Overview
Executive summary
On May 19, 2025, the US Department of Justice (DOJ) launched the Civil Rights Fraud Initiative, a sweeping enforcement effort targeting recipients of federal funds—particularly institutions of higher education (IHEs)—that allegedly violate federal civil rights laws through unlawful diversity, equity, and inclusion (DEI) programs. Although unlawful diversity, equity, and inclusion (DEI) programs, as outlined by the administration, include policies or initiatives that assign benefits or burdens based on protected characteristics, such as race, ethnicity, or national origin, the full extent to which the administration will go after practices beyond this scope is less clear. This initiative, outlined in the Civil Rights Initiative Memo (CRI Memo), builds on Executive Order 14173 and the Bondi Memo, which direct federal agencies to investigate and penalize DEI practices the administration deems discriminatory.
The DOJ intends to use the False Claims Act (FCA) as its primary enforcement tool. Under the FCA, organizations that knowingly submit false claims or certifications to the federal government may face treble damages and other penalties. The CRI Memo specifically warns that IHEs could be liable if they certify compliance with civil rights laws while maintaining DEI programs that assign benefits or burdens based on race, ethnicity, or national origin.
The initiative also encourages whistleblower (qui tam) lawsuits, significantly increasing exposure for IHEs. Students, parents, and employees may all serve as potential whistleblowers, compounding the risk of litigation and reputational harm.
Legal uncertainties remain. The administration has not clearly defined what constitutes "illegal DEI," and courts have raised First Amendment and due process concerns about the administration's approach. Nonetheless, the DOJ’s aggressive posture means IHEs must act now to mitigate risk.
The Full Read
The Department of Justice (DOJ) has announced a significant step in furthering the Trump administration's efforts to eliminate allegedly unlawful Diversity, Equity, and Inclusion (DEI) policies and programs throughout the United States. On May 19, 2025, Deputy Attorney General Todd Blanche issued a memorandum (the "CRI Memo") establishing a Civil Rights Fraud Initiative (the "Initiative"), which intends to use the False Claims Act (FCA) to "investigate and, as appropriate, pursue FCA claims against any recipient of federal funds that knowingly violates federal civil rights laws."
Lead-Up to the CRI Memo
The CRI Memo was issued in the wake of President Trump's January Executive Order titled "Ending Illegal Discrimination and Restoring Merit-Based Opportunity" (EO No. 14173), which directs the DOJ and other federal agencies to initiate investigations and pursue litigation against private sector DEI programs. (See our prior coverage of Executive Order No. 14173 here and here.) That order requires federal contractors, subcontractors, and grant recipients to certify that they do not "operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws," and that "all applicable Federal anti-discrimination laws are material to the government's payment decisions for purposes of section 3729(b)(4) of title 31, United States Code" (i.e., The FCA). EO No. 14173 further specifies that federal agencies must each identify "up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, state and local bar and medical associations, and institutions of higher education with endowments exceeding $1 billion."
On the heels of E.O. No. 14173, Attorney General Pam Bondi issued a memorandum on February 5, 2025, titled "Ending Illegal DEI and DEIA Discrimination and Preferences" (the "Bondi Memo"). The Bondi Memo directs the DOJ's Civil Rights Division to take measures to enforce federal civil rights laws and to penalize "illegal" DEI policies and programs in the private sector, at government contractors, and in educational institutions receiving federal funding. The Bondi Memo calls for proposals for both criminal and civil investigations into assertedly illegal DEI programs in place at these organizations.
Overview of CRI Memo
Prompted by AG Bondi's February directive, the CRI Memo urges "vigorous enforcement" of the False Claims Act against those accused of violating civil rights laws while receiving federal funding. The FCA, codified at 31 U.S.C. §§ 3729-3733, is a civil enforcement mechanism that prohibits the submission of false claims to the federal government. Parties may also be liable under the statute for causing false submissions or knowingly providing false information material to a government claim. The CRI Memo provides that FCA enforcement actions may be brought against federal contractors and other recipients of federal funding who knowingly violate civil rights laws and falsely certify compliance with such laws, opening them to potential treble damages and other liability risks.
While FCA enforcement has traditionally focused on healthcare and private sector procurement fraud, the CRI Memo notably targets institutions of higher education ("IHEs") for enforcement. It specifies that a university accepting federal funding may violate the FCA if "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 CRI Memo comes amid the Trump administration's increased scrutiny of US universities and DOJ's reported launch of an FCA investigation into whether Harvard defrauded the federal government through its allegedly discriminatory admissions practices. The CRI Memo does not limit the Civil Rights Fraud Initiative to enforcement against IHEs, however. It specifies that the FCA is implicated whenever "federal-funding recipients or contractors certify compliance with civil rights laws while knowingly engaging in racist preferences, mandates, policies, programs, and activities, including through diversity, equity, and inclusion (DEI) programs that assign benefits or burdens on race, ethnicity, or national origin."
The CRI Memo further explains that the Civil Rights Fraud Initiative will be co-led by the DOJ's Civil Division Fraud Section and Civil Rights Division. It instructs each of the 93 United States Attorney’s Offices to identify an Assistant United States Attorney tasked with advancing the initiative’s efforts. It also calls for coordination with DOJ's Criminal Division, which recently issued guidance indicating that procurement fraud will be a priority of the Department’s white-collar crime enforcement policy, and explains that DOJ will establish partnerships with state attorneys general and local law enforcement to further the aims of the initiative.
Lastly, the CRI Memo encourages private parties to bring qui tam actions under the FCA – and to share in the monetary recovery from any successful claims. Specifically, it encourages whistleblowers to bring these claims or to report any knowledge they may have of discrimination by federal funding recipients to federal authorities. While traditional FCA whistleblowers are often a company’s internal employees, the concept of FCA enforcement against IHEs related to their DEI policies and programs raises for IHEs, in particular, the specter of pools of thousands of potential new whistleblowers among their student bodies (and potentially even students' parents), thereby compounding exponentially IHEs' exposure under the FCA.
Questions Arising Out of the CRI Memo
The announcement of the Civil Rights Fraud Initiative and its use of the FCA as its primary enforcement tool raises a host of FCA-related issues that companies and IHEs should familiarize themselves with in order to assess risk and ensure compliance with federal anti-discrimination and civil rights laws and minimize FCA risk.
Express vs. Implied Certification
To prove an FCA violation, the government must prove that a claim or statement to the government was false. Where the alleged violation is based on the subject company's DEI program violating federal anti-discrimination law, the government must prove that either (1) the claim/statement in question included an express certification of compliance with those laws (or with all applicable laws more broadly), or (2) the claim/statement implicitly certified such compliance.
President Trump's EO No. 14173 contains a certification provision that directs agencies to require federal contractors and grant recipients to "certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws." The administration leaves organizations in a tough position to decide whether to file express, anti-DEI certifications or to risk losing federal funding. While some organizations have begun providing such certifications, ambiguity over what constitutes "illegal DEI" could ultimately render some express certifications "false."
But even when the claim does not contain an express false statement or misrepresentation, the government may attempt to prove falsity on the theory of implied certification as well. This would occur when a contractor or recipient knows (or is reckless in not knowing) it is not in compliance with federal civil rights or anti-discrimination laws but fails to disclose that and still submits a claim. Under Universal Health Services, Inc. v. United States ex rel. Escobar, the Supreme Court acknowledged that the implied certification theory has validity, noting that the question turns on "whether the defendant knowingly violated a requirement that the defendant knows is material to the government's payment decision."1 However, after Escobar, an implicit certification theory of liability will be more difficult to prove in the DEI context because the claim needs to make specific representations about the goods or services provided but fails to disclose non-compliance with those legal requirements material to those representations. In many cases, a contractor or grant recipient's compliance with anti-discrimination laws will not be material to the goods or services for which it is receiving federal money.
Scienter and What Is "Illegal DEI"?
Although the administration has provided hints of what it views as "illegal DEI" in the EEOC's guidance and in its letters to law firms,2 it has yet to provide concrete parameters around those views. The CRI Memo arguably puts a finer point on what the DEI practices the Civil Rights Initiative intends to target: those that "assign benefits or burdens on race, ethnicity or national origin." However, it is difficult to reconcile that statement with the view articulated elsewhere in the CRI Memo that the "encourage[ment] [of] antisemitism" and "refus[al] to protect Jewish students" could also give rise to FCA enforcement. Thus, even after the CRI Memo, there is still gray area around what, in the administration's view, constitutes "illegal DEI." Although the race-based assignment of benefits and preferences, even for the purpose of furthering diversity, is likely a clear violation of Title VI after Students for Fair Admissions, Inc. v. Harvard,3 whether other "DEI" measures like affinity groups, mentoring programs that race-based mentorship programs, or implicit bias training violate the federal anti-discrimination laws is at best still an open question. Indeed, several court decisions suggest otherwise. In Honeyfund.com Inc., et al. v. Governor DeSantis, et al.,4 the Eleventh Circuit affirmed a preliminary injunction against the enforcement of Florida's so-called "Stop W.O.K.E. Act," which sought to ban employers from subjecting employees to training sessions or other activities that espouse or promote certain "concepts" related to race, color, sex, or national origin. The court upheld the injunction on First Amendment grounds, finding that the ban amounted to an unconstitutional restriction on content- and viewpoint-based speech.5 Similarly, despite ruling to stay a preliminary injunction issued against EO.14173, a Fourth Circuit panel recently noted that "neither [of Trump's DEI-related orders] ever defines DEI or its component terms” and that any enforcement "beyond the Orders' narrow scope may well raise serious First Amendment and Due Process concerns."6
In addition to First Amendment considerations, it is also unclear whether the failure to protect employees (and, in the case of IHEs, students) from a "racially hostile environment," akin to the CRI Memo’s express concern about the "encourage[ment] [of] antisemitism" and "refus[al] to protect Jewish students," can amount to material non-compliance with the federal anti-discrimination laws.
In Diemert v. City of Seattle,7 a federal district court recently granted Seattle's motion for summary judgment in a lawsuit brought by a former city employee under Title VII that alleged the city's Race and Social Justice Initiative (RSJI) created a racially hostile work environment. The court stated that while RSJI trainings certainly contained statements about race, "exposure to material that discusses race does not by itself create an unlawful hostile-work environment."8 The court also held that such exposure to trainings on concepts that "acknowledge institutionalized racism and implicit bias" should not be equated with "personal attacks" and "cannot reasonably be construed as a threat to [Plaintiff's] safety or well-being or an impediment to his job."9 In the IHE context, a federal judge in New Hampshire recently questioned the scope of what educational programs the administration believes would create "a racially hostile environment."10 In granting a preliminary injunction against the Department of Education's February 2025 "Dear Colleague" letter, the court found that the qualifying conduct for "a racially hostile environment" outlined in the letter was "quite broad" and seemed "to sweep within its scope lessons that require students to analyze or discuss themes of race or those that discuss how race and attitudes toward race have shaped American history."11 The Court ultimately held that the Department's letter was likely "impermissibly vague" in violation of the Due Process Clause and likely targeted speech based on viewpoint in violation of the First Amendment.12
Given this lack of clarity, the government will also be hard-pressed to prove that a contractor/recipient's knowledge that the claim/statement submitted to the government was false. Where ambiguity in the underlying laws or guidance exists as to what constitutes "illegal DEI" programs or policies, courts may view a certification made with a reasonable belief of compliance as insufficient to establish the FCA's knowledge element. The FCA’s knowledge requirement is satisfied on proof of (1) actual knowledge, (2) deliberate ignorance, or (3) reckless disregard of the truth or falsity of the information. Where a company has certified its compliance with federal anti-discrimination laws based on a good-faith belief in such compliance in the face of legal uncertainty, the government will, therefore, be hard-pressed to demonstrate that any certifications it considers false were submitted "knowingly."13
Given the legal uncertainties around what constitutes "illegal DEI" and the legal and factual defenses arising from those uncertainties to disprove both falsity and knowledge, federal contractors, IHEs, and other recipients of federal funds (e.g., pharma and device companies and other healthcare providers participating in federal healthcare programs) would do well to consider engaging outside counsel to conduct a "fresh look" assessment of whether their DEI policies comply with federal anti-discrimination laws (and state anti-discrimination laws as well, see infra), both on paper and in practice. Such an assessment should examine not only whether the organization's DEI policies violate controlling anti-discrimination laws but also whether they would be subjectively viewed by the administration as violative of those laws. Conduct perceived to be violations by the administration, even if ultimately legal, could still expose the organization to the risk of an extended, costly and disruptive government FCA investigation or a relator-only litigation even if the government were to decline to intervene in the relator’s case, and such an assessment of this enforcement risk would allow organizations to assess that risk against the business benefits of engaging in those DEI practices.
Materiality
To prove an FCA violation, the government must also establish that the false record or statement was material to a false or fraudulent claim.14 Notably, EO No. 14173 specifically requires the heads of federal agencies to include in every federal contract or grant a provision requiring the contracting party or grant recipient "to agree that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government's payment decisions for purposes of [31 U.S.C. § 3729(b)(4)]." Even with such provisions in place, however, the government may still encounter challenges in directly linking a broad DEI certification to the specific purpose of a government contract.
In Escobar, the Supreme Court held that the FCA's materiality requirement is a "demanding" and "rigorous" one, and found that materiality "cannot be found where non-compliance is minor or insubstantial."15 It further held that "when evaluating materiality under the False Claims Act, the government's decision to expressly identify a provision as a condition of payment is relevant, but not automatically dispositive."16 The government thus will still face a significant burden in proving the materiality element of the FCA even where the contractor or federal fund recipient has expressly certified the materiality of its compliance certification if it was aware of a university or company's DEI program prior to awarding a contract or grant and nonetheless continued to pay.
Another potential problem the government may encounter when attempting to establish materiality in the DEI context was articulated by Justice Thomas in his recent concurrence in Kousisis, et al. v. United States.17In that concurrence, Thomas noted that a contractor's representations to the government about subcontracting with a disadvantaged business enterprise (DBE) would likely not qualify as material because the DBE provisions were irrelevant to the contracts' "fundamental purpose."18 Further, Thomas pointed out that the imposition of an unconstitutional requirement on a government contractor – there is a race-based procurement preference – may, on its own, fail to establish materiality.19 This same rationale could be applied in this context. That is, the requirement that contractors not engage in First Amendment-protected DEI-related speech as a condition of payment may similarly be considered an unconstitutional requirement that is necessarily immaterial to payment.
First Amendment Defenses
As described above, courts have already begun to raise First Amendment concerns with the Trump administration and others' approach to rooting out what they consider "illegal DEI."” In the employment context, and as evidenced by the Eleventh Circuit's decision regarding Florida's "Stop W.O.K.E. Act," attempts to restrict DEI-related trainings or programs may infringe on organizations' First Amendment rights when the restriction amounts to a ban on content- and viewpoint-based speech. In the IHE context, the New Hampshire federal court's order blocking the Department of Education's "Dear Colleague" letter found that the letter targeted speech based on viewpoint in violation of IHE educators' First Amendment rights, stating that "[a] professor runs afoul of the 2025 Letter if she expresses the view in her teaching that structural racism exists in America, but does not do so if she denies structural racism's existence."20 For religiously affiliated schools whose mission includes racial tolerance and inclusion, requiring the elimination of some DEI programs aimed at furthering that mission could also implicate the protections of the Free Exercise Clause.
In addition to these viewpoint discrimination concerns, FCA enforcement targeting DEI programs and policies in the IHE context may also implicate the unique First Amendment protection afforded IHEs based on the principle of academic freedom. Courts have held that the right to academic freedom under the First Amendment "establish[es] a zone of First Amendment protection for the educational process itself, which, in proper circumstances, must include not only students and teachers but their host institutions as well."21 Harvard's recently filed lawsuit seeks to test this theory in the courts after the Trump administration demanded that the university immediately shutter all DEI-related programs and policies, arguing that "[a] 'funding condition' that seeks to curtail academic freedom can therefore 'result in an unconstitutional burden on First Amendment rights.'"22 IHEs will want to consider defending its DEI policies on academic freedom grounds, and argue that the IHE's allegedly false certification is not material because the compliance that was certified is related to an unconstitutionally imposed requirement.
Coordination with State Attorneys General
The CRI Memo further calls for coordination between DOJ, state attorneys general and local law enforcement. This section of the CRI Memo signals that anti-DEI enforcement may be expanding to local school districts and other entities outside the jurisdictional reach of the federal False Claims Act but subject to state False Claims Act statutes, most of which have their own whistleblower provisions. Organizations should familiarize themselves with their applicable state False Claims Act statutes and ensure that their compliance programs account for any requirements or penalties that may differ from the federal FCA. Given that many state laws require companies to affirmatively implement DEI policies, there will also almost certainly arise circumstances where companies are caught between complying with state law and complying with federal law, and efforts to comply with one’s state law could be evidence negating knowledge as to federal FCA liability (and vice versa).
Criminal Referrals
The CRI Memo's call for coordination with the DOJ's Criminal Division reinforces prior signaling from the Attorney General that the administration will pursue criminal penalties for illegal DEI in tandem with civil enforcement under the FCA. To that end, in a March 12, 2025 memorandum, DOJ's Criminal Division identified procurement fraud as a top priority for its white-collar enforcement initiatives. Organizations should understand that civil FCA investigations can quickly lead to criminal prosecutions, especially if internal communications or practices demonstrate an intent to defraud the federal government. In the context of DEI, evidence of internal discussions showing an intent to mask race-conscious practices as race-neutral, a practice this administration believes is widespread among IHEs, may be enough to spark a criminal referral. The threat of criminal liability (and the potential collateral consequence of debarment/exclusion) reinforces the importance of the need for contractors' DEI-related programs to comply with federal anti-discrimination laws, both on paper and in practice.
Takeaways
Federal contractors and IHEs receiving federal funds should ultimately make their own decisions related to DEI programs and policies based on their business needs, overall mission and institutional moral compass, but given the now heightened risks associated with DEI programs, contractors should conduct privileged audits of their DEI practices and stay informed regarding the shifting legal landscape of the False Claims Act to o protect organizations' interests and avoid costly disputes. This is particularly true in the IHE context, where whistleblowers can emerge not only from the workforce but from the student body as well, and IHEs should consider extending their current employee whistleblower policies (with appropriate tailoring) to their handling of student whistleblowers. In all events, all organizations receiving federal funding should weigh the benefits of their DEI initiatives against these increasing investigation and litigation risks.
Checklist of critical actions for Federal contractors and IHEs
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Conduct a Legal Risk Assessment
Engage outside counsel to review DEI policies and practices for compliance with federal and state anti-discrimination laws. This includes evaluating whether any programs could be perceived as assigning benefits based on protected characteristics. - Review Federal Certifications
Examine all certifications made in connection with federal funding to ensure they are accurate and not vulnerable to FCA claims, whether express or implied. - Strengthen Whistleblower Protocols
Update internal reporting mechanisms to include protections for student whistleblowers. Ensure policies are clear, accessible, and compliant with both federal and state whistleblower laws. - Monitor Legal and Regulatory Developments
Stay informed about evolving DOJ guidance, court rulings, and state-level enforcement trends. This includes tracking litigation related to DEI, academic freedom, and First Amendment protections. - Evaluate Insurance Coverage for FCA Investigations
Government contractors and grantees should review liability insurance policies to assess whether investigations into Title VI or Title VII violations, typically covered under these policies, might now fall under exclusions for FCA-related investigations. Recent trends show increased coordination between the DOJ's Civil Division (which enforces the FCA) and agencies like the EEOC, DOJ's Civil Rights Division, and the Department of Education—even in cases not initiated by FCA whistleblowers. This expanded scrutiny highlights the importance of ensuring insurance coverage aligns with potential risks. - Balance Compliance with Institutional Mission
Evaluate the strategic value of DEI initiatives in light of legal risk. Institutions should weigh the benefits of these programs against the potential for costly investigations or litigation. - Prepare for Multi-Agency Scrutiny
Recognize that DOJ coordination with state attorneys general and local law enforcement may expand enforcement beyond federal jurisdiction. Understand how state False Claims Acts may apply. - Document Good-Faith Compliance Efforts
Maintain records of legal reviews, training, and policy updates to demonstrate a proactive approach to compliance.
Nathan Nelson, a Steptoe summer associate, also contributed to this article.
1 See Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U.S. 176 (2016).
2 See U.S. Equal Emp. Opportunity Comm'n, Technical Assistance Document on What You Should Know About DEI-Related Discrimination at Work (2025); see Madeleine Ngo, Trump Administration Questions Law Firms over D.E.I. Employment Practices, The New York Times (Mar. 17, 2025), https://www.nytimes.com/2025/03/17/us/politics/trump-dei-perkins-coie-law-firms.html.
3 Students for Fair Admissions, Inc. v. Harvard, 600 U.S. 181 (2023).
4 Honeyfund.com Inc., et al. v. Governor DiSantis, et al., 94 F.4th 1272, 1283 (11th Cir. 2024) ("[B]y barring only speech that endorses any of those ideas, [the Act] penalizes certain viewpoints—the greatest First Amendment sin.").
5 See id. at 1280–83.
6 National Association of Diversity Officers in Higher Education, et al. v. Trump, No. 25-1189 (4th Cir. 2025) (order staying preliminary injunction).
7 See Diemert v. City of Seattle, No. 2:22-cv-1640, 2025 WL 446753, at *1 (W.D. Wash. Feb. 10, 2025) (order granting defendant's motion for summary judgment).
8 Id. at *10.
9 Id.
10 See National Education Association, et al. v. Department of Education, et al., No. 1:25-cv-00091, 2025 WL 1188160, at *1, *21 (D.N.H. Apr. 24, 2025) (order granting preliminary injunction).
11 Id.
12 Id. at *18, *24.
13 See Farmer v. City of Houston, 523 F.3d 333, 342 (5th Cir. 2008) (finding that "“the jury would necessarily assess how obvious it should have been to defendants that they were violating the regulations: the more obvious the violation, the more rational the inference that defendants were acting knowingly. Here, however, the violation is not obvious at all … [t]he presence of this ambiguity makes it less likely that the jury would conclude that a violation—if, indeed, there was one—of the provision means that defendants acted with reckless disregard for the truth…"); see also U.S. ex rel. Phalp v. Lincare Holdings, Inc., 857 F.3d 1148, 1155 (11th Cir. 2017) ("… a court must determine whether the defendant actually knew or should have known that its conduct violated a regulation in light of any ambiguity at the time of the alleged violation.") (internal citations omitted); United States v. Science Applications Intern. Corp., 626 F.3d 1257, 1275 (D.C. Cir. 2010) ("Congress clearly had no intention to turn the FCA, a law designed to punish and deter fraud, into a vehicle for either 'punish[ing] honest mistakes or incorrect claims submitted through mere negligence' or imposing 'a burdensome obligation’ on government contractors rather than a 'limited duty to inquire.'") (internal citations omitted); see also U.S. ex rel. Gugenheim v. Meridian Senior Living, LLC, 36 F.4th 173, 179 (4th Cir. 2022) (holding that the FCA does not punish honest mistakes or incorrect claims submitted through mere negligence).
14 See 31 U.S.C. § 3729(a)(1)(B).
15 Id. at 192, 194.
16 Id. at 194 (emphasis added).
17 See Kousisis, et al. v. United States, No. 23—909, slip op. (U.S. May 22, 2025) (Thomas, J., concurring).
18 Id. at 6 (suggesting that DBE provisions in contracts were irrelevant to the fundamental purpose, bridge repair, and were thus "minor or insubstantial" conditions that cannot count as material).
19 Id. at 8.
20 See National Education Association, et al., 2025 WL 1188160, at *24.
21 Asociacion de Educacion Privada de P.R., Inc. v. Garcia-Padilla, 490 F.3d 1, 8 (1st Cir. 2007) (internal citations omitted).
22 Compl., President and Fellows of Harvard College v. US Department of Health and Human Services, 1:25-cv-11048, (D. Mass. Apr. 21, 2025) (citing Agency for Int'l Dev. v. All. for Open Soc’y Int’l, Inc. ("AID"), 570 U.S. 205, 214 (2013)).
