Wednesday, January 23, 2019
Skadden & Arps Pays $4.6 million and Agrees to Register as an Agent of a Foreign Principal to Avoid Prosecution
Skadden, Arps, Slate, Meagher & Flom LLP has entered into a settlement agreement with the Department of Justice, resolving its liability for violations of the Foreign Agents Registration Act (FARA), announced Assistant Attorney General for National Security John Demers.
According to the Agreement, Skadden acted as an agent of the Government of Ukraine within the meaning of FARA, 22 U.S.C. § 611 et seq., by contributing to a public relations campaign directed at select members of the U.S. news media in 2012. Moreover, in 2012 and 2013, Skadden received multiple inquiries from the Department’s FARA Registration Unit about its role in that campaign. A partner then at Skadden made false and misleading statements to the FARA Unit, which led it to conclude in 2013 that the firm was not obligated to register under FARA. The facts, when uncovered, showed that Skadden was indeed required to register in 2012, and, under the Agreement, it will do so retroactively.
“Law firms should handle inquiries from the federal government the same way they would counsel their clients to: with appropriate due diligence to ensure the honesty of their response,” said Assistant Attorney General Demers. “Skadden’s failure to do so, and reliance on only the representations of the lead partner on the matter, hid from the public that its report was part of a Ukrainian foreign influence campaign. FARA protects the integrity of the American political system by enabling Americans to consider the identity of the speaker as they evaluate the substance of the speech.” Assistant Attorney General Demers added, “The Department appreciates Skadden’s more recent extensive cooperation in the investigation of this matter, which facilitated its resolution.”
In addition to agreeing to register under FARA, Skadden has agreed to pay the U.S. Treasury more than $4.6 million, which it received in fees and expenses for its work with Ukraine, and will ensure that it has formal, robust procedures for responding to inquiries concerning its conduct from any federal government entity and ensuring FARA compliance as to its engagements on behalf of foreign clients.
The Agreement acknowledges that Skadden has already taken substantial steps to comply with its terms, and so long as the firm continues to comply with it, the Department will not undertake any action against the firm relating to any of the conduct described in the Agreement and its Appendix.
Background of the Investigation
According to the Agreement, in the spring of 2012, Ukraine, Ministry of Justice (MOJ), with the assistance of Paul Manafort, hired Skadden to write a report (Report) on the evidence and procedures used during the 2011 prosecution and trial of former Prime Minister Yulia Tymoshenko and to address various questions regarding its fairness. Skadden also agreed to advise Ukraine in connection with a second, potential future prosecution of Tymoshenko. Although the engagement letter between Skadden and the MOJ stated that Skadden would be paid its customary fees and expenses, the contract Skadden signed with the MOJ, and which the MOJ made public, stated that the law firm would be paid only 95,000 Ukrainian hryvynas, which is approximately $12,000. Skadden understood that a Ukrainian business person would be paying its fees, which the law firm received from a Cypriot bank account of an entity named Black Sea View Ltd., which Manafort controlled. Skadden was eventually paid $4,657,568.91 for its work on behalf of the MOJ. The arrangements with the Ukrainian business person, the amounts paid, and advice on a second criminal prosecution of Tymoshenko were not disclosed in connection with the issuance of the Report.
Soon after it began work for the MOJ, Skadden became aware that Ukraine intended to use the Report as part of a public relations campaign to influence U.S. policy and public opinion toward Ukraine. After that point, Skadden’s lead partner for the Ukraine engagement took steps to advance the public relations campaign. In the fall of 2012, shortly after a meeting in New York with Manafort and a representative from Ukraine’s public relations firm to finalize the Report and discuss the media strategy for its rollout, the lead partner contacted a journalist at a national newspaper and asked whether the journalist would take a call from a lobbyist for Ukraine about the Report in advance of its release. Then, shortly before Ukraine released the report on December 13, 2012, the lead partner again contacted the journalist and arranged for delivery of the Report to the journalist, both via email and in person. On December 12, 2012, the lead partner spoke with the national newspaper about the Report and provided a quotation for attribution.
The lead partner’s pre-release outreach to the journalist was consistent with Ukraine’s media strategy for the Report, which including leaking the Report prior to its official release so as to “effectively set the agenda for subsequent coverage.”
FARA requires those in the U.S. who engage in political activities on behalf of foreign principals, which include foreign governments, to make a variety of written public disclosures to the Department of Justice. Based on its awareness of and involvement in Ukraine’s public relations campaign, Skadden had an obligation to register with the Department of Justice under FARA, but it failed to do so. If Skadden had registered, it would have had to disclose, among other things, the full amount it was being paid, the source of those payments, and the full scope of the work it was doing on behalf of the MOJ.
Five days after news articles appeared about the Report, the FARA Unit sent Skadden a letter, seeking information about its activities on behalf of Ukraine in order to assist the FARA Unit in determining whether Skadden had a registration obligation. This was the first of several requests for information the FARA Unit made to Skadden.
In both written and oral responses to the FARA Unit between February 6, 2013, and October 11, 2013, Skadden, in reliance on the lead partner, made false and misleading statements including, among other things, that Skadden provided a copy of the Report only in response to requests from the media and spoke to the media to correct misinformation about the report that the media was already reporting. The firm also submitted documents to the FARA unit that were false.
The FARA Unit made a determination that Skadden did not have a registration obligation in connection with its work for Ukraine, and it based that conclusion on the false and misleading information Skadden had provided. Before making its representations to the FARA Unit, Skadden had conducted no investigation to confirm the information the lead partner was providing to the FARA Unit and to other partners at the firm.
The investigation and negotiation of the Agreement was handled by Jason B.A. McCullough, a Trial Attorney in the Counterintelligence and Export Control Section, which includes the FARA Registration Unit, with assistance from the Federal Bureau of Investigation’s Counterintelligence Division.