The Department of Justice (DOJ) confirmed this week that it will be using the False Claims Act (FCA) to investigate recipients of federal funds that the agency determines have certified compliance with federal non-discrimination 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.”
According to a memo addressed to DOJ attorneys, the agency is standing up a new “Civil Rights Fraud Section” to be co-led by DOJ’s Civil Division’s Fraud section and its Civil Rights Division, and engage with DOJ’s Criminal Division and other federal agencies with civil rights enforcement authority (such as the Departments of Education, Health and Human Services, Housing and Urban Development, and Labor). The “Civil Rights Fraud Initiative” also intends to establish partnerships with state attorneys general and local law enforcement to share information and coordinate enforcement actions.
In a strongly-worded press release announcing the new initiative, the Department of Justice made clear that “the days of using federal funds to further discrimination are over.” The press release also “strongly encourages anyone with knowledge of discrimination by federal funding recipients to consider filing a qui tam action” under the FCA and to report violations to the federal government. Qui tam actions under the FCA allow private individuals to litigate false claims on behalf of the federal government and to share in any monetary recovery.
The DOJ’s actions stem primarily from Executive Order 14173 which revoked Executive Order 11246 and added a new certification requirement for federal contractors. The new certification requires that contractors certify they do not operate any programs promoting DEI that violate federal non-discrimination laws, and that compliance with all applicable federal anti-discrimination laws is “material” for purposes of the FCA.
Under the FCA, individuals are prohibited from “knowingly” providing false information for the purpose of obtaining payment from the federal government. The FCA defines “knowingly” to include “recklessly,” meaning that individuals would have an affirmative duty to perform some level of due diligence before certifying that their organization is not violating federal non-discrimination laws.
According to a 14-page letter reviewed by The New York Times, DOJ has already launched an investigation into Harvard’s admission policies, and whether or not those policies were used to “defraud” the federal government under the FCA (Harvard and its affiliated organizations and institutions are both federal contractors and recipients of multiple federal grants).
While further information about the DOJ investigation is scant, Harvard as an institution has generally signaled that it intends to put up a robust fight against what it describes as “abusive and retaliatory” action by the Trump administration. Accordingly, the Harvard investigation could turn out to be an important test case for the administration’s FCA approach.
In the meantime, however, DOJ is likely to bring many more investigations before the Harvard case can be fully adjudicated. Federal contractors that underwent an OFCCP audit in the past several years could be particularly vulnerable as the OFCCP has committed to reviewing materials from current and past audits in light of the new administration’s priorities. In addition, EO 14173 specifically required the Attorney General to submit a report to the White House by May 21, 2025 that included information about “potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, State and local bar and medical associations, and institutions of higher education with endowments over 1 billion dollars.” These organizations are also likely to be potential early targets for FCA claims.
Proving a negative — that an organization is not engaging in illegal discrimination — is notoriously difficult. Many of the analyses formerly required by EO 11246 were some of the best tools for demonstrating that an organization actively monitors for potential discrimination or illegal DEI concerns. When combined with a robust review of all employment policies and programs, regular review of your employment decisions makes it much less likely that illegal discrimination is actually occurring.
Although federal contractors are no longer required to prepare annual affirmative action plans, non-discrimination monitoring was not made illegal by any of the administration’s executive orders or actions, and robust non-discrimination monitoring will be useful to defend against an FCA investigation or other claims of discrimination. Berkshire offers Non-Discrimination Workforce Analytics that can serve this very purpose, among many others. We also can help organizations conduct a robust audit of all DEI-related programs, policies and procedures before your organization certifies compliance under the FCA.
We will continue to monitor for and bring you important developments. If you have questions about this or any other federal contractor-related matter, feel free to contact us at bai@berkshireassociates.com.