DOJ Announces Civil Rights Fraud Initiative for Investigating DEI Programs of Federal Contractors and Grantees

The U.S. Department of Justice (“DOJ”) recently announced the creation of the Civil Rights Fraud Initiative (the “Initiative”). The Initiative will use the False Claims Act (“FCA”) to investigate and pursue claims against any recipient of federal funds that “knowingly violates federal civil rights laws,” with a particular emphasis on bringing claims against entities engaging in diversity, equity, and inclusion (“DEI”) practices that may violate federal anti-discrimination laws. This stems from an early Trump Administration Executive Order, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (the “Executive Order”), which first linked violations of federal anti-discrimination laws with potential enforcement under the FCA.

The False Claims Act

The FCA imposes liability on individuals and entities that receive federal funds and knowingly submit false claims to the federal government for payment. To establish liability under the FCA, the government must prove that a false statement or claim was made in seeking payment from the government. A recipient of federal funds must have knowingly submitted the false information in connection with a request for payment, which includes deliberate avoidance or reckless disregard of the truth. For liability to be imposed, the false claim must also be “material,” meaning it is likely to affect or impact the payment.

While FCA claims are typically brought directly by the federal government, a key component of the FCA is its provision that allows private individuals to file lawsuits, known as qui tam actions, on behalf of the government. If successful, these whistleblowers can receive a percentage of the government’s financial recovery. As part of the Initiative, the DOJ “strongly encourages” individuals to file FCA lawsuits alleging suspected fraud in connection with violations of anti-discrimination laws, or to report them to federal officials.

Practices Potentially Subject to Review

The Initiative targets compliance with the Executive Order, which requires a provision in every government contract or grant award that the recipient certify it does not operate any DEI programs that violate federal anti-discrimination laws (the “Certification”). In addition, the contracts and grants must include a term requiring the contractor or grantee “to agree that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions” (emphasis added) for purposes of the False Claims Act. While the Supreme Court has described the materiality standard under the FCA as “demanding,” and generally exclusive of minor or insubstantial noncompliance, the Executive Order requires recipients of federal funds to affirmatively agree that compliance with federal anti-discrimination laws is material. Legal questions remain regarding whether this required agreement is sufficient to meet the FCA materiality standard, and it will need to be decided by the courts.

According to the Initiative announcement, the primary emphasis of the Initiative is the pursuit of investigations and claims against recipients of federal funds who violate civil rights laws. Through this, the DOJ aims to ensure that the federal government does not “subsidize unlawful discrimination.” For example, the announcement states that the False Claims Act is implicated where a recipient of federal funds makes the Certification while “knowingly engaging in racist preferences, mandates, policies, programs, and activities,” including through the operation of DEI programs that “assign benefits or burdens on race, ethnicity, or national origin.” The announcement also states that a university that receives federal funds and permits antisemitism, fails to protect Jewish students, enables men to enter women’s facilities, or mandates that men compete in women’s athletic competitions, could be in violation of the FCA. The announcement specifically mentions, as worthy of scrutiny, ongoing DEI programs that are “camouflaged with cosmetic changes that disguise their discriminatory nature.”

Risks and Penalties under the False Claims Act

Significant statutory damages and penalties make the FCA a compelling enforcement tool for the government. If found liable, entities face treble damages (three times the government’s damages). There is no uniform method for calculating the government’s damages under the FCA, as courts tailor their approach based on the specific facts of the case and the type of fraud involved. The central focus is the financial harm to the government, but how that harm is quantified often hinges on what the defendant certified to the government and the applicable regulatory framework, with different types of fraud requiring different methods of calculation. Additionally, the FCA provides a civil penalty of $5,000 to $10,000 per false claim (adjusted for inflation). Beyond financial penalties, FCA investigations are often costly and disruptive, involving extensive data collection, including emails and text messages, and depositions of employees and other witnesses.

Takeaways

The DOJ has seemingly already begun enforcement actions. According to a New York Times article published on May 15, 2025, the DOJ is investigating, under the FCA, whether Harvard University’s admissions policies violate the U.S. Supreme Court ruling in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, which effectively banned affirmative action in college admissions.

Given the creation of the Initiative, federal contractors and grantees should consult with counsel about compliance with federal anti-discrimination laws and consider a privileged review of policies and practices related to DEI to ensure they comply with all applicable federal anti-discrimination laws. This includes ensuring that individuals are not receiving benefits or being excluded from employment opportunities based on race, ethnicity, or national origin. With the DOJ’s encouragement of individual whistleblower litigation and reporting, employers should also consider reviewing internal complaint and escalation procedures, and conducting a privileged review of decision-making and documentation practices related to employment decisions. Finally, should an employer be contacted by the federal government or receive a civil investigative demand, immediate consultation with counsel will be important for potential liability assessment and in responding.

Employers with questions about the Initiative should contact Kelly Jines at kjines@fglawllc.com or any attorney at the Firm.

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