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Ex-Partner's Fight Against Lobbying Charges to Put Skadden Back in Limelight

Skadden's offices in Washington, D.C. Photo: Diego M. Radzinschi/ALM

Skadden, Arps, Meagher, Slate & Flom sought to close the doors on its unwelcome connection to the Mueller probe when it inked a $4.6 million settlement with the Department of Justice in January, resolving claims that it violated the Foreign Agents Registration Act by not disclosing work undertaken on behalf of the Ukrainian government.

But the federal indictment against former Skadden attorney Gregory Craig, who appears to be itching to fight the charges in court and in public, suggests the firm is not out of the woods—at least from a reputational standpoint.

In a video statement uploaded to YouTube, Craig—a former White House counsel to President Barack Obama—denied engaging in any lobbying activity for Ukraine, calling the charges "unprecedented and unjustified." On Friday, he pleaded not guilty to two counts of providing false statements to federal investigator in an initial appearance Friday in Washington, D.C., federal court.

Gregory Craig. Photo: Diego M. Radzinschi/ALM

That means more of Skadden's dirty laundry will likely be aired by the time Craig is either exonerated or convicted.

It will be a "continual reminder of something they wanted to move past once they signed the settlement agreement in January," said Matt Sanderson, a member at Caplin & Drysdale.

Sanderson, an expert on compliance with the FARA statute, noted that Skadden wound up on the hot seat because of its failure to exercise due diligence after the Department of Justice made an initial inquiry in December 2012 about whether the firm's work for Ukraine required it to register. That came less than a week after Craig spoke with several reporters about a report the a report the firm prepared about the prosecution of Yulia Tymoshenko, a former prime minister and political rival of the country’s president at the time, Viktor Yanukovych.

Sanderson said the firm's laissez-faire response was in keeping with a previous standard, but that kind of approach no longer cuts it.

"They're sending a message to the regulated community that they're no longer going to accept a half-hearted effort in responding to letters of inquiry," he said.

"It’s hard to think of a better scenario than that of Skadden: 'We’re trusting the word of a former White House counsel, a very prestigious lawyer, we’re trusting him to be accurate and complete. It was reasonable for us to not look at the facts independently and pull all communications,'" Sanderson said. "There are not many law firms that are responding to letters who have facts that are that good."

Still, if the firm had the bad luck to engage in commonplace FARA behavior at a time that regulators' expectations were changing, Craig's resolve to fight the charges in a bid to redeem his reputation marks another stroke of ill fortune.

"When a corporation or a firm settles, the hope is for that resolution to make for a one-day or a brief story, and then focus on its quality of work and reputation going forward," said Jacob Frenkel, the chair of the government Investigations and securities enforcement practice at Dickinson Wright.

But they can't control the prospect that rather than pleading out, an associated individual facing criminal charges or civil claims will use the justice system to try to clear his or her name.

He compared the matter to the recent trial of former KMPG executive David Mittendorf, who was found guilty by a New York federal jury in March of stealing confidential information intended to help the accounting giant look better to its regulator.

"When the individual, no different than the KPMG trial in New York, fights the indictment and that person was a partner and acted for the firm, the contesting of a criminal case alone, by definition, brings the firm's advice and conduct back to center stage," Frenkel said.

A look at the indictment reveals several points that could prove embarrassing for Skadden. One is an allegation that Craig was resistant to registering as a Ukrainian agent under FARA out of concern that it would cost him, and colleagues at the firm, the ability to work for the federal government down the line.

The indictment also raises questions about Skadden's wider complicity in a scheme to obscure the source of the millions in fees it was receiving for Craig's work. The formal engagement letter with the Ministry of Justice of Ukraine allegedly set out a total of $12,000, when in reality a private individual was paying $4 million. After a Ukrainian publication raised questions about that low figure, Craig allegedly worked with an American lobbyist to create a false invoice boosting the Ukrainian government's contribution to the firm.

While the Justice Department had previously identified convicted former Trump campaign chairman Paul Manafort as the lobbyist who helped Ukraine retain Skadden, Manafort is not named in the indictment.

A representative for the firm did not respond to a request for comment Friday.

Sanderson emphasized that the charges against Craig, particularly the second count of providing misstatements under FARA, are no slam dunk for the government. The defendant will likely argue that it does not apply because he never registered under FARA, and also that the statute of limitations has run.

"On that particular legal issue, there's no precedent," Sanderson said.

And Craig and his lawyers from Zuckerman Spaeder, who pre-emptively shared the news of the pending indictment Wednesday, are aiming to send a clear message that they can win the case. That doesn't mean he'll automatically be rehabilitated in the public eye. Recall the words of Raymond Donovan, President Ronald Reagan's former secretary of labor, after he was acquitted of Fraud in 1987: "Which office do I go to get my reputation back?"

"This is a kind of case in which we could see a Ray Donovan revisited because of the precision necessary for a conviction," Frenkel said.