. i I:n f-..--- __-.. ted Star t’s . General Accounting Office Rqxxt, 1o the Chairman, Subcommittee GAO -- on Oversight of Government Management, Committee on Gwernmental Affairs, U.S. Senate -_. -. ._-__-,_-.. ._- ..,-...“. -. ..- __-- .------ -_.-.. *July 1990 FOREIGN AGENT REGISTWTION Justice Needs to Improve Program Administration RESTRICTED--Not to be released outside the General Accounting office unless 8pecifhUy approved by the Office of Congremional Relations. GAO,/NSIAD-90-250 -~ united states GAO General Accounting Office Washington,D.C.20648 National Security and Intemation8l Affairs Division B-240379 July 30,199O The Honorable Carl Levin Chairman, Subcommitteeon Oversight of Government Management Committee on Governmental Affairs United States Senate Dear Mr. Chairman: ln responseto your request, we have updated our 1980 report’ on the Department of Justice’s administration of foreign agent2registration. Cur objectives were to determine whether (1) the recommendations made in our 1980 report have been implemented and (2) foreign agents are complying with the law by registering with the Department of Jus- tice, by fully disclosing their activities, and by fii required reports on time. We also reviewed the adequacyof the Justice Department’s disclo- sure criteria and guidance. In our 1980 report, we recommendedthat the Attorney General seek leg- islative authority to (1) require written notification to the Justice Department of all exemption claims prior to any agent activity and (2) give .the . Justicesubpoena Department additional enforcement measures(such as admuustrative powers, a scheduleof civil fines for minor vi+ lations, and increasesin existing fines). The Department of Justice has not implemented the recommendations l3esultsin Brief we made in our 1980 report. As a result, the Department has no mfor- mation on exemptions and still has limited enforcement authority. The admmistration of foreign agent registration has remained a problem. The Justice Department currently maintains files on approxi- mately 776 foreign agents.Cur review of Justice’s files on a random sample of 46 of these agentsindicated that one-half of them had not fully disclosedtheir activities; over one-half registered initial forms late; and over one-half filed their required semiannual reports late. We also found that the Justice Department’s disclosure criteria is unclear. Both foreign agents and the Justice Department officials who review the agents’ registration forms lack specific written guidanceon what should be reported. The questions on the semiannual supplemental statements are general and do not specifically require the information necessaryto satisfy the act’s disclosure requirements. The Foreign Agents Registration Act of 1938 was enactedto identify Background agentsengagedin political activities, including the spreading of foreign propaganda on behalf of foreign principals,3 and to require them to pub- licly report their activities and finances. Amendments to the act, passed in 1966, were designedto place emphasison protecting the integrity of the U.S. government’s decision-making processand to disclosethe activi- ties of foreign agents,including their contacts with executive branch officials. The 1938 act, as amended,requires foreign agentsto disclosetheir con- nections with foreign governments,foreign political parties, and other foreign principals, as well as the activities they perform on behalf of such principals in the United States.Justice’s regulations implementing the act are found at 28 Codeof Federal Regulations, Part 6. The regulations require that foreign agentsfile an initial statement with detailed information and exhibits and file a supplemental statement every 6 months for the duration of the foreign principal-agent relation- ship. According to the regulations, a statement is “detailed” within the meaning of the act when it has that degreeof specificity necessaryto permit meaningful public evaluation of each of the significant steps taken by a registrant to achieve the purposesof the foreign principal- agent relationship. The act also provides certain exemptions to registration, such as for dip- lomatic, humanitarian, commercial, and legal activities. However, for- eign agents are not required to notify the Justice Department when they claim such an exemption. The Department of Justice’s Registration Unit, composedof nine profes- sional and four admin&rative staff, is responsible for administering and -.- implementing the act. The Registration Unit’s responsibilities include (1) identifying unregistered agents,(2) ensuring that agentsfile reports on time, (3) rendering advisory opinions interpreting the act, (4) reviewing reports to ensure proper form and completeness,and (5) requesting report corrections when errors are found. Prior GAO Reports In 1974, we reported that many agents’ statements to the Justice Department were not filed on a timely basis or lacked sufficient detail to adequately describethe registered agents’ activities on behalf of their foreign principals4 The 1974 report also stated that the Justice Depart- ment was not making full use of its authority to enforce the act and related regulations. In a 1980 follow-up report, we noted that despite Justice’s efforts to improve the administration of the act, people were acting as foreign agents without registering, registered agents were not fully disclosing their activities, and officials in the executive branch were often unaware of the act’s requirements. Thus, the act’s goal of providing the public with sufficient information on foreign agents and their activities was not being completely fulfilled. The Registration Unit identifies unregistered agentsby reviewing news- Foreign Agents May papers, magazines,and the CongressionalQuarterly;6 inspecting regis- Not Be Registering tered agent’s records; and acting on tips provided from various sources such as government agenciesand material Ned by registered agents. The unit doesnot make scheduledreviews of executive agency records or periodic inquiries of agency officials about agent activities because, according to the Chief of the unit, additional staff would be neededfor this purpose. During its review of the CongressionalQuarterly for the period October 1988 through October 1989, the Registration Unit identified 70 individ- uals or firms acting as lobbyists for foreign interests, 13 of which it believed may be obligated to register as foreign agents. Subsequently, the Registration Unit sent these 13 individuals or firms letters 4Effectlvenemof the Fore&n Act of 1938, POAmended, and Its Administration bytheDepartmcntofJu8tice 6AccordingtotheLkputyChiefoftheRegiatrrttonUnit,the isthebest sourceofinf~onindMduaiswho~lowylngfor be obligated to regkter as foreign agents. Page 3 ~O/lWUD4mllSO Fomim Agent Re&t.radon requesting that they provide (1) a complete statement of who owns and controls the foreign principal, (2) a description of the nature of the activities for or in the interest of the foreign principal, and (3) a copy of the written contract with the principal or a full description of the terms and conditions of each existing or proposed oral agreement.As of June 1990, the Registration Unit had receivedthe requestedinformation but had not completed its analysis to determine whether these individuals or firms had to register under the act. However, according to the Chief of the Registration Unit, prelimlnary indications are that at least some of them should have registered as foreign agents, We found that the Registration Unit did not collect information on the number of foreign agentswho were claiming an exemption from regis- tering because,according to the Chief of the Unit, the Justice Depart- ment still has not taken steps to have the act amendedto require written notification of all exemption claims, as we recommendedln our 1980 report. Moreover, Justice officials do not believe that the additional information on unregistered foreign agentsthat might result from an exemption notification requirement would justify the associatedcostsin increasedmanpower needsand paperwork. However, Justice has not performed a cost analysis to support this position. Wedo not believe that the administrative costs of implementing the exemption notification requirement would be exorbitant, and we think it could improve pro- gram administration. Each agent is required to file a semiannual supplemental statement InadequateDisclosure wlthln 30 days after the expiration of each period of 6 months suc- in Reporting ceedlngthe original filing of a registration statement. In our 1980 report, we noted that 146 (49 percent) of the 299 supplemental statements that we reviewed had not provided adequatedisclosure. Such omissionscon- tinue to be a problem. According to the act, each supplemental statement must contain infor- mation on (1) the nature and status of the registrant’s business,(2) for- eign principals represented,(3) activities performed for foreign principals, (4) related financial data, (6) dissemination of political pro- paganda, and (6) the filing of certain required exhibits and short-form registration statements. The unit’s caseworkersreview these statements for adequate disclosure and request additional information from the agents,as necessary. P8ge 4 GAO/NSIADWW Foreign Agent Reglstmtlon Our review of 25 foreign agent files and the supplemental statements that should have been filed between June 1,1987, and April 1, 1990, showed that about half of the statements did not adequately report the agents’ activities, basedon criteria previously mentioned. Among the deficiencies we identified were insufficient description of activities; con- flicting responsesto questions; no listing of contacts, and/or finances; missing supplemental forms; no statement of purpose or position; and latenessin reporting activities. According to the Unit Chief, inadequate disclosurestypically occur when (1) agents are not specific in reporting information, (2) questions on the supplemental statement forms are not specific, and (3) caseworkerslack effective methods to obtain additional information. Unit officials stated that they are taking steps to improve the adminis- tration of disclosure reporting by writing or calling individuals to request additional information. They are also conducting more inspec- tions of agents’ books and records to assurethat registered agents are reporting all their activities and finances. In our analysis of the supplemental statements, we noted that the ques- tions on the forms were general and did not specifically require informa- tion necessaryto satisfy the act’s disclosure requirements. We also found Justice’s regulations implementing the act do not provide ade- quate information to understand disclosure requirements. The Unit Chief agreed with our analysis. He stated that, if requestedthe caseworker will give advice to an agent. However, he also stated that the caseworkersreviewing the statements do not have standardized written guidance on specifically how and what a foreign agent should report. Consequently,there is potential for inconsistent reviews from one caseworker to another. Our review of registration statements showed that over one-half of a Timelinessof Agent sample of 28 initial registration statements were not filed by the Registration and required dates, and over one-half of a sample of 204 supplemental state- Reporting Remainsa ments were not filed before the deadlines. Problem The act requires that people file initial registration forms within 10 days of becomingagents.In 1980, we reported that 61(77 percent) of the 79 registration forms filed by foreign agents,that we reviewed, did not meet this requirement. The level of registration compliance has con- tinued to be low. Of 28 foreign agent’s initial registration statements we reviewed for this report, 19 (68 percent) were not registered on time. Of P8ge5 GAO/NSuDgo-2M) Foreign Agent Registration B-240979 these 28 statements, 17 (61 percent) missed the due date by more than 30 days. Furthermore, we could not determine whether seven(25 per- cent) of the initial statements met the requirement becausethe material in the files did not show when they began activities for the foreign prin- cipal. In summary, 26 (93 percent) of the 28 forms were either not filed on time or did not contain sufficient information to determine their filing status. Similar problems exist in the filing of supplemental statements.The act requires agentsto file supplemental reports within 30 days of the end of each 6-month period. In our 1980 report, we noted that 179 (60 percent) of the 299 supplemental statements reviewed were not filed by the deadline. For the period from June 1,1987, through April 1,1990, we reviewed 46 foreign agents’ files and found 121(69 percent) of the cor- responding 204 semiannual supplemental statements that were sup posed to be filed, were filed late. About 27 (13 percent) of these 204 statements missed the due date by more than 30 days. We could not find the supplemental statements for 23 (11 percent) of the 204 statements due becausethey were either missing from the Ales and Justice officials could not find them (3 percent of the statements), or the Justice Depart- ment said it had never received them (8 percent of the statements). Unit officials said that agentsfrequently register and report late becausethey lack awarenessof or ignore the act’s requirements. The Registration Unit’s follow-up proceduresinclude sending reminder Follow-Up Procedures letters, making a phone call, and then mailing a formal notice to each delinquent filer. In addition, a copy of the delinquency notice is sent to the agent’s foreign principal. Registration Unit staff stated that they had not assessedadministrative fines against late filers or used subpoenapowers becausethe Justice Department lacks authority to take such administrative actions. According to the Unit’s Chief, the authority to levy fines against late filers and summon individuals to appear, testify, or produce records at administrative hearings could improve registration and reporting com- pliance under the act. We recommendedboth of these actions in our 1980 report, but the Justice Department did not pursue them. P8ge 6 GAO/NStAD&HS9 Fonign Agent Registration 5949979 In addition to reaffirming our 1980 recommendations,we further recom- Recommendations mend that the Attorney General direct the Registration Unit to take the following actions: l Develop standard disclosure criteria for reporting under the act; provide specific guidance to agents and agencypersonnel on the criteria and how information should be reported; and enforce compliancewith the criteria. 9 Revisethe supplemental statement to better reflect the requirements of the act as well as the standard criteria. - The Department of Justice usesthe lack of authority as a reason for not 1v1al4lJc13 IV1 taking action to enforce the law but has not sought the neededlegisla- Congressional tive authority. Therefore, the Congressmay wish to consider amending Consideration the Foreign Agents Registration Act of 1938, as amended,to give the Department of Justice the authority to: . Subpoenaforeign agentsto appear, testify, or produce records at admin- istrative hearings. . Impose administrative fines for minor violations against those who, after being directly informed of their obligation to report, still fail to do so. Appendix I provides details on the scopeand methodology of our review. As requested,we did not obtain formal agency commentson this report; however, we discussedour findings with appropriate Department of Justice officials and incorporated their commentswhere appropriate. As arranged with your office, unless you publicly announceits contents earlier, we plan no further distribution of this report until 40 days from the date it is issued.At that time, we will send copiesto the Attorney General and appropriate congressionalcommittees and make copies available to other interested parties upon request. P8ge 7 GAO/NSUD4&269 Foreign Agent Registration This report was prepared under the direction of Allan I. Mendelowitz, Director, Trade, Energy, and Finance Issues.He can be reached on (202) 276-4812if you have any questions about this report. Other major con- tributors are listed in appendix II. Sincerely yours, Frank C. Conahan Assistant Comptroller General Page8 GAO/NSIAD-8&889 Fodgn Agent Regbtmtion GAO/NSLUH@%O Fcaw@Apnt Re@tmtlon Contents Appendix I 12 Scopeand Methodology Appendix II 13 Major Contributors to This Report Pyt 10 GAO/NS~880 Foreign Agent Registration Appendix I . Scope and Methodology In developing information for this report, we reviewed the act, the legis- lative history, and the Justice Department’s rules and regulations that addressthe responsibilities of foreign agents and managersof the regis- tration process. We also interviewed Department of Justice officials regarding the efforts to improve the administration of foreign agent registration. We reviewed the proceduresused by the Registration Unit to identify unre- gistered agents. We obtained Justice’s listing of 819 foreign agentsregistered under sep- arate registration numbers as of December31,1989. Becausesomefor- eign agents registered their suboffices under separate registration numbers, we adjusted the number of registered agentsby counting those agents with more than one registration number as one agent. This adjustment resulted in a population size of 776 foreign agents. To get someindication of whether the registration problems identified in our prior reports still exist, we drew a random sample of 46 of the regis- tered foreign agent files. This size sample was sufficiently large to sta- tistically validate the continued existenceof the problems identified in our earlier reports. Weexamined records indicating when foreign agent reports were received by the Registration Unit and then comparing that date to report due dates prescribed in the regulations. In assessingthe timeli- nessof agent initial registration, we reviewed 28 initial registration forms filed after 1980. To assessthe timeliness of foreign agents’ semi- annual supplemental forms, we reviewed 46 agent files and the corre- sponding statements that were supposedto have been filed between June 1,1987, and April 1,199O.We limited our review of supplemental statements to those filed after June 1987 to determine whether this is a current problem. To assessadequacy of disclosure, we reviewed 25 agent files and the agents’ required semiannual supplemental statements for the period June 1987 through April 1990. Our work was conducted from January through June 1990 in accor- dance with generally acceptedgovernment auditing standards. Plrge 12 GAO/NSLUHO-250 Fortign Agent Rtghtration -- Major Contributorsto This Report Elliott C. Smith Assistant Director NatkXI~ Security and Anne M Pond ivaluator International Affairs Laura C.’ Filipkcu, Evaluator Division, Washington, Arthur J. Kendall, Mathematical Statistician JamesM. Fields, Social ScienceAnalyst D.C. (-) Page 13 GAO/NSlAD9&230 Foreign Agent Rtgimdon - _
Foreign Agent Registration: Justice Needs to Improve Program Administration
Published by the Government Accountability Office on 1990-07-30.
Below is a raw (and likely hideous) rendition of the original report. (PDF)