Recent Guilty Plea Highlights Espionage-Related Security and Compliance Risks, and Potential for Leniency Based on Classified Discovery Issues
On February 16, 2022, Hector Fuentes pleaded guilty in the Southern District of Florida to acting in the United States on behalf of Russia without notifying the Attorney General, in violation of 18 U.S.C. § 951. Fuentes admitted to traveling to the United States at the direction of a Russian intelligence officer to collect information relating to a U.S. informant. This alert addresses three takeaways from the plea:
1. The Fuentes case illustrates the importance of private security measures to mitigate risks associated with different forms of spying by foreign adversaries, including economic and corporate espionage.
2. Fuentes entered the Section 951 plea as DOJ contemplates changes to a related-but-distinct statute, the Foreign Agents Registration Act (“FARA”), 22 U.S.C. § 611, et seq. Due to DOJ’s focus on enforcement of these statutes, U.S. companies and individuals should continue to address compliance and money laundering risks associated with their foreign relationships.
3. Public filings in Fuentes suggest that obviating the need for classified motions and discovery may have played a role in the prosecutors’ plea offer. Counsel for those facing investigation or prosecution in cases with national security themes may be in a position to leverage more favorable terms through effective advocacy on these issues.
The Crime
Fuentes is a Mexican national with ties to Russia and Singapore. On February 13, 2020, he entered the United States on a temporary visa. The next day, private security at a Florida apartment complex observed Fuentes and an associate photographing the license plate of a U.S. informant who had previously provided information to the United States regarding Russian intelligence activities. Two days later, when Fuentes and his companion tried to fly to Mexico, law enforcement interviewed Fuentes at the airport and conducted related searches that revealed a photograph of the informant’s license plate. After Fuentes admitted to acting at the direction of someone he believed was a member of Russia’s Federal Security Service, the FBI arrested him based on substantive and conspiracy violations of Section 951.
Section 951 and FARA
Section 951 requires individuals acting in the United States as agents of foreign government officials (other than diplomats) to notify the Attorney General. DOJ has described Section 951 as covering “espionage lite” because it applies to a wider variety of clandestine activities than the more serious charges carrying heavier penalties in the Espionage Act, 18 U.S.C. §§ 793-794. Pending changes under consideration by DOJ, FARA applies to agents of foreign principals, including foreign officials as well as some private sector actors, and is targeted more narrowly at political activity. Individuals in the United States subject to FARA are required to make public disclosures relating to their relationships with foreign principals and activities on those principals’ behalf. When faced with a decision between Section 951 and FARA’s criminal provision, 22 U.S.C. § 618(a)(1), prosecutors often proceed under Section 951 because a criminal violation of FARA requires willful misconduct but Section 951 does not.
The Guilty Plea
On February 16, 2022, approximately two years after the arrest, Fuentes pleaded guilty to a substantive violation of Section 951 that carries a statutory maximum term of 10 years’ imprisonment. The U.S. Sentencing Guidelines do not contain an offense guideline relating to Section 951, but U.S.S.G. § 2X5.1 applies and the prosecutors stipulated in the plea agreement that a four-year term of imprisonment would be consistent with 18 U.S.C. § 3553(a). Although some publicly filed SDFL plea agreements in other cases reference the possibility of cooperation-related credit at or after sentencing, the Fuentes plea agreement contains no such references.
Takeaways
Espionage Risk. Fuentes is an espionage prosecution that involved disrupting hostile activities by a foreign intelligence service in the United States. DOJ has publicly identified other instances of domestic efforts by agents and co-optees acting on behalf of foreign nations. In July 2021, prosecutors in the Southern District of New York charged alleged members of an Iranian intelligence network with plotting to kidnap and rendition a dissident in Brooklyn. In January 2022, Xiang Haitao pleaded guilty in the Eastern District of Missouri to economic espionage conspiracy, in connection with efforts to steal a U.S. company’s intellectual property and deliver the information to China. The disruption in Fuentes appears to have commenced with surveillance by private security. Collectively, these and other prosecutions underscore the need for U.S. companies to remain vigilant in implementing security measures designed to mitigate risks of sophisticated foreign espionage activities, including economic and corporate espionage.
Compliance Risk. Fuentes is another data point on the trendline of DOJ and FBI surging resources toward investigations and prosecutions under Section 951 and FARA. Other examples include the conviction of Imaad Shah Zuberi in the Central District of California for violating FARA and other statutes, and the ongoing Section 951 prosecution of Thomas Barrack and Matthew Gilmore in the Eastern District of New York. Companies and individuals in the United States should be mindful of these statutes when structuring foreign engagements, and seek counsel on whether and to what extent government notification is appropriate when close questions emerge during those deliberations.
DOJ’s continued focus on Section 951 and FARA may also merit review and updating to compliance policies and AML programs. For example, felony FARA violations are a form of “specified unlawful activity” for purposes of federal money laundering statutes. Thus, employee, customer, and counterparty diligence should be reasonably calibrated to elicit sufficient information to identify foreign agency relationships and assess any associated risks.
Classified Discovery Risks Faced by the Government. Finally, of note to those facing investigation or prosecution under Section 951 or FARA, Fuentes suggests that prosecutors may offer leniency to avoid classified discovery or litigation and protect other equities of the U.S. intelligence community. Although Fuentes’ stipulated 48-month sentence is longer than, for example, the 30-month stipulated sentence for Russian SVR officer Evgeny Burakov or the 18-month sentence imposed on Mariia Butina, prosecutors likely could have pursued an even more severe penalty based on Fuentes’ efforts to help a Russian intelligence service target a U.S. informant. Fuentes’ plea agreement does not suggest that he cooperated, and classified-information risks may have played a role in the plea offer.
On March 16, 2020, the Fuentes prosecutors publicly disclosed that they “anticipate[d] . . . issues of discovery, disclosure, or use of classified information.” The next day, Fuentes filed the first of six unopposed motions to adjourn his trial. The Court granted each application, including a December 13, 2021 filing that referenced an “attempt to reach [a plea] agreement prior to any motions deadline.” In other filings, prosecutors appeared to go out of their way to emphasize that Fuentes “believed” his handler was a Russian intelligence officer rather than providing a U.S. assessment of the co-conspirator’s affiliation. And there is no indication of substantive motion practice pursuant to the Classified Information Procedures Act (“CIPA”) on the public Fuentes docket. All of this is consistent with prosecutors having made a more lenient plea offer contingent on Fuentes accepting it before the prosecutors had to file CIPA motions. A similar issue could arise in the Barrack prosecution, where prosecutors informed the Court in an October 29, 2021 filing that they were engaged in an “ongoing review” of “classified holdings for any potentially discoverable materials”—which could imply that those defendants were charged before the prosecutors fully evaluated classified litigation and discovery risks associated with the case. These filings suggest that counsel for investigative targets in cases with national security themes may be in a position to leverage beneficial outcomes through effective advocacy relating to these issues.
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