Client Alert

DOJ Seeks to Require U.S. Businessman to Register as a Foreign Agent on Expansive Agency Theory

20 May 2022

Earlier this week, the U.S. Department of Justice (DOJ) filed a civil enforcement action seeking to compel U.S. businessman Steve Wynn to register under the Foreign Agents Registration Act (FARA) as an agent of the Chinese government. The complaint alleges that in 2017—at the request of a Chinese government official—Wynn communicated to President Trump and other administration officials the Chinese government’s desire for the United States to cancel the visa of a Chinese national who was charged with corruption in China and sought political asylum in the United States. According to the DOJ, Wynn acceded to these requests to protect his business interests in Macau.

This complaint marks only the second time in more than 30 years that the DOJ has asked a court to direct someone to register under FARA. Along with the half dozen criminal foreign influence cases filed this year, the Wynn complaint signals the DOJ’s continued focus on combating foreign interference and requiring the disclosure to the U.S. government of political activities on behalf of foreign entities. Coming in the same week that a U.S. citizen and officials from China’s Ministry of State Security were indicted for spying on prominent Chinese dissidents in the United States, the case underscores the DOJ’s particular focus on policing the Chinese government’s influence activities in the United States.

The Facts – Quintessential Political Activities

For all that is exceptional about this case—a prominent defendant, an expansive (though not new) theory of agency, and the DOJ resorting to FARA’s rarely used civil enforcement authority—the alleged activity is unremarkable from a FARA perspective.

Wynn allegedly had at least eight telephone calls with Sun Lijun, the former Vice Minister for Public Security in the People’s Republic of China. According to the complaint, Sun requested Wynn’s help in seeking the removal of the Chinese national, Wynn agreed to raise the matter with President Trump and administration officials even though he had no prior connection to the Chinese national or independent interest in his removal, and Wynn in fact discussed the matter with President Trump and multiple administration officials.

Wynn’s alleged actions at the request of a Chinese government official to lobby the President of the United States on a specific matter of interest to the Chinese government are the type of classic “political activities” covered by FARA. Whether Wynn must register for those activities, however, turns on whether he acted as an agent of Sun and the Chinese government. 

The Legal Issue – When Does a Request Create Agency Under FARA?

Under FARA, an “agent of a foreign principal” is any person who engages in certain activities “at the order, request, or under the direction or control, of a foreign principal.” 22 U.S.C. § 611(c)(1) (emphasis added). The Wynn complaint notably relies only on the Chinese government official’s request as the basis to allege that Wynn acted as an agent of the Chinese government. Wynn is not alleged to have been paid for his cooperation or to have entered into a written agreement or otherwise acted subject to the direction or control of the Chinese official. 

The DOJ has long maintained that a mere request can create an agency relationship under FARA. In a March 19, 2021 advisory opinion, for example, the FARA Unit noted that “[a]cting at the ‘request’ of a foreign principal is sufficient to establish the requisite agency relationship under FARA” even “though there is no contract or compensation.” Similarly, in an April 4, 2019 advisory opinion, the FARA Unit rejected the argument “that there must be ‘direction or control’ by a foreign principal to establish the requisite agency relationship.” According to the FARA Unit, “[t]hat argument is inconsistent with a plain language of the statute, which identifies ‘order’ and ‘request’ as separate perquisites, stated in the disjunctive, that give rise to an agency on behalf of the foreign principal.” 

In a 2020 white paper, “The Scope of Agency Under FARA,” the FARA Unit further explained the factors it considers when assessing whether a person should be viewed as an “agent” for purposes of FARA:

  • Whether those requested to act were identified with specificity by the principal;
  • The specificity of the action requested;
  • Whether the request is compensated or coerced;
  • Whether the political activities align with the person’s own interests;
  • Whether the position advocated aligns with the person’s subjective viewpoint; and
  • The nature of the relationship between the person and the foreign principal.

According to the DOJ, “[t]he ultimate test for agency under FARA is whether it is fair to draw the conclusion that an individual is not acting independently, is not simply stating his or her own views, but is acting as an agent or alter ego of the foreign principal.”

The DOJ can find support for its position in one of the few appellate court decisions to interpret FARA. In 1982, the Second Circuit confirmed that agency for the purpose of FARA is broader than the common law standard for agency and does not require that the foreign principal have control of the agent. See Attorney Gen. v. Irish N. Aid Comm., 668 F.2d 159, 161 (2d Cir. 1982) (INAC). Addressing specifically whether a foreign principal’s request can fall within the scope of FARA, the court concluded that it could: “Once a foreign principal establishes a particular course of conduct to be followed, those who respond to its ‘request’ for complying action may properly be found to be agents under [FARA].”  Id. at 162.

But the Second Circuit also cautioned that “request” “is not to be understood in its most precatory sense” because “[s]uch an interpretation would sweep within the statute’s scope many forms of conduct that Congress did not intend to regulate.” Id. at 161. And the FARA Unit’s 2020 white paper, quoting INAC, acknowledged that “[t]he exact perimeters of a ‘request’ under [FARA] are difficult to locate.”

In a statement, Wynn’s attorneys disagreed with the DOJ’s legal interpretation. According to the complaint, the DOJ first advised Wynn of his obligation to register in 2018. After four years of back and forth between Wynn’s attorneys and the DOJ, a court may finally weigh in and provide additional guidance regarding the scope of agency under FARA.

Why It Matters

 

Regardless of the outcome, the case underscores how FARA’s broad definitions require careful analysis of activities on behalf of foreign governments or other foreign principals – even in the absence of a formal agreement. The case also highlights the DOJ’s continued use of FARA as a tool to expose the sources of foreign influence on U.S. government policy, particularly involving jurisdictions and topics of heightened national security or foreign policy concern.

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