The US Department of Justice announced the establishment of the Civil Rights Fraud Initiative on May 19, 2025, which will “utilize the False Claims Act to investigate and, as appropriate, pursue claims against any recipient of federal funds that knowingly violates federal civil rights laws.” The Attorney General’s Memorandum establishing the initiative directs the DOJ Civil Division’s Fraud Section and Civil Rights Division to co-lead and direct enforcement efforts aimed at universities, federal contractors, and other federal funding recipients that “adhere to racist policies and preferences” and thus “knowingly violate[] federal civil rights laws.”
The specific categories of conduct identified for enforcement under the initiative are consonant with existing priorities of the administration, including targeting “diversity, equity, and inclusion (DEI) programs that assign benefits or burdens on race, ethnicity, or national origin.”
This LawFlash outlines the most significant points of the Memorandum. Our white collar litigation and government investigations, government contracts, and labor and employment teams as well as a cross-functional dedicated task force made up of key partners in these practice areas will continue to monitor and evaluate the implementation of this Memorandum and provide analysis on any DOJ enforcement actions undertaken pursuant to the initiative.
In recent decades, the False Claims Act (FCA) has served as DOJ’s primary fraud enforcement tool, enabling massive recoveries from private sector actors; in FY 2024 alone, government recoveries from settlements and judgments exceeded $2.9 billion. Under the FCA, whistleblowers, known as “relators,” can file qui tam complaints and share a portion of any recovery. Qui tam FCA lawsuits have become a key driver of FCA enforcement and recoveries.
DOJ’s May 19 memorandum seeks to advance the objectives outlined in the administration’s January 21 executive order Ending Illegal Discrimination and Restoring Merit-Based Opportunity (EO 14173), including its identification of the FCA as an enforcement tool to target “race- and sex- based preferences under the guise of so called ‘diversity, equity, and inclusion’ (DEI) or ‘diversity, equity, inclusion, and accessibility’ (DEIA) that can violate the civil-rights laws of this Nation.”
Seeking to end what it describes as “illegal preferences and discrimination,” EO 14173 requires that the attorney general submit, within 120 days, “a report to the Assistant to the President for Domestic Policy containing recommendations for enforcing Federal civil-rights laws and taking other appropriate measures to encourage the private sector to end illegal discrimination and preferences, including DEI.”
EO 14173 provides the same deadline for the attorney general and Secretary of Education to “jointly issue guidance to all State and local educational agencies that receive Federal funds, as well as all institutions of higher education that receive Federal grants or participate in the Federal student loan assistance program under Title IV of the Higher Education Act, 20 U.S.C. 1070 et seq., regarding the measures and practices required to comply with Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, 600 U.S. 181 (2023).”
Notably, EO 14173 also tees up the potential use of the FCA as a novel tool for civil rights enforcement. Specifically, recognizing that a contractor may be liable under the FCA for knowingly and falsely certifying compliance with the law where the certification is material to the government’s decision to pay, EO 14173 adds new certification requirements to federal contracts.
In this regard, EO 14173 mandates that federal agency heads require every contractual counterparty or grant recipient to “certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws” and include in every contract and grant award a “term requiring the contractual counterparty or grant recipient to agree that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions” under the FCA. These provisions are intended to aid future enforcement efforts by simplifying the government’s burden to demonstrate the FCA’s materiality element.
On February 5, the attorney general issued a brief memorandum, Ending Illegal DEI and DEIA Discrimination and Preferences, announcing that DOJ will implement EO 14173 by “investigat[ing], eliminat[ing], and penaliz[ing] illegal DEI and DEIA preferences, mandates, policies, programs, and activities in the private sector and in educational institutions that receive federal funds.”
The Memorandum states that the FCA is “the Justice Department’s primary weapon against government fraud, waste, and abuse” and announces that this enforcement tool will be deployed against “those who defraud the United States by taking its money while knowingly violating civil rights laws.” Citing EO 14173, the Memorandum describes both general and specific enforcement priorities for the initiative.
At the general level, the Memorandum identifies any “federal-funding recipients or contractors” who “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” as subject to actions.
The Memorandum maintains that, even after EO 14173 and the US Supreme Court’s decision in Students for Fair Admissions, Inc. v. President & Fellows of Harvard College, “many corporations and schools continue to adhere to racist policies and preferences- albeit camouflaged with cosmetic changes that disguise their discriminatory nature.”
At the specific level, the Memorandum asserts that “a university that accepts federal funds could violate the False Claims Act” if, for example, it encourages or fails to address antisemitism on campus or permits transgender women to use women’s bathrooms or participate in women’s sporting events.
While the Civil Division’s Fraud Section and Civil Rights Division will co-lead the initiative, they are also directed to engage with the Criminal Division and “other federal agencies that enforce civil rights requirements for federal funding recipients” (including the US Departments of Education, Health and Human Services, Housing and Urban Development, and Labor) and “establish partnerships with state attorneys general and local law enforcement to share information and coordinate enforcement actions.” An assistant United States attorney in each of the 93 United States Attorney’s Offices will be assigned the role of implementing and advancing the initiative.
The Memorandum and accompanying press release both call for private enforcement of the initiative’s goals through qui tam FCA actions, “strongly encourag[ing]” such filings and noting that “the whistleblower typically receives a portion of the monetary recovery.” The Memorandum does not change the mechanics for filing such actions: qui tam relators must file their FCA complaints under seal and serve copies, together with statements of material evidence, on the government, which in turn must investigate the claims and decide whether to intervene in the matter.
Since the announcement of EO 14173, questions have swirled among legal commentators regarding the scope of DEI activities that the government will consider to be violative of the nation’s civil rights laws.
The Memorandum may be seeking to clarify that issue by declaring the FCA to be “implicated whenever federal-funding recipients or contractors certify compliance with civil rights laws while knowingly engaging in racist preferences, mandates, policies, programs, and activities”—citing those DEI programs “that assign benefits or burdens on race, ethnicity, or national origin” as instances of a breach of the broader prohibition on racial discrimination. In any event, there are questions about what may constitute illegal DEI, and the Memorandum does not provide much additional insight into how the administration defines it as of yet.
DOJ likely will need to pursue litigation to assess the broad scope of currently practiced DEI strategies and determine which of those might run afoul of federal civil rights laws. This is particularly true because the current administration’s views about which strategies are illegal deviate from the views of prior administrations and agency interpretation. Courts will also have to contend with recent Supreme Court precedent in Students for Fair Admissions v. Harvard & UNC and the arguments that DEI strategies are intended to promote an increase in thought, experience, and opinion and level the playing field in light of the history of discrimination in this country and the concomitant disparities in access and opportunity.
The current lack of clarity around scope creates significant uncertainty and may pose legal obstacles for future enforcement actions undertaken pursuant to the FCA.
To prevail on an FCA claim in this context, the government must prove legal falsity (an express or implied false certification of legal or contractual compliance), materiality (the defendant’s misrepresentation must have been material to the government’s payment decision), and scienter (defined as actual knowledge, reckless disregard, or deliberate ignorance). [1]
All of these elements could be challenging to prove in a hypothetical DEI-FCA enforcement case. Legal falsity requires proof of actual violations of underlying civil rights laws, which will be difficult given their inherent ambiguities in the context of how the administration seeks to enforce them.
Materiality is defined as having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property. The Supreme Court in Universal Health Services v. Escobar ex rel. United States held that the standard is exacting, as the FCA is not “a vehicle for punishing garden-variety breaches of contract or regulatory violations”—significantly, Morgan Lewis is not aware of a single pre-2025 instance in which the government refused to pay out a federal claim based on the claimant’s implementation of DEI policies or programs. Further, “statutory, regulatory, and contractual requirements are not automatically material, even if they are labeled conditions of payment.”
As to scienter, FCA defendants will have a ready argument that they could not have knowingly or even recklessly violated a proscription against “illegal DEI,” the limits of which are far from clearly delineated. This is particularly true where the interpretation of acceptable and legitimate DEI practices has changed markedly between administrations. For example, a federal contractor defendant may argue that it reasonably understood its DEI program to be consistent with federal law. Under United States ex rel. Schutte v. SuperValu, Inc., a defendant who holds a good-faith subjective belief that the claim submitted was not false does not violate the FCA.
The new initiative is the latest step forward in what has been a policy priority for the administration from its first days: ending the application of racial and other preferences, via DEI or related policies or programs, by federal funding recipients in what the administration perceives as a violation of civil rights laws.
It thus remains critical for any private recipients of federal funding, including corporations, foundations, and educational institutions, to carefully review their policies and practices relating to DEI including any policies or practices that, under any name, may create the appearance of singling out members of a particular race, gender, or national origin for benefits or burdens. This also extends to policies and practices governing privileges available to transgender individuals.
Moreover, federal contractors and grantees should be on the lookout for agency requests for certification and establish a process to undertake prior to signing the certification to ensure compliance with federal anti-discrimination laws, at least as understood by the contractor/grantee. These requests may come in the form of standalone text incorporated into modifications to existing agreements or as new clauses that have been issued by agencies, such as the US State Department’s H-048 clause, Certification Regarding Compliance with Applicable U.S. Federal Antidiscrimination Law.
The focus in the Memorandum and press release on the importance of qui tam relators signals an understanding that internal whistleblowers likely will be essential to future enforcement actions that advance the initiative’s goals. This could come in the form of corporate or university insiders. However, the FCA does not require relators to be insiders or even individuals. Thus, qui tam FCA lawsuits could be brought by private organizations that support the administration’s agenda. The Memorandum’s focus on qui tam cases also suggests that the government may be more willing to intervene in such matters.
As May 21 marks 120 days of EO 14173, additional announcements relating to its objectives (from DOJ or other federal agencies) may be forthcoming in the near term.
There are a number of arguments that individuals and entities subject to DOJ enforcement actions for violating the FCA may raise. For example, a defendant may be able to argue the following:
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If you have any questions or would like more information on the issues discussed in this LawFlash, please contact the authors or lawyers in our Culture and DEI, FCA & Qui Tam Litigation, and Government Contracts practices.