DOJ Outlines Plans to Enforce the False Claims Act Against Recipients of Federal Funds that Knowingly Violate Civil Rights Laws

On May 19, 2025, Deputy Attorney General Todd Blanche issued a memorandum, Deputy Attorney General Blanche Memo: Civil Rights Fraud Initiative, announcing an initiative to “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.” 

For many years, the government has required contractors and grant recipients to make representations regarding compliance with various federal civil rights laws. Historically, numerous agencies, including the Department of Justice (DOJ), have shared the responsibility for monitoring compliance. The Trump administration’s announcement that it will use the FCA to enforce compliance with civil rights laws is, however, largely unprecedented. Similarly, the administration’s focus on “illegal DEI” as a primary threat to American’s civil rights also represents a significant departure from the past practices of prior administrations, including the first Trump administration. When combined with continuing uncertainty as to what constitutes illegal DEI, the Justice Department’s new memo leaves many questions unanswered. 

Nevertheless, what is clear is that now may be a good time for government contractors and grant recipients to review their compliance with federal civil rights laws and exercise caution when making representations to the government regarding compliance.

Background

The FCA, originally established in 1863 to combat defense contractor fraud during the Civil War, prohibits the knowing submission of false claims to the government. It prohibits contractors from making false representations to the government regarding a law, regulation, or federal contract. Only knowing noncompliance with material statutory, regulatory, or contractual requirements can support an FCA claim regarding a false certification to the government. See Universal Health Servs. v. U.S. ex rel. Escobar, 579 U.S. 176 (2016). Because a violation must be knowing, a good faith defense may exist where an entity certifies compliance with the law based on an objectively reasonable interpretation of an underlying law. See U.S. ex rel Schutte v. SuperValu Inc., 598 U.S. ___ (2023); U.S. ex rel. Proctor v. Safeway, Inc., 598 U.S. __ (2023).  The FCA carries criminal and civil penalties, including treble damages. It also allows private citizens (known as “relators”) to file “qui tam” suits on behalf of the government against entities that allegedly defraud the government.¹ In FY 2024, the DOJ reported that it collected nearly $3 billion in settlements and judgments from FCA cases. 

On January 21, 2025, President Trump issued Executive Order 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity, 90 Fed. Reg. 8633, directing the executive branch agencies to take action to end the adoption and use of “dangerous, demeaning, and immoral 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.” On February 5, 2025, the attorney general issued a memorandum promising that the DOJ’s Civil Rights Division “will investigate, eliminate, and penalize illegal DEI and DEIA preferences, mandates, policies, programs, and activities in the private sector and in educational institutions that receive federal funds.”

The May 19, 2025 memo from Deputy Attorney General Blanche (the “DOJ Memo”) appears to represent the next step in the implementation of EO 14173.

The DOJ Memo

The DOJ Memo encourages use of the FCA against federal contractors or grant recipients that “defraud the United States by taking its money while knowingly violating civil rights laws.” According to the DOJ Memo, a federal contractor or grant recipient may implicate the FCA if it “knowingly violates civil rights laws . . . and falsely certifies compliance with such laws.” The DOJ Memo does not define the terms “federal contractors” or “grant recipients.” Nor does it indicate the specific “claims” the government may use to support an action under the FCA beyond stating that the statute: 

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. Colleges and universities cannot accept federal funds while discriminating against their students.

The False Claims Act is also implicated when 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.

Notably, there are several hallmarks to a successful FCA action. The representation must be fraudulent, knowing, and material. To constitute a violation of the FCA, a representation regarding compliance with civil rights laws would have to be both false and material. In other words, an actual legal violation would have to be shown, based on statutory and case law. Importantly, the government’s mere assertion that a particular representation is “material” (even if a contractor or grant recipient acknowledges the government’s position) does not necessarily establish materiality for purposes of a claim. Materiality is ultimately an issue of law and fact to be decided by a court. 

Likewise, the administration’s positions as to what the law should require may be at odds with the current state of the law in some respects. For example, some of the administration’s arguments regarding the rights of transgender individuals have not yet been heard or decided by the courts.

Conclusion

The DOJ Memo represents a change in the use of the FCA. This is not the first time the FCA has been used to enforce civil rights laws, but it represents a new DOJ focus on use of the FCA to promote the administration’s agenda regarding issues such as IE&D initiatives and transgender rights. Questions exist as to whether the representations at issue meet the materiality requirements of the FCA. Lack of precedent in this area may argue against materiality.

Government contractors and grant recipients that seek to limit exposure to FCA claims may want to:

• Engage in the appropriate due diligence to avoid knowing misrepresentations to the government and consult with counsel regarding certification language in government contracts and to establish a good faith defense to FCA claims.
• Evaluate policies and programs, including those related to inclusion, equity, and diversity, to ensure compliance with existing statutory and case law. Employers that abruptly change course on certain policies or practices may end up facing claims from aggrieved applicants or employees.
• Establish and maintain strong internal reporting policies and procedures and encourage such reporting in order to address concerns appropriately and avoid surprises.
• Pay attention to formal and informal complaints in order to evaluate and address them, if necessary.
• Investigate internal reports of civil rights violations.
• Establish policies that protect students and employees from behavior that violates civil rights laws.
• Consult with counsel regarding complying with state and federal civil rights laws.
• Consult with counsel regarding defenses, including a good faith defense, to threatened FCA actions.