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United States v. Manafort

United States District Court, District of Columbia

June 22, 2018

UNITED STATES OF AMERICA,
v.
PAUL J. MANAFORT, JR., Defendant.

          MEMORANDUM OPINION AND ORDER

          AMY BERMAN JACKSON, UNITED STATES DISTRICT JUDGE

         Defendant Paul J. Manafort, Jr. has filed a motion to dismiss Count Two of the Superseding Indictment, which is the money laundering charge, and to strike the forfeiture allegation based on that charge. Def.'s Mot. to Dismiss Count Two and to Strike the Forfeiture Allegation [Dkt. # 237] (“Def.'s Mot.”).[1] In general, the money laundering provisions of the United States Code prohibit the use of financial transactions to advance or conceal the commission of certain criminal offenses, and they bar engaging in financial transactions with the proceeds of criminal offenses. Defendant's motion concerns the intersection between these provisions and the statute that criminalizes the alleged underlying illegality in this case: the Foreign Agent Registration Act (“FARA”). Manafort questions whether and how the financial transactions itemized in the indictment could, as charged, “promote” a failure to register in violation of FARA, and whether a violation of FARA could generate “proceeds” to which the money laundering statute applies. After consideration of the parties' briefs and the applicable statutes and case law, the Court will deny the motion to dismiss the count.

         Count Two charges a conspiracy to violate the money laundering statute in several ways. Superseding Indictment [Dkt. # 318] (“Ind.”) ¶¶ 40-41. Paragraph 41(a) of the indictment alleges that Manafort violated 18 U.S.C. § 1956(a)(2)(A) by conspiring with others to transfer funds into and out of the United States “with the intent to promote” the carrying on of a “Specified Unlawful Activity, ” that is, a felony violation of FARA. Ind. ¶ 41(a).

         Paragraph 41(b) alleges that defendant violated 18 U.S.C. § 1956(a)(1)(A)(ii) and § 1956(a)(1)(B)(i) by conspiring with others to conduct financial transactions using the “proceeds” of the “Specified Unlawful Activity” - which is, again, the FARA violation - in two different unlawful ways: (i) with the intent to engage in conduct constituting a violation of the Internal Revenue Code; and (ii) knowing that the transactions were designed to conceal the source and ownership of the proceeds of the Specified Unlawful Activity. Id. ¶ 41(b).

         Thus, both objects of the money laundering conspiracy charged in Count Two involve an alleged violation of the Foreign Agent Registration Act. Manafort argues that FARA simply bans the failure to register as a foreign agent, and not the act of serving as a foreign agent, so the conduct detailed in the indictment could not have “promoted” the commission of a FARA offense, and the offense could not have generated “proceeds” for purposes of the money laundering statute. He maintains that, therefore, neither section of Count Two alleges a crime.

         Resolving Manafort's motion requires a close analysis of the Foreign Agent Registration Act. FARA provides:

No person shall act as an agent of a foreign principal unless he has filed with the Attorney General a true and complete registration statement and supplements thereto . . . . [E]very person who becomes an agent of a foreign principal shall, within ten days thereafter, file with the Attorney General, in duplicate, a registration statement, under oath on a form prescribed by the Attorney General.

22 U.S.C. § 612(a). Section 618(a) of the statute makes it a felony to willfully violate the Act or to willfully make a false statement of material fact in, or omit a material fact from, a registration statement or supplement. 22 U.S.C. § 618(a).[2]

         According to Manafort, FARA “requires the filing of a registration statement, and . . . makes it a crime to willfully fail to file such a statement, ” but it does not prohibit acting as an agent of a foreign principal, even while unregistered. Def.'s Mot. at 4. Thus, he argues, a violation of FARA is an act of omission that could not have been “promoted” within the meaning of the section 1956(a)(2)(A) by the international transfers listed in the indictment, and it does not generate “proceeds” with the meaning of sections 1956(a)(1)(A)(ii) and (a)(1)(B)(i). Def.'s Mot. at 2, 8, 11.

         But this contention is inconsistent with the text of the statute, which begins with the unequivocal prohibition: “[n]o person shall act as an agent of a foreign principal.” 22 U.S.C. § 612(a) (emphasis added). It is a crime to “act” “unless” one has registered - the statute does not simply state that the failure to register is unlawful. And while defendant is correct that FARA does not prohibit being a foreign agent, undertaking activities on behalf of a foreign client, or “acting” as a foreign agent per se, it is illegal to act as an undisclosed foreign agent. The statute gives a person ten days after becoming an agent to register, after which time, acting as an undisclosed agent for that foreign principal is prohibited. See id.; see also 22 U.S.C. § 618(g) (also making it “unlawful for any person to act as an agent of a foreign principal at any time ten days or more after” receiving notice that his or her registration statement does not comply with the statute) (emphasis added).

         Defendant suggests that the heading of section 612, which is entitled “Registration statement, ” confirms that he has properly characterized FARA as a reporting statute that does not criminalize “acting” as a foreign agent. Def.'s Reply at 2-3. He cites INS v. Nat'l Ctr. for Immigrants' Rights, 502 U.S. 183 (1991) for the basic proposition that a court may rely on statutory headings to “aid in resolving an ambiguity in the legislation's text.” Def.'s Reply at 3, citing 502 U.S. at 189. But here, there is no ambiguity in the text at issue.

         Defendant also points to the fact that Congress included a provision in Title 18, the Crimes and Criminal Procedure section of the U.S. Code, that prohibits acting as a foreign agent under certain circumstances, and he submits that this demonstrates that the FARA statute was aimed solely at registration. Def.'s Mot. at 4-5, citing 18 U.S.C. § 951. Section 951 of Title 18 states that “[w]hoever, other than a diplomatic or consular officer or attaché, acts in the United States as an agent of a foreign government without prior notification to the Attorney General” shall be fined or imprisoned for up to ten years, or both. 18 U.S.C. § 951(a). According to defendant, this statute criminalizes acting as a foreign agent, whereas FARA is merely a “regulatory scheme for foreign agent registration” that criminalizes only the willful failure to register. Def.'s Mot. at 5, quoting United States v. McGoff, 831 F.2d 1071, 1075 (D.C. Cir. 1987).

         But the reference to section 951 does not support defendant's position, since defendant acknowledges that section 951 plainly governs acting as an agent of a foreign government, and the language of the two provisions is quite similar. See Def.'s Mot. at 4-5; compare 18 U.S.C. § 951(a) (“Whoever . . . acts in the United States as an agent of a foreign government without prior notification to the Attorney General . . . shall be fined under this title or imprisoned . . . .”) with 22 U.S.C. § 612(a) (“No person shall act as an agent of a foreign principal unless he has filed with the Attorney General a true and complete registration statement . . . .”) and id. § 618(a) (imposing criminal penalties on any person who “willfully violates any provision of this subchapter or any regulation thereunder” or “willfully makes a false statement of a material fact or willfully omits any material fact” in a FARA statement). These laws are not just about paperwork; their object is to ensure that no person acts to advance the interests of a foreign government or principal within the United States unless the public has been properly notified of his or her allegiance. So both statutes expressly prohibit “acting” as a representative of a foreign entity without submitting the required notification to the Attorney General. For these reasons, the alleged international banking transactions could “promote, ” and Manafort could realize “proceeds” from, a FARA violation.[3]

         Moreover, it is difficult to square defendant's argument that a violation of FARA is an act of omission that cannot be “promoted” or generate “proceeds” with the meaning of the money laundering statute when Congress specifically amended the money laundering statute to add FARA violations to the list of predicate offenses. See USA PATRIOT Act of 2001, Pub. L. No. 107-56, tit. III, § 315, 115 Stat. 272, 308-309 (2001); 18 U.S.C. § 1956(c)(7)(D) (defining “specified unlawful activity” to include “any felony violation of the Foreign Agents Registration Act of 1938”); see also H.R. Rep. No. 107-250, pt. 1, at 55 (2001) (explaining that the Act expanded “the list of foreign crimes that can lead to money laundering prosecutions in this country when the proceeds . . . are laundered in the United States, ” and that it was “intend[ed] . . . to send a strong signal that the United States will not tolerate the use of its financial institutions for the purpose of laundering the proceeds of such activities”) (emphases added). Defendant asserts that this amendment is not instructive since section 1956(c)(7) incorporates ...


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