The Justice Department Threatens Federal Contractors with False Claims Act Suits & Is Encouraging Whistleblowers to Sue

OutSolve has invited John C. Fox, Esq. as a guest blogger providing legal insights on EEO and compliance issues. The views expressed in his posts are his and do not reflect the viewpoint of OutSolve or its employees. 

Background

In a major escalation of the Trump Administration’s war on unlawful DEI programs and false certifications of nondiscrimination compliance, U.S. Department of Justice Deputy Attorney General Todd Blanche took dead center aim at federal contractors. Promising “vigorous enforcement” of the False Claims Act, Blanche announced that he was “standing up the Civil Rights Fraud Initiative” to prosecute those who “defraud the United States by taking its money while knowingly violating civil rights laws.”   

Throwing Down the Gauntlet: New Federal Strike Force Forming

They’re coming! In a succinct and direct two-page May 19, 2025, Memorandum titled “Civil Rights Fraud Initiative,” the Deputy AG (the US Department of Justice’s second highest ranking official) emphasized that “[t]he federal government should not subsidize unlawful discrimination”  “The Initiative will be co-led by the Civil Division’s Fraud Section, which enforces the False Claims Act, and the Civil Rights Division, which enforces civil rights laws.” Blanche also noted that both divisions will identify “a team of attorneys” to “aggressively” pursue violators. In addition, “[e]ach of the 93 United States Attorney’s Offices will identify an Assistant United States Attorney to advance these efforts.” 

NOTE: This is a massive plaintiff lawyer workforce that the Justice Department has just formed to attack federal government contractors, larger than any other plaintiffs’ law firm in the country, and with highly skilled no-nonsense trial lawyers. I have litigated against these lawyers. They are magnitudes of sophistication, discrimination law knowledge, and aggressive nature different from the lawyers the affirmative action community faced at OFCCP over the last four decades. House Cats vs. Bengal Tigers. 

Highlights:  

1. “The False Claims Act is the Justice Department’s primary weapon against government fraud, waste, and abuse. Liability results in treble damages and significant penalties,” wrote Blanche. 
2. The False Claims Act is “[i]mplicated when a federal contractor or recipient of federal funds knowingly violates civil rights laws… and falsely certifies compliance with such laws.” 
3. “The False Claims Act is also implicated whenever federal-funding recipients (meaning “grant” [“Federal Financial Assistance”] 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.”  
4. “The Department (of Justice) recognizes that it alone cannot identify every instance of civil rights fraud. Congress likewise has recognized as much and, as a result, has authorized private parties to protect the public interest by filing lawsuits and litigating claims under the False Claims Act—and, if successful, sharing any monetary recovery.” 
5. Chumming for Employee Whistleblowers: “The Department also encourages anyone with knowledge of discrimination by federal funding recipients to report that information to the appropriate federal authorities so that the Department may consider the information and take any appropriate action.”  

Update on Federal Contractor Non-discrimination and anti-DEI Certifications 

To prepare you for this day, we have written five OutSolve Blogs to date warning federal contractors that False Claim Act lawsuits are coming (and how to avoid them). At the same time, OutSolve formed special work teams to work with customers to position them to be able to confidently make the coming required federal contract/grant certifications. 

These blogs, and OutSolve’s internal resources shift and team building, followed President Trump’s early publication of Executive Orders requiring federal procurement agencies to install two non-discrimination “certifications” in federal contract and “grant” instruments: 

1. March 24, 2025:  Legal Alert: Federal Court Greenlights Trump Anti-DEI Contract and Grant Certifications: This is Now Real! 
2. April 3, 2025: Part 1: Actions Federal Contractors and Grantees Should Take Now to Certify Their Federal Contracts & Grants 
   NOTE: This is an important Blog. Read this if nothing else.
3. April 9, 2025:  Part 2: Actions Federal Contractors and Grantees Should Take Now to Certify Their Federal Contracts & Grants 
4. April 21, 2025: Why Companies and Institutions Should Fear False Claims Act Lawsuits When Signing Coming Federal Contract and Grant Certifications 
5. April 24, 2025: Federal Contract Changes: DoD and GSA Strip DEI Language from Solicitations  

See related short story about the current status of the federal procurement system’s two non-discrimination/anti-DEI contract certifications. 

Conclusion

This Administration means it when it says it is going to find and attack unlawful DEI programs in major companies and colleges and universities in the United States. This is now not something you may either ho-hum or ignore. Trump Administration federal prosecutors will sternly rebuke you with statements like “We   Warned You” if you protest that you were caught unawares of this policy shift within the federal government. Make no mistake that the U.S. Department of Justice is now mobilizing for a nationwide review of each and every coming federal contactor certification. 

Now is the time to act. Later is likely too late. 

The two best ways to avoid False Claims Act liability are to: 

1.  not unlawfully discriminate: Do not have any corporate or institutional policies or practices which would be found to constitute unlawful employment or contract discrimination violative of federal nondiscrimination law(s). Remember to, and don’t forget to include in your DEI Scrub, the fact that the Civil Rights Act of 1866 is a federal civil rights law which the federal courts have found to: 
   1. apply to Hispanics and Whites as Protected Classes, and not just African Americans; and 
   2. Require non-discrimination and apply to any form of contract, whether it be an employment contract, a contract to procure independent contractor services, a commercial contract, or even a contract to deliver a charitable grant from your corporate charitable foundation. (See my April 9, 2025 “Part 2” Blog referenced  above), AND 
2.  undertake a “DEI Scrub:” The Courts have applied either a “knew or should have known” standard to define when a company “knows” that it has engaged in one or more instances of unlawful discrimination in some form of its business governed by federal discrimination law. Alternatively, and worse for you, some courts have defined the knowledge requirement of the False Claims Act to require an active and current investigation prior to certifying that no unlawful discrimination exists at the employer/institution’s place of business (see my April 21, 2025 Blog as to why companies and institutions should fear the False Claims Act: the Hogan’s Heros “Sergeant Schultz defense:” “I See Nothing; I Hear Nothing; I know Nothing,” does not operate as a defense in False Claims Act litigation. Sitting at your desk, blissful in your ignorance, is a recipe for liability in the False Claims world. 

This is likely the last warning I, John Fox, will be able to provide to you before federal Justice Department lawyers/investigators start showing up at your front doors to verify your compliance with federal non-discrimination laws and test any contract certifications someone in your company may have made. 

So, use your remaining time well. Get scrubbed and get “clean” if you have concerns about the legality of any particular policy or practice as you measure it against the strictures of applicable federal non-discrimination laws. The feds will applaud self-help and attack inaction, particularly following any actual knowledge (without repair) of unlawfully discriminatory policies or practices.  

Such a circumstance creates two legal problems for you (not one) in the mind of a federal investigator/prosecutor: 

1. you undertook an unlawful act, and 
2. then, with knowledge aforethought, you did nothing thereafter to end or even mitigate your unlawful action.

Obdurate and knowing violations of federal law are the kinds of facts which often provoke federal prosecutors to start thinking about enhanced financial and procedural process punishments (punitive damages/liquidated damages). 

In the immortal words of Sgt. Phil Esterhaus in the famous long-running TV drama “Hill Street Blues” spoken daily as he dismissed his police squads after their morning briefings and roll call: 

“Let’s be careful out there.”