Justice Department Launches Civil Rights Fraud Initiative

The U.S. Department of Justice (DOJ) has announced it will use the False Claims Act to investigate and pursue claims against any federal funds recipients that violate federal civil rights laws. Violations of the False Claims Act can result in triple damages and significant penalties.

The DOJ’s Civil Rights Fraud Initiative “is an extension of Executive Order 14173, ‘Ending Illegal Discrimination and Restoring Merit-Based Opportunity,’ and the memorandum issued by U.S. Attorney General Pam Bondi on Feb. 5, ‘Ending Illegal DEI and DEIA Discrimination and Preferences,’ ” said Andrew Turnbull, an attorney with Morrison Foerster in Washington, D.C.

The majority of HR professionals (58%) say recent executive orders have had little to no impact on inclusion and diversity (I&D) efforts at their organization over the last three months, according to SHRM’s May Current Events Pulse survey. However, “nearly 1 in 5 (19%) say their organization has ceased or reduced DEI efforts,” the survey found.

With the Civil Rights Fraud Initiative, “DEI practices are more under the microscope than ever,” said Christy Kiely and Teddie Arnold, attorneys with Seyfarth in Washington, D.C. Under the initiative, “It’s not just the federal government looking for unlawful DEI, but also applicants, employees, customers, suppliers, and even the general public.”

Entities could be tied up in costly litigation dragging on for years, they added.

Initiative Covers Many Institutions

In the May 19 memorandum announcing the Civil Rights Fraud Initiative, Deputy Attorney General Todd Blanche said the False Claims Act is implicated when a federal contractor or federal funds recipient knowingly violates civil rights laws and falsely certifies compliance with these laws.

“Accordingly, 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,” the memo said. “Colleges and universities cannot accept federal funds while discriminating against their students.”

The DOJ said its Civil Fraud Section and Civil Rights Division would cooperate with the Criminal Division, as well as numerous federal departments, including the U.S. Department of Labor, as part of the initiative. The DOJ also strongly encouraged lawsuits by private parties under the False Claims Act.

The Civil Rights Fraud Initiative covers a wide range of federal funds recipients, said Sarah Goodman, an attorney with Offit Kurman in Philadelphia. These include: 

• Federal contractors and subcontractors.
• Universities and K-12 schools that receive federal aid.
• Nonprofits with government grants.
• State and local governments that receive federal support.

Course Corrections

Covered entities, particularly educational institutions, may want to immediately review their policies to identify any areas of risk, said Lauren Hicks, an attorney with Ogletree Deakins in Indianapolis and Atlanta.

Turnbull recommended that federal funds recipients:

• Conduct privileged audits of all programs that might be covered for risk, including those not directly tied to federal funding. These audits should identify any practices, policies, or communications that could be perceived as unlawful preferences or quotas based on race or other protected characteristics, and rank initiatives by potential legal exposure. Document both the practices’ risk profile and organizational value such that the outcome of these audits can provide actionable intelligence helping companies move forward based on risk tolerances in compliance with the law. Conducting these audits under attorney-client privilege minimizes the risk of having to disclose the audit findings in response to litigation, government investigations, or shareholder proposals.
• Strengthen internal investigation protocols to ensure proper and timely investigations. Companies should review and reinforce internal procedures for documenting and escalating internal inclusion and diversity complaints, especially given the potential for False Claims Act exposure. Promptly document, investigate, and adjust practices as warranted in response to internal complaints.

How to Conduct a Workplace Investigation

• Train staff and managers on risk and escalation. Arm teams, including people managers, with guidance on how to respond to employee complaints regarding inclusion and diversity I&D programs, policies, and communications. Ensure leadership understands the legal and reputational stakes and that staff is fully aware of anti-discrimination laws’ prohibition against retaliation.
• Document employment decisions carefully. The memo effectively deputizes employees to scrutinize I&D programs, increasing the risk of claims that certain employment decisions — for example, hiring, firing, and promotions — were allegedly related to employee complaints about unlawful programs. This means employment decisions are likely to be the subject and focus of increased scrutiny and litigation, including False Claims Act actions. Federal contractors and funds recipients should review their procedures for documenting and justifying employment decisions to ensure they are sufficient to identify and support the legitimate business reasons for those decisions, with extra emphasis on demonstrating that particular employment decisions were based on merit — not unlawful consideration of race or other protected characteristics.
• Avoid overcorrecting. Rolling back I&D programs can also invite risks, including traditional discrimination claims, undermining recruitment or retention efforts, or prompting dissatisfaction from employees, customers, and other stakeholders. Organizations should be mindful that their corrective measures remain aligned with their stated corporate goals and values. Evaluate the legal and business implications of scaling back, or removing entirely, initiatives aimed at mitigating bias before doing so.

That said, “DOJ will not be satisfied with window-dressing changes to DEI programs,” noted Kate Driscoll, an attorney with Morrison Foerster in Washington, D.C. She cautioned that “some companies are rebranding their DEI programs without making substantive changes.”

Goodman said federal contractors and recipients should: 

• Review all I&D, hiring, admissions, and promotional practices to ensure they do not create unlawful preferences.
• Ensure certifications of compliance are accurate and reflect entities’ actual policies and practices.
• Prepare for increased whistleblower activity — internal training and response protocols are key.