Does Your DEI Program Violate the False Claims Act?
On May 19, 2025, the DOJ announced the establishment of the “Civil Rights Fraud Initiative,” which seeks to use the False Claims Act (FCA) to investigate, and possibly take civil action against, recipients of federal funds that knowingly violate federal civil rights law. The Trump administration’s position that, among other things, diversity, equity and inclusion (DEI) programs may violate federal civil rights laws exposes those who operate such programs to potential FCA liability. In addition to the government prosecuting such “frauds” in its own name, the DOJ is also “strongly encourage[ing] anyone with knowledge of discrimination by federal funding recipients to consider filing a qui tam action” and to “report instances of such discrimination to the appropriate federal authorities.” Companies and businesses that do business with the government should scrutinize and review any DEI policies to mitigate the loss of federal funding and the risk of potential penalties.
The DOJ recently announced a False Claims Act investigation against Harvard in connection with alleged unlawful discrimination in its admissions procedures. While Harvard is squarely in the crosshairs for the time being, other institutes of higher education — and every recipient of federal funds — should take notice as well. Since taking office, the Trump administration has expressly stated its goals of ending “radical and wasteful government DEI programs and preferencing” and “illegal discrimination” in order to restore “merit-based opportunity.”
But how exactly might a private company’s DEI program implicate FCA liability?
The FCA makes liable anyone who submits to the government (1) a false or misleading claim or statement, (2) with knowledge of its falsity, where (3) the false claim or statement was material to the government’s payment decision. In sum, when asking for federal money, applicants must certify to the truth of the information submitted in support of the request — this is true of any applicant.
In addition, in the 2016 case of United Health Services, Inc. v. United States ex rel. Escobar, the Supreme Court authorized the “implied certification” theory for FCA liability. 579 U.S. 176 (2016). At the highest level, that theory holds that liability can attach “when the defendant submits a claim for payment that makes specific representations about the goods or services provided but knowingly fails to disclose the defendant’s noncompliance with a statutory, regulatory, or contractual requirement,” rendering the claimant’s representations misleading. Id. at 181. In the Escobar case, for example, the defendant-claimant was alleged to have billed Medicare for performing various healthcare services without disclosing serious legal violations pertaining to staff qualifications and licensing requirements for those services. See Id. at 183-186.
President Trump’s recent executive order 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity, 90 Fed. Reg. 8633 (Jan. 21, 2025) requires government agencies to include in every contract and grant award a provision wherein the contractor or grant recipient agrees that it is in compliance “with all applicable Federal anti-discrimination laws” and that such compliance “is material to the government’s payment decisions” for purposes of the FCA.
While not much is known about the FCA investigation into Harvard for the time being, Deputy Attorney General Blanche’s May 19, 2025, memo instructs that the FCA is implicated when:
a federal contractor or recipient of federal funds knowingly violates civil rights laws—including but not limited to Title IV, Title VI, and Title IX, of the Civil Rights Act of 1964—and falsely certifies compliance with such laws. Accordingly, a university that accepts federal funds could violate the False Claims Act when it encourages antisemitism, refuses to protect Jewish students, allows men to intrude into women’s bathrooms, or requires women to compete against men in athletic competitions.
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The False Claims Act is also implicated whenever federal-funding recipients or contractors certify compliance with civil rights laws while knowingly engaging in racist preferences, mandates, policies, programs, and activities, including through diversity, equity, and inclusion (DEI) programs that assign benefits or burdens on race, ethnicity, or national origin.
The outcome is that operating certain DEI programs — namely, those that potentially discriminate—may run afoul of federal civil rights law, especially following the Supreme Court’s recent decision in Students for Fair Admissions, Inc. v. Harvard, 600 U.S. 181 (2023). To the extent that those programs do indeed violate federal civil rights law, they may also expose recipients of federal funds to FCA liability. And as DAG Blanche noted, FCA liability results in treble damages and significant penalties, so recipients of federal funds need to be wary in ensuring that they comply with federal antidiscrimination law.
For any questions regarding FCA exposure in light of these developments, please contact Co-Chair of our White Collar Defense and Investigations Group Ryan L. O’Neill at 201.857.6769, Co-Chair Gerard M. Karam at 570.507.5840 or the Stevens & Lee attorney with whom you regularly work.
