Alert
05.21.25
In a memorandum issued by Deputy Attorney General Todd Blanche on May 19, 2025, the U.S. Department of Justice (DOJ) announced the creation of the Civil Rights Fraud Initiative, a new enforcement effort that uses the federal False Claims Act (FCA) to pursue investigations and prosecutions of recipients of federal funding—including institutions of higher education, research centers and federal contractors—who allegedly falsely certify their compliance with federal civil rights laws. The FCA is known as the government’s “primary weapon against fraud, waste, and abuse,” because FCA violations can yield treble damages plus five-figure penalties for each false claim.
The announcement of this Initiative is significant in at least two ways. First, it marks a dramatic and material expansion of DOJ’s use of the FCA, which has been traditionally used to prosecute false or fraudulent claims submitted by recipients of federal funds rather than allegations of discrimination by federal grant recipients and government contractors. Second, DOJ’s express solicitation of qui tam filings and whistleblower complaints could result in a serious increase in litigation and investigations relating to diversity initiatives.
This alert describes the Civil Rights Fraud Initiative, explains how it may affect recipients of federal funding, and offers suggestions for steps that institutions and contractors should take to mitigate risk from an expansion in FCA enforcement.
What Is the Civil Rights Fraud Initiative?
The Civil Rights Fraud Initiative stems from Attorney General Bondi’s February 5, 2025, Memorandum titled, “Ending Illegal DEI and DEIA Discrimination and Preferences,” which implemented President Trump’s January 21, 2025, Executive Order, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (J21 Order). In her Memorandum, AG Bondi stated that DOJ “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,” and she directed the Civil Rights Division and the Office of Legal Policy to submit a report with recommendations for measures to “end illegal discrimination and preferences, including policies relating to DEI and DEIA.”
In response to these mandates, the Initiative directs DOJ to use the False Claims Act, 31 U.S.C. § 3729 et seq., to investigate and pursue claims against any recipient of federal funds that violates federal civil rights laws. As examples, Deputy AG Blanche’s Memorandum indicates that “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.” While the Memorandum focuses on universities, the Initiative also targets all recipients of federal funds and contractors who knowingly engage 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 Initiative will be led by DOJ’s Civil Rights Division and the Civil Division’s Fraud Section, which is the primary DOJ component with responsibility for civil False Claims Act matters. The Memorandum directs Civil Rights and Civil Frauds to regularly coordinate and share information to advance investigations. It also directs them to engage, as appropriate, with DOJ’s Criminal Division and other federal agencies—including the Department of Education, the Department of Health and Human Services, the Department of Housing and Urban Development, and the Department of Labor. In addition, the memorandum directs each of the 93 U.S. Attorney’s Offices to appoint an Assistant U.S. Attorney to advance these efforts.
To build investigative leads, the Memorandum encourages anyone with knowledge of discrimination by federal-funding recipients to report that information to federal authorities. And, in addition to agency-initiated investigations, the Memorandum “strongly encourages” whistleblowers (called “relators”) to file qui tam actions alleging violations of the FCA, which authorizes relators to file their own private FCA lawsuits and share in any monetary recovery that the government obtains.
How Could the Civil Rights Fraud Initiative Affect Schools and Companies?
The United States has used the FCA to root out fraud since the Civil War. But the FCA was traditionally used to investigate and prosecute those who receive federal funds and falsely certify compliance with specific contractual terms. The Initiative’s use of the FCA—and DOJ’s encouragement of relators—to investigate and prosecute universities and other federal-funding recipients that maintain DEI programs is a new development. This expanding application of the FCA raises a number of issues that educational institutions and corporations will need to consider.
As many observers will note, the Trump administration has already begun investigating universities for a variety of reasons. In March 2025, the U.S. Department of Education sent letters to 60 institutions of higher education warning them of “potential enforcement actions if they do not fulfill their obligations under Title VI of the Civil Rights Act to protect Jewish students on campus, including uninterrupted access to campus facilities and educational opportunities.” Various news outlets also have reported that Harvard University is being investigated under the FCA.
While defendants have significant monetary exposure under the FCA’s treble damages and penalties provisions, which sharply increases the litigation risk, there may be several avenues available to defend against these actions.
To establish an FCA violation, a plaintiff must prove falsity, scienter and materiality, and recent U.S. Supreme Court rulings highlight how these elements might play out in the context of the Civil Rights Fraud Initiative. For example, Universal Health Services, Inc. v. U.S. ex rel. Escobar, 579 U.S. 176 (2016), set forth several non-exhaustive factors to consider in assessing materiality, and while no single factor is determinative, one factor is whether the government designated the requirement as a condition of payment. As for scienter, in U.S. ex rel. Schutte v. SuperValu Inc., 598 U.S. 739 (2023), the Court held that “knowingly” refers to a defendant’s actual knowledge and subjective beliefs, not to what an objectively reasonable person may have known or believed. This sets a high bar, which could prove particularly significant given (1) the long history at certain companies and universities of conducting DEI initiatives, and (2) recent district court orders relating to the J21 Order.
Specifically, in Nat'l Ass'n of Diversity Officers in Higher Educ. v. Trump, No. 1:25-CV-00333-ABA, 2025 WL 573764 at *21 (D. Md. Feb. 21, 2025), opinion clarified, 2025 WL 750690 (D. Md. Mar. 10, 2025), the Court entered a preliminary injunction enjoining the J21 Order, finding that “Plaintiffs are likely to succeed on their claim that [the J21 Order] violates the First Amendment because on its face it constitutes a content-based restriction on the speech rights of federal contractors and grantees, and further because such restriction expands to all of those contractors’ and grantees’ work, whether funded by the government or not.” The Court added that the “speech-chilling effect of the Certification Provision … is particularly obvious given the vagueness of the [J21 Order].” “Because even the government does not know what constitutes DEI-related speech that violates federal anti-discrimination laws … Plaintiffs … have shown they are unable to know which of their DEI programs (if any) violate federal anti-discrimination laws, and are highly likely to chill their own speech—to self-censor, and reasonably so—because of the Certification Provision.” (See our May 7, 2025, client alert discussing injunctions entered in National Education Association v. U.S. Department of Education and American Federation of Teachers v. U.S. Department of Education regarding actions taken by the U.S. Department of Education.)
Although the Fourth Circuit stayed the preliminary injunction of the J21 Order pending the government’s appeal, one of the members of the panel wrote in a concurrence that “[a]gency enforcement actions that go beyond the Orders’ narrow scope may well raise serious First Amendment and Due Process concerns, for the reasons cogently explained by the district court.” Order at 7, No. 25-1189 (4th Cir. Mar. 14, 2025) (Harris, J., concurring). Another judge noted, “[D]espite the vitriol now being heaped on DEI, people of good faith who work to promote diversity, equity, and inclusion deserve praise, not opprobrium. … Under the most basic tenets of the First Amendment, there should be room for open discussion and principled debate about DEI programs, and whether its corresponding values should guide admissions, hiring, scholarship, funding, or workplace and educational practices.” (Diaz, C.J., concurring).
Notwithstanding possible defenses, however, DOJ has the ability to initiate and conduct investigations—which can be burdensome on institutions—long before determining whether to file suit. DOJ typically initiates an FCA investigation by issuing a Civil Investigative Demand (CID), which—like a subpoena—requires targets to produce documents, answer interrogatories or appear for depositions. These investigations can be lengthy and costly, even when DOJ ultimately decides not to file suit. And, critically, the government is not the only party that can initiate an FCA action. Relators can initiate an FCA action, called a qui tam, which the government can then investigate while the complaint remains under seal. Relators are often current or former employees, and while the FCA provides certain limits on who can be a proper relator, the reality is that anyone can initiate a qui tam action. Moreover, DOJ’s announcement that it “strongly encourages these lawsuits” is a call to action that will not go unnoticed by potential relators and the substantial relators’ bar, which is comprised of many sophisticated attorneys, several of whom are former FCA prosecutors. The result will likely be an increase in investigations and litigation, even if DOJ does not initiate the matter.
Finally, although the Initiative focuses on the civil FCA as the enforcement tool, federal-funding recipients should be aware of the criminal FCA analog, 18 U.S.C. § 267. The essential difference between the statutes is the burden of proof: whereas a criminal violation requires proof beyond a reasonable doubt, a civil violation requires proof by only a preponderance of the evidence.
Next Steps for Federal-Funding Recipients
The Civil Rights Fraud Initiative signals a new era of FCA enforcement—one that reaches far beyond traditional fraud and deep into civil rights compliance. Organizations that receive federal funds, especially educational institutions and government contractors, should act quickly to do the following:
Given the evolving legal landscape and heightened scrutiny, a proactive legal and compliance strategy is essential. Institutions that address these issues proactively—by adjusting programs and/or crafting a defense strategy—will be better placed if targeted in an enforcement action.
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