ to enforce FARA. Without the ability to compel registration for past activity through a civil complaint, the only tool left to enforce FARA against individuals and entities who failed to register during their agency would be criminal enforcement. However, criminal actions require proof of willfulness—in other words, that the individual or entity knew at the time of the offense that they had an obligation to register and failed to do so—which is more difficult to establish. Accordingly, in the countless instances where a defendant is unaware of FARA or the existence of a registration obligation is uncertain, DOJ would be limited in its ability to require registration after the relevant conduct ends.

However, in the short-term, the decision is unlikely to change FARA enforcement

First, the implications of this ruling for enforcement efforts are so severe that we expect DOJ will have no choice but to appeal. Considering that McGoff was a criminal case and that its holding was unclear, the D.C. Circuit could distinguish McGoff and reverse Judge Boasberg’s ruling.

Second, the ruling is only binding in the District of Columbia. Although the D.C. District Court has jurisdiction over all FARA enforcement actions because DOJ’s FARA Unit is located in the District of Columbia, DOJ could bring civil actions in other districts. Such civil enforcement actions have been brought outside the District of Columbia before. It is unclear how persuasive Wynn will be outside the District of Columbia, particularly since Judge Boasberg’s own decision calls into question the rationale of the D.C. Circuit’s decision.

Moreover, the decision does not affect entities that will continue to act as foreign agents

The decision does not impact every potential foreign agent. If a foreign entity is acting within the United States, or if an agent continues to lobby or engage in political activities for a foreign agent, DOJ will continue to be able to seek an injunction to stop the entity and/or agent from acting in the United States as a foreign agent until they register.

Finally, this decision will likely prompt DOJ to prioritize FARA legislative reform

For many years, members of Congress have proposed bipartisan legislation that would arm DOJ with more investigative tools, such as subpoenas, and expand the penalties for violations. Historically, DOJ has not taken a position on those proposals.

However, since the Wynn decision has placed a potentially significant limitation on DOJ’s ability to enforce FARA, we anticipate that DOJ will now support such FARA reforms, including those that address the language at issue in the Wynn case. We also expect that Congress will, in the near future, introduce legislation to amend FARA to make it clear that foreign agents have an ongoing obligation to register after their agency relationship with a foreign principal has concluded. DOJ’s support could well be the difference that leads to legislative reform this time around. Moreover, these changes could include the addition of civil investigative demand authority that would empower the FARA Unit to subpoena parties for information, giving the FARA Unit more tools to pursue civil enforcement.

IV. Conclusion

Given the likelihood of an appeal and the limited immediate impact of the Wynn ruling, we do not foresee a significant change in FARA’s enforcement posture. Nevertheless, until the D.C. District Court’s decision is overturned, targets of letters of inquiry should carefully consider the impact of the Wynn decision on their own situations.

Diego Negron-Reichard, a Law Clerk in our Washington, D.C., office, contributed to the writing of this alert.