5 Strategies for Mitigating DOJ False Claims Act Investigation Risks

The Department of Justice (DOJ) has signaled a more aggressive approach to civil False Claims Act enforcement against companies receiving federal funding, a move that could significantly impact government contractors across multiple industries. The FCA, which serves as the government’s primary civil remedy against fraud, generates billions in settlements and judgments annually, with whistleblower qui tam lawsuits driving the majority of these cases.

Industry experts are highlighting key strategies for companies to protect themselves in this heightened enforcement environment, as the DOJ’s focus continues to broaden across multiple sectors.

Strengthening ethics and compliance programs has become essential for companies doing business with the federal government. This involves conducting comprehensive reviews of existing compliance frameworks and updating them to address emerging risks. Regular training sessions and clear procedures for employees to report potential misconduct are increasingly critical components of risk management.

“Companies should be proactively updating their policies to reflect the current enforcement landscape,” notes one compliance specialist familiar with recent DOJ actions. “The investment in prevention is minimal compared to the potential costs of an FCA violation.”

When potential misconduct is detected, conducting proper internal investigations under attorney-client privilege can help manage organizational risk. Experienced counsel should evaluate all credible allegations, as initial reports may sometimes mischaracterize situations or identify issues that don’t actually constitute violations. When genuine misconduct is discovered, companies and their legal advisors must carefully consider whether disclosure to authorities is warranted or required.

The DOJ’s enforcement focus has expanded significantly in recent years. In May 2025, the department announced a Civil Rights Fraud Initiative specifically aimed at using the FCA to address violations of civil rights laws, including issues related to Diversity, Equity, and Inclusion programs. This represents a notable expansion of the FCA’s traditional scope into employment practices.

Simultaneously, the FCA has become a central tool in the administration’s enforcement efforts related to imports and tariffs. Companies engaged in importing goods or components should re-evaluate their processes for determining country of origin on imports and maintain documentation of good-faith interpretations of applicable regulations.

Cybersecurity compliance has emerged as another critical area of FCA enforcement. Recent DOJ settlements demonstrate that non-compliance with cybersecurity requirements can lead to substantial liability. Defense contractors in particular face heightened scrutiny as they update system security plans and prepare for third-party assessments under the Department of War’s Cybersecurity Maturity Model Certification Program (CMMC).

“The government is increasingly treating cybersecurity deficiencies as material misrepresentations under government contracts,” explained a legal expert specializing in government contracting. “What might have previously been viewed as technical compliance issues are now potential FCA violations.”

Supply chain management presents another significant area of risk. Proper oversight of subcontractors and suppliers on government contracts is essential, particularly regarding required “flow-down” clauses that extend certain obligations throughout the supply chain. Inadequate diligence in this area can create cybersecurity vulnerabilities and other FCA risks.

The stakes for non-compliance continue to rise. FCA violations can result in treble damages and substantial civil penalties, not to mention reputational damage and potential suspension or debarment from government contracting.

Market analysts note that these enhanced enforcement priorities are already affecting investment decisions and corporate governance in sectors heavily dependent on government contracts, including defense, healthcare, and infrastructure.

As the DOJ continues to expand its use of the False Claims Act across new domains, companies receiving federal dollars face an increasingly complex compliance landscape that requires vigilance, proactive risk management, and specialized legal guidance to navigate successfully.