The Department of Justice recently announced a landmark settlement agreement with the prominent law firm Skadden, Arps, Slate, Meagher & Flom LLP. Skadden acknowledges in the agreement that it should have registered under the Foreign Agents Registration Act (“FARA”) for its work on behalf of the Government of Ukraine. The agreement also, among other things, requires Skadden to file a late FARA registration, disgorge $4.6 million to the U.S. Treasury, and implement “formal, robust procedures” to ensure FARA compliance.
This Skadden settlement is the first of its kind in at least several decades and could have far-reaching consequences particularly for lobbying, public relations, and law firms that represent foreign governments and foreign entities.
Skadden’s Representation of the Ukrainian Government
According to a U.S. Department of Justice appendix attached to the settlement agreement, the Ukrainian Ministry of Justice hired Skadden in 2012 to write a Report on the “evidence and procedures used during the 2011 prosecution and trial of former Prime Minister Yulia Tymoshenko” and advise the Ministry “about rule of law issues in connection with a second criminal case against Tymoshenko.” The engagement was led by a Skadden attorney referred to in the appendix as “Partner-1,” who is reportedly former White House Counsel and then-Skadden partner Greg Craig.
Under the engagement, a $4 million advance retainer was paid to Skadden by a third party “business person.” The retention agreement, which was never countersigned by the Ministry, included a provision that Skadden was “not being retained to engage – and will not engage – in political activities as defined by the Foreign Agents Registration Act (FARA).” Notably, the retention agreement also incorporated by reference a separate contract between the Ministry of Justice and Skadden that set the maximum amount to be paid by the Ukrainian Government at just $12,000.
Skadden is described in the appendix as exercising independence in preparing the Report, taking such measures as disregarding the Ministry’s comments and repeatedly engaging Ms. Tymoshenko’s attorney to obtain her opposing viewpoint. The Report did not include, however, certain pro-Tymoshenko observations about the 2011 criminal trial that were separately memorialized by Mr. Craig in a personal memo. Skadden delivered the Report officially on November 30, 2012 and the Ukrainian Government released the Report to the public on December 13, 2012.
The U.S. Department of Justice appendix indicates that Skadden’s in-house FARA experts provided advice about the statute’s application to the Ukraine representation “on multiple occasions” to the Skadden attorneys writing the Report, including Mr. Craig. This advice apparently included a note saying that “if we were to perform public relations work aimed at the US …. then we would be obligated to register under FARA.” The appendix also indicates that Mr. Craig sent an email to an executive at a public relations firm stating that “we cannot run close to the FARA line and if we were seen as hiring and directing [PR Firm] we would be doing much more than just lawyering.”
Later, though, the appendix indicates that Mr. Craig was enlisted in the public-relations efforts by offering input into the proposed media plans and by interacting with a specific journalist with whom Mr. Craig had a prior relationship, which apparently included delivery of the Report to that journalist. (Attorneys for Mr. Craig have said previously that he did not disseminate the Report.) Mr. Craig was ultimately interviewed by the journalist and quoted in a news story about the Report.
Skadden’s Interactions with the Department of Justice
After reading Mr. Craig’s quotes in the media about the Report, the Department of Justice’s FARA Unit sent to Skadden a Letter of Inquiry in December 2012 asking the law firm for additional information and documents about the Ukrainian Ministry of Justice representation. Skadden responded that its work “was conditioned on the understanding with the client that the Firm would not provide any services that would be covered by” FARA. The response did not indicate how much Skadden had been paid in total or identify the source of its compensation.
The FARA Unit followed up in April 2013 with a subsequent request for “additional information to determine whether your firm is obligated to register,” including whether any Skadden personnel released or distributed the Report to any journalists, whether any Skadden personnel gave any media interviews, and the amount and source of Skadden’s compensation for the engagement. Skadden responded to this request in June 2013, but the appendix indicates that some facts “were not fully reflected” in Skadden’s response.
In September 2013, the FARA Unit sent a letter indicating it had determined that Skadden must register under FARA as an agent of the Ukrainian Government, “as a result of the dissemination of the Report to the media and communications with the media regarding the Report.” Skadden requested and held an in-person meeting in October 2013 with the FARA Unit to address the government’s conclusions. The firm subsequently sent a letter to the FARA Unit signed by Mr. Craig indicating, among other things, that the Report was provided to U.S. media outlets only “in response to requests from the media.”
The FARA Unit then changed its position and concluded in a January 2014 letter to Skadden that the firm had “no present obligation to register under FARA.”
Resolution for Skadden
The Department of Justice has since received information that now leads it to conclude that the FARA Unit’s 2014 conclusion about Skadden’s registration status was incorrect:
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.
Skadden agrees with this conclusion, pursuant to a settlement agreement with the Department of Justice. This settlement agreement also requires Skadden to
The settlement agreement did not subject Skadden to any ongoing government monitoring or reporting regime.
Skadden did, in fact, register under FARA for its prior Ukraine work on January 18, 2019. The firm disclosed that 12 individuals associated with Skadden assisted in the representation and declared that it “understood that its work was to be largely funded by Victor Pinchuk.”
Important “Takeaways” from the Skadden Settlement
Skadden’s situation and settlement agreement offer important insights into FARA compliance to the regulated community, including: