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Justice Department Uses False Claims Act to Probe Corporate DEI Programs
The U.S. Department of Justice is stepping up its scrutiny of diversity, equity, and inclusion (DEI) initiatives at major companies that conduct business with the federal government, according to a Wall Street Journal report published December 28, 2025.
The DOJ is leveraging the False Claims Act (FCA) – a Civil War-era law designed to combat fraud against the government – to investigate what the current administration characterizes as “illegal” workplace DEI programs. These investigations target not just the policies themselves, but how they are implemented and their impact on hiring and promotion decisions.
Several high-profile companies in the technology and telecommunications sectors have reportedly received civil investigative demands (CIDs), requiring them to provide documents and information about their diversity programs. The use of CIDs signals that the DOJ is approaching these matters as potential fraud cases rather than policy disagreements.
This enforcement strategy has been developing throughout 2025, beginning with Executive Order 14173 issued on January 21. The order, titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” eliminated longstanding DEI policies across federal agencies and affected companies doing business with the government. It notably revoked Executive Order 11246, which since 1965 had required affirmative action programs from government contractors.
The executive order introduced significant provisions for government contracts and grants, requiring counterparties to certify they don’t operate DEI programs that violate federal anti-discrimination laws, and to acknowledge that compliance is “material” to payment decisions under the False Claims Act.
Attorney General Pamela Bondi reinforced this approach in February, instructing the Civil Rights Division to “investigate, eliminate, and penalize illegal DEI and DEIA preferences, mandates, policies, programs, and activities” in the private sector and educational institutions receiving federal funds.
By May, the DOJ had launched a “Civil Rights Fraud Initiative,” with Deputy Attorney General Todd Blanche describing the FCA as a “weapon” for pursuing entities that continue discriminatory policies while receiving federal money. Assistant Attorney General Brett Shumate later pledged “aggressive investigation” against such entities.
Legal experts note these investigations face potential challenges. The Supreme Court’s 2016 ruling in Universal Health Services v. Escobar established that the materiality standard under the FCA is “rigorous” and “demanding.” The Court held that the FCA is not “a vehicle for punishing garden-variety breaches of contract or regulatory violations,” and that government designation of a provision as a payment condition is “relevant, but not automatically dispositive.”
For businesses, the practical implications are substantial. Government contractors and funding recipients must carefully review their DEI programs for potential compliance issues. The DOJ appears particularly focused on programs that allocate “benefits or burdens” based on protected characteristics – including eligibility criteria, scoring mechanisms, and promotion pathways.
Companies should consider examining not just how their diversity programs are labeled, but how they function in practice. Special attention should be paid to internal reporting procedures, as employees who perceive noncompliance might become FCA whistleblowers incentivized to file qui tam actions.
Even before formal complaints, civil investigative demands can impose significant costs and business disruptions. Legal experts recommend implementing litigation holds, identifying data sources, and protecting attorney-client privilege through counsel-directed investigations.
The DOJ’s novel application of the False Claims Act to DEI programs represents a significant shift in enforcement strategy. As cases progress through the courts, the interpretation of “materiality” under the FCA will likely be a central point of contention, determining whether DEI compliance is truly essential to government payment decisions.
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9 Comments
The DOJ’s move to leverage the False Claims Act in this context is notable. It suggests they view certain DEI practices as potentially defrauding the government, which seems like a high bar to clear. More transparency is needed around their specific concerns.
Leveraging the False Claims Act to probe corporate diversity initiatives is an aggressive and potentially problematic move by the DOJ. I hope they can clearly articulate the specific issues they’ve identified that warrant such heavy-handed legal action, rather than simply opposing DEI programs on ideological grounds.
Interesting to see the DOJ using the False Claims Act to investigate corporate diversity programs. This suggests they view these initiatives as potential fraud against the government. I wonder what specific issues they’ve identified that warrant such aggressive oversight.
The use of the False Claims Act to probe DEI programs seems like an aggressive legal tactic. I’d be curious to learn more about the administration’s rationale and the criteria they’re using to evaluate these programs as potentially ‘illegal’.
Agreed, the legal strategy here appears quite heavy-handed. It will be important to see if the DOJ can demonstrate clear evidence of fraud or misrepresentation in how these programs are implemented.
This is a concerning development, as it could have a chilling effect on corporate efforts to promote diversity and inclusion. I hope the DOJ’s investigation is based on substantive concerns, not just ideological opposition to DEI initiatives.
Absolutely. Any perceived misuse of the False Claims Act to target DEI programs could undermine important efforts to address systemic inequities in the workplace.
This is a significant escalation in the government’s scrutiny of corporate diversity programs. Using the False Claims Act implies the DOJ sees these initiatives as a form of fraud, which is a very serious allegation. I’ll be interested to see what evidence they present to justify this approach.
The DOJ’s use of the False Claims Act to investigate DEI programs is a concerning development. While the government has the right to ensure tax dollars aren’t being misused, this tactic seems overly aggressive and could undermine legitimate efforts to promote inclusion in the workplace.