By Sara Mieczkowski and Eddie Suarez / www.suarezlawfirm.com
On December 28, 2025, the Wall Street Journal reported that the Department of Justice has launched investigations into the diversity, equity, and inclusion programs of several major corporations—including Alphabet’s Google and Verizon Communications. The probe represents a dramatic expansion of an enforcement strategy that has been building throughout 2025: using the False Claims Act, a Civil War-era statute designed to combat fraud against the government, to target companies with federal contracts that maintain DEI programs the administration considers unlawful.
The Investigations: What We Know
According to the WSJ report, the DOJ’s Fraud Section has demanded documents and information from Google, Verizon, and companies across multiple industries—including automotive, pharmaceutical, defense, and utilities. Some executives have already met in person with DOJ officials to discuss their workplace programs.
The theory underlying these investigations is that companies holding federal contracts committed fraud by maintaining DEI programs that allegedly violate federal anti-discrimination laws. The administration’s position is that these programs constitute illegal discrimination based on race or sex, and that federal contractors who certify compliance with civil rights laws while operating such programs have submitted false claims for government payment.
What makes these investigations particularly notable is their origin. As the WSJ observed, most FCA cases spring from corporate whistleblowers or federal watchdogs. These probes, by contrast, appear to be driven by politically appointed officials who believe companies with federal contracts aren’t meeting their obligations if they still maintain DEI programs.
The Legal Foundation: Executive Orders and the FCA
The current enforcement posture traces directly to Executive Order 14173, issued on January 21, 2025, titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” This order revoked Executive Order 11246, the foundational 1965 order that had required federal contractors to implement affirmative action programs, and established new compliance requirements.
The executive order contains two provisions with direct FCA implications. First, it requires every federal contract and grant to include a term stating that the recipient’s compliance with federal anti-discrimination laws is “material to the government’s payment decisions” under 31 U.S.C. § 3729(b)(4), the FCA’s materiality provision. Second, it requires contractors and grantees to certify that they “do not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.”
These provisions are significant because they attempt to preemptively establish two elements that are typically contested in FCA litigation: (1) that the certification is material to payment, and (2) that the contractor made a certification. By building these requirements into contracts themselves, the administration has sought to lower the evidentiary burden for FCA enforcement.
The Civil Rights Fraud Initiative
The DOJ formalized its enforcement approach on May 19, 2025, when Deputy Attorney General Todd Blanche announced the Civil Rights Fraud Initiative. According to the DOJ press release, the initiative will use the False Claims Act to “investigate and, as appropriate, pursue claims against any recipient of federal funds that knowingly violates federal civil rights laws.”
The initiative brings together the DOJ’s Civil Fraud Section and Civil Rights Division to identify recipients of federal funds who allegedly fail to uphold their obligations under civil rights laws. Attorney General Pamela Bondi stated that “institutions that take federal money only to allow anti-Semitism and promote divisive DEI policies are putting their access to federal funds at risk.”
Crucially, the DOJ has “strongly encouraged” potential whistleblowers to file qui tam actions under the FCA. This is not mere rhetoric; the qui tam provision allows private individuals to file lawsuits on behalf of the government and receive between 15% and 30% of any recovery. Given the FCA’s treble damages provision and per-claim penalties (currently ranging from $14,308 to $28,619), the financial incentives for relators are substantial.
What This Means for Federal Contractors
The enforcement landscape has shifted significantly. Companies with federal contracts or grants face a novel form of FCA exposure that did not exist twelve months ago. Several practical considerations emerge from these developments.
The new certification requirement creates potential liability every time a contractor submits a claim for payment. If the government later determines that the contractor’s DEI programs violate anti-discrimination laws as the administration interprets them, the contractor may face FCA exposure for each invoice submitted while those programs were in place.
Definitional Uncertainty
A significant challenge for contractors is the absence of clear guidance on what constitutes “illegal DEI.” While DOJ issued guidance in July 2025 listing certain programs considered unlawful, including those that use ostensibly neutral criteria as proxies for race or sex, the boundaries remain unclear. This ambiguity complicates compliance efforts and creates litigation risk.
This definitional uncertainty when coupled with the DOJ’s active encouragement of qui tam actions, means that current and former employees may view DEI-related concerns as potential sources of significant financial recovery. Companies should expect increased scrutiny of their workplace programs from individuals motivated by the prospect of whistleblower awards.
Materiality Questions
The administration’s attempt to pre-establish materiality through contract terms may face judicial skepticism. In Universal Health Services v. United States ex rel. Escobar (2016), the Supreme Court held that materiality is a demanding standard and that not all regulatory violations are material to payment decisions. Whether DEI compliance is genuinely material to the government’s payment decisions for a defense contract or technology services agreement is a question courts have not yet addressed.
Looking Ahead
The application of the False Claims Act to DEI programs represents uncharted legal territory. The FCA has traditionally been used to combat fraud in healthcare billing, defense contracting, and similar contexts where false claims for payment are relatively clear-cut. Whether the statute can effectively be applied to workplace diversity programs and whether courts will accept the administration’s theory of liability remains to be seen.
What is certain is that federal contractors face a new category of compliance risk. The investigations into Google, Verizon, and other major companies signal that the administration is using its significant resources to pursue this enforcement agenda. Companies that receive federal funds should take these developments seriously and assess their exposure before they receive a CID or learn of a qui tam action.
The landscape will continue to evolve as courts weigh in on the underlying legal questions and as the administration refines its enforcement approach. Companies should work closely with counsel to navigate these developments and to develop compliance strategies that address both the current regulatory environment and the ongoing legal uncertainty.
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If you have questions about how these developments may affect your organization, or if you are facing an FCA investigation related to workplace programs, we encourage you to contact experienced counsel to discuss your specific situation.
