Highlights
- The U.S. Department of Justice (DOJ) announced on May 19, 2025, that it would use the False Claims Act (FCA) against institutions and contractors receiving federal funding that "knowingly" violate federal civil rights laws and have certified their compliance with such statutes.
- The DOJ cited diversity, equity and inclusion (DEI) programs maintained by federal contractors and alleged antisemitism on university campuses as potential areas where the law could be implicated.
The U.S. Department of Justice (DOJ) announced on May 19, 2025, that it would use the False Claims Act (FCA) against institutions and contractors receiving federal funding that "knowingly" violate federal civil rights laws and have certified their compliance with such statutes. The DOJ cited diversity, equity and inclusion (DEI) programs maintained by federal contractors and alleged antisemitism on university campuses as potential areas where the law could be implicated. U.S. Attorney General Pamela Bondi provided additional focus by stating, "Institutions that take federal money only to allow anti-Semitism and promote divisive DEI policies are putting their access to federal funds at risk."
The FCA is a major weapon in the government's law enforcement arsenal, as it enables the U.S. to recover treble damages and substantial civil penalties from federal contractors or grantees who knowingly submit a false claim to the government. It also enables private whistleblowers to initiate suits in the name of the government. Colleges and universities are potential targets of FCA suits and investigations because they receive billions of dollars in federal funds through research grants and student financial aid for which they must certify their compliance with federal law and other terms and conditions. Certifications that are "knowingly false" (as defined and interpreted under the FCA) could result in significant liability.
The current administration has articulated that it is serious about pursuing its new FCA initiative. The DOJ has indicated that it intends to launch investigations of some institutions and likely will initiate some civil FCA suits, as well as entertain whistleblower suits. Weathering a DOJ investigation can consume considerable amounts of time and resources. The FCA authorizes the DOJ to issue civil investigative demands (CIDs) requiring that the recipient produce documents, written interrogatory responses and/or testimony under oath that is transcribed by a court reporter. The DOJ does not hesitate to use these powers. If the investigation leads to a settlement or actual FCA law suit, even more resources will have to be expended.
So, what steps can and should an institution take to avoid such an experience or to put itself in the best position to succeed if it is the target of an investigation or FCA suit?
Be Proactive
This is not the time to be complacent. Good faith and good intentions do not provide shields. It is imprudent to assume that the policies are up to date and comply with the current DOJ interpretations of the applicable laws. The current administration takes a different view of the civil rights laws than did prior administrations, and this is an area of constant change. Further, and importantly, even if the policies are accurate and up to date, do not assume that they are always being adhered to in practice.
Conduct a Thorough Review
A thorough review of your institution's policies and actual practices with respect to DEI and antisemitism response is needed, together with a review of your compliance program for ensuring that the policies are being followed. As part of the review process, identify all policies and programs that address civil rights laws, trainings and implementation. Institutions that have lawful policies and adhere to them are less likely to be targets of an FCA investigation or lawsuit. In addition, lawful policies and effective compliance programs furnish the best defense to any such investigation or suit because they serve to negate the conclusion that the institution "knowingly" violated federal civil rights laws.
What the Review Should Cover
A thorough review will explore a number of issues. Are the institution's policies up to date and compliant with current interpretations of the applicable law? How recently have those policies been communicated to the relevant persons? Who has received training about those policies, and when? Are there records of those training sessions? Have any alleged violations occurred? What has been the response? Have violations led to changes in policy or procedures? Has disciplinary action been taken?
Most civil FCA cases are not initiated by the DOJ but instead by whistleblowers who then disclose their allegations to the DOJ. Experience teaches that many of these whistleblowers first tried to alert a supervisor to the perceived problem but were ignored – or felt that they were. Thus, a key component of a compliance program for government contractors is establishing a confidential reporting mechanism (often a hotline) for employees to report their concerns and training managers to recognize and respond appropriately to whistleblower complaints. The DOJ considers such mechanisms "highly probative" of whether a program is effective. Does the institution have such a reporting mechanism? Is it publicized? How often is it used? Different mechanisms may be appropriate for employees, faculty and students – do they exist? Are managers effectively trained? Are individuals with authority making statements that are at odds with the institution's facially compliant policies, which could be cited by a whistleblower?
DOJ attorneys probe specifically and thoroughly whether a compliance program is a mere "paper program" or instead a serious one. The current DOJ primer on evaluating corporate compliance programs is 25 pages long. A review on behalf of the institution should be equally thorough and cover the same bases.
Who Should Conduct the Review?
The review must be conducted by legal counsel in order for it to be privileged. It can be conducted by either inside or outside counsel; however, inside counsel often do not have sufficient resources and/or range of necessary expertise to conduct an effective, comprehensive review. Furthermore, as a practical matter, the DOJ usually will consider outside counsel to be more objective than inside counsel and so will give more weight to their findings and conclusions. This can be a significant benefit if the institution does come under DOJ scrutiny because it bolsters the conclusion that the institution acted in good faith and complied with the law (or diligently attempted to do so). Reliance on the advice of counsel is a defense to FCA liability. Beyond that, credible evidence of an institution's good faith reliance on counsel influences the DOJ's assessment of whether to pursue – and how to resolve – an investigation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
