Former Obama White House counsel Gregory B. Craig was in federal court Monday as he faces trial for allegedly lying to the Justice Department in a prosecution that has shaken up the capital’s billion-dollar foreign-influence industry.
Craig has pleaded not guilty in Washington, where opening statements were expected Tuesday. The charge against him stems from alleged public relations work, rather than lobbying, while with the law firm Skadden, Arps, Slate, Meagher & Flom. He is accused not of failing to register as a foreign agent under the law, but of lying and withholding information from Justice officials seeking to determine whether he was required to register.
Still, Washington attorneys representing foreign governments have already drawn their own lessons from his proceedings.
“It’s rare when you see a case like this, where someone who is extremely experienced, savvy and considered a wise person in Washington, is charged with violating a law that most would assume that he or she knows a lot about,” said Thomas J. Spulak, a partner at the King & Spalding law firm who advises on lobbying compliance.
“Everyone who practices in this area knows it’s going to be a different day,” Spulak said. “Either you come in and tell us [the Justice Department] the truth, the whole truth, and don’t leave out any facts that could be relevant to what you’re telling us, or you’ll suffer the consequences,” he said.
The foreign agents act, known as FARA, was enacted in 1938 in response to propaganda from Nazi-inspired groups in the United States. It requires Americans to publicly register with the attorney general when they are paid to influence U.S. policy for foreign governments, political parties or politicians.
The law formed the basis of charges against nearly two dozen defendants investigated in special counsel Robert S. Mueller III’s probe of Russian interference in the 2016 election. In the preceding five decades, it factored into only seven federal prosecutions.
Craig was the first prominent Democratic figure to be charged in a case spun off from Mueller’s office.
Craig, 74, a party stalwart who was President Barack Obama’s first White House counsel and special counsel for his former Yale Law School classmate, President Bill Clinton, has called the case against him “unprecedented and unjustified.”
Craig’s defense argues he has been singled out for conduct no one would have thought required registering under the act at the time. Specifically, Craig denied lying to conceal information from the Justice Department’s FARA unit as it investigated work he did with GOP lobbyist Paul Manafort on behalf of the Ukrainian Justice Ministry in 2012.
Craig’s attorneys, led by William J. Murphy and William W. Taylor III, contend he was not acting under the control or direction of his clients when he reached out to reporters to discuss his law firm’s Ukraine work. Instead, they said Craig was trying to correct misrepresentations about the work spread by Ukraine’s representatives that he opposed.
The trial has riveted the attention of Craig’s counterparts among Washington’s elite and well-compensated bar of 20 to 30 attorneys concentrated at 10 major law firms who advise foreign entities on navigating the law.
His prosecution is “emblematic of a more muscular government approach to enforcement of FARA,” said David Laufman, a partner at Wiggin and Dana who previously oversaw FARA enforcement at Justice.
The case underscores “what is essentially a zero-tolerance policy for what the Justice Department regards as false statements” when the FARA unit investigates whether a party has an obligation to register, Laufman said, adding, “law firms as well as lobbying and public relations firms can be impacted by FARA if their activities on behalf of a foreign political party or government include public relations work.”
Mueller’s 22-month investigation indicted or investigated some of the most visible players in Washington over FARA-related offenses, including former Trump campaign chairman Manafort; his deputy, Rick Gates; associate W. Samuel Patten; and Trump foreign policy adviser Michael Flynn.
As the special counsel’s probe concluded in March, Assistant Attorney General for National Security John C. Demers formally announced the department’s shift “from treating FARA as an administrative obligation and regulatory obligation to one that is increasingly an enforcement priority.” He named veteran Mueller team member and federal prosecutor Brandon Van Grack to lead the FARA unit.
A Justice Department spokesman declined to comment on the impact of the National Security Division’s increased enforcement.
But the reaction by lobbyists and law firms appears to be sharp.
The number of foreign agents registering annually with the Justice Department has surged 30 percent since 2016 to more than 460 this calendar year, after years of hovering near 350, according to the government’s FARA website.
Registrants reported their foreign clients spent $1.2 billion to influence U.S. policy since 2017, according to the Center for Responsive Politics. U.S. allies Israel, South Korea, Japan and Saudi Arabia are top spenders, with rivals China and Russia also within the top 10, the center reported.
The department has also pressed several media providers for Russian state-owned television and radio outlets RT and Sputnik to register, as well as the U.S. division of China Global Television Network, formerly known as CCTV. In another first this May, the department successfully sued and obtained a court ruling requiring RM Broadcasting of Florida to register for providing programming for a D.C.-area Sputnik radio station through an agreement with state-run Rossiya Segodnya.
Amid those actions, Craig was charged in April with making false statements in connection with his law firm’s work with Manafort and Gates.
Manafort served as a political adviser to Ukrainian President Viktor Yanukovych, and in 2012 helped arranged for Craig and Skadden to be hired to write a report reviewing the jailing of Yanukovych’s political rival, Yulia Tymoshenko.
The report offered a mixed review of her trial. But human rights advocates charged that it whitewashed Yanukovych’s actions, while Manafort made the report the centerpiece of an undisclosed lobbying campaign to improve Yanukovych’s reputation in the West.
Prosecutors allege interactions Craig had with the media to explain and publicize the report in December 2012 triggered a requirement to register. They contend he did not want to register because he believed it could prevent him from reentering government service and because he feared having to disclose that Ukrainian businessman Viktor Pinchuk had paid the firm $4.15 million for the report, undermining perceptions of Skadden’s independence.
In a statement at his indictment and through lawyers, Craig said he had not acted on Ukraine’s behalf when he briefed journalists and instead had been working to correct Ukrainian spin about Skadden’s work.
Craig’s attorneys said his work on the Tymoshenko case came “as an independent expert on the rule of law, not as an advocate for the client,” and that he refused requests to participate in Ukraine’s lobbying around the report.
Last week, U.S. District Judge Amy Berman Jackson granted a motion by Craig’s defense to dismiss one of two counts against him. She struck a charge alleging Craig made false statements under FARA in an Oct. 11, 2013, letter submitted to the department, citing a lack of clarity in the law. But she allowed his trial to proceed on a general false statements charge.
Skadden in January reached a settlement with the Justice Department, admitting it should have registered for its work in 2012 and 2013, and agreed to turn over $4.6 million it made for the report in exchange for facing no criminal charges. In its settlement, Skadden agreed that an initial finding by the Justice Department in 2014 that the firm did not need to register came after the agency relied on “false and misleading oral and written statements” made by Craig.