DOJ Announces Plan to Use the FCA to Tackle DEI

Deputy Attorney General (AG) Todd Blanche issued a memorandum establishing the Civil Rights Fraud Initiative, a task force which will “utilize the False Claims Act to investigate and, as appropriate, pursue claims against any recipient of federal funds that knowingly violates civil rights laws.” Calling the FCA the government’s “primary weapon against government fraud, waste, and abuse,” Deputy AG Blanche underscored that “[t]he federal government should not subsidize unlawful discrimination.” The move increases legal exposure for any organization that receives federal funding, including universities and government contractors.

The announcement of the Civil Rights Fraud Initiative comes on the heels of reports that the DOJ is investigating Harvard University for potential FCA violations resulting from the university’s alleged failure to comply with Student for Fair Admissions, Inc. v. President & Fellows of Harvard College, 600 U.S. 181 (2023), the US Supreme Court decision effectively ending affirmative action. According to the DOJ, Harvard University continues to engage in unlawful discrimination through its admissions process and could be liable under the FCA for falsely certifying that it complies with anti-discrimination laws.

The memorandum lists other examples where an organization receiving federal funds could potentially violate the FCA, including:

• A university that encourages antisemitism or refuses to protect Jewish students.
• A university that allows men to intrude into women’s bathrooms or requires women to compete against men in athletic competitions.
• A company that receives federal funding or a contractor that engages in racist preferences, mandates, policies, programs, and activities, including through DEI programs.

Although the memorandum explicitly calls out colleges and universities, the DOJ’s pronouncement makes clear that any organization that receives federal funding is subject to investigation. Moreover, according to Deputy AG Blanche, a federal contractor or recipient of federal funds is liable under the FCA if it knowingly violates civil rights laws while falsely certifying compliance with such laws, including Title IV, Title VI, and Title IX of the Civil Rights Act of 1964.

Although the DOJ has brought FCA actions against universities in the past, its use of the FCA to investigate and prosecute fraud based on civil rights noncompliance is a new and untested area of FCA enforcement. The Trump Administration first signaled its intent to leverage the FCA to enforce policy objectives in various executive orders issued in January, including Executive Order (EO) 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity. Among other things, the EO requires government contractors and grant recipients to end “illegal DEI” programs, and furthermore, to certify that they are in compliance with federal anti-discrimination laws. The EO has been the subject of multiple legal challenges, and one federal district court issued a nationwide injunction blocking enforcement of the certification provision. The injunction was subsequently stayed pending review by the Fourth Circuit Court of Appeals (National Association of Diversity Officers in Higher Education, et al. v. Trump, et al.). As a result, organizations receiving federal funds are currently required to certify compliance with all applicable anti-discrimination laws.

The Civil Rights Fraud Initiative will be jointly led by the DOJ Civil Division’s Fraud Section and the Civil Rights Division. Together, the Civil Rights Fraud Initiative will coordinate meetings and encourage interagency information sharing, including with all 93 US Attorney’s Offices, state attorneys general, and local law enforcement.

Deputy AG Blanche’s memorandum also encourages individuals with purported knowledge of discrimination by recipients of federal funding to report that information to federal authorities or file qui tam (whistleblower) lawsuits under the FCA. The combination of an increased interagency effort and a public call for whistleblower suits is likely to increase the possibility of an investigation or FCA enforcement action across the board.

Key Takeaways

Any organization receiving federal funding, in particular universities and government contractors, should (1) review and update their policies and DEI programs to ensure compliance with anti-discrimination laws, (2) conduct a detailed review and analysis of compliance certifications and conditions of payment required for receipt of federal funds, (3) conduct risk assessments to identify areas of potential FCA exposure arising out of DEI programs, and (4) ensure compliance programs and hotlines are in place to capture and address complaints of discrimination. Proactively addressing any risks and documenting the steps taken to comply, prior to the start of any government investigation or whistleblower allegation, is imperative.