The U.S. Department of Justice is expanding the use of the False Claims Act, a historically financial fraud-focused statute, to investigate corporate diversity, equity, and inclusion (DEI) programs—marking a major development in how the federal government scrutinizes civil rights compliance by its contractors. In late December 2025, the Justice Department launched formal investigations into a number of major corporations, including Google and Verizon, seeking internal documentation to assess whether their DEI policies violated federal laws governing nondiscrimination in federal contracts.
This unprecedented use of the False Claims Act—traditionally employed in cases involving Medicare fraud, military contracting irregularities, and similar financial deceptions—is now being applied to examine whether companies falsely certified their compliance with federal anti-discrimination laws in order to obtain or retain lucrative government contracts. The shift reflects a broader pivot by federal authorities toward enforcing civil rights regulations through economic leverage, using financial statutes to challenge programs once deemed voluntary corporate initiatives.
The affected companies, which span sectors such as technology, telecommunications, automotive, defense, and pharmaceuticals, have reportedly been asked to provide internal records related to hiring practices, promotion criteria, diversity training content, and any statements made to federal agencies about civil rights compliance. Legal analysts say the government is attempting to determine whether these companies misrepresented their adherence to federal contracting rules that require equal employment opportunity, and if such misrepresentations influenced federal agencies in awarding contracts.
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At the center of this enforcement effort is a policy directive issued earlier in 2025 by Deputy Attorney General Todd Blanche. This directive established a Civil Rights Fraud Initiative within the Justice Department’s Civil Division, encouraging prosecutors to use the False Claims Act in cases where recipients of federal funds allegedly violated civil rights laws. The guidance emphasized that contractors and grant recipients who falsely certify compliance with nondiscrimination laws could be held accountable under the FCA, exposing them to significant financial penalties. The statute permits treble damages and per-violation fines, making it a powerful legal tool.
This move comes amid a wider federal rollback of DEI programs across executive agencies. Earlier in 2025, several departments eliminated DEI positions, suspended diversity-focused grant programs, and rescinded internal DEI mandates. These steps signaled a shift in how the federal government defines its role in promoting workplace equity, pivoting from policy encouragement to a stricter interpretation of civil rights statutes. The Justice Department’s use of the FCA to examine private-sector compliance is the latest and most aggressive manifestation of that policy direction.
Critics of the new enforcement approach argue that the application of the False Claims Act to DEI efforts is legally tenuous and potentially chilling for companies seeking to promote inclusive workplaces. Because the FCA is rooted in allegations of fraud against the government, critics contend that its extension into civil rights territory could overreach its intended purpose. They point to the complexity of proving that any statements made about DEI compliance were materially false and directly influenced a federal agency’s contracting decision—both of which are required for an FCA violation to be upheld in court.
Some legal scholars have suggested that the DOJ could face significant legal pushback, especially if companies argue that their DEI programs reflect aspirational goals rather than binding legal promises. Questions also remain about whether federal courts will support the DOJ’s position that violations of civil rights obligations can constitute fraud under the FCA without direct evidence of intent to deceive or financial gain.
Despite these concerns, proponents of the initiative argue that companies benefiting from federal contracts must be held accountable for complying with the laws that govern those agreements. They view the DOJ’s action as a necessary check against what they perceive as politically driven DEI efforts that may sidestep established nondiscrimination rules. Supporters also point to the potential for whistleblowers—often employees with internal knowledge—to bring qui tam lawsuits under the FCA, which allows private citizens to sue on behalf of the government and receive a share of any recovered damages.
As investigations proceed, major corporations are bracing for heightened legal exposure and public scrutiny. For companies like Google and Verizon, federal probes into their internal policies could result in not only reputational risk but also financial consequences if any violations are found. Lawyers advising government contractors are now urging clients to review their compliance procedures, internal DEI materials, and representations made to federal agencies regarding civil rights adherence.
This new wave of enforcement marks a significant evolution in the federal government’s approach to workplace equity. Where previous administrations encouraged DEI efforts as a supplement to legal compliance, the current approach seeks to enforce traditional nondiscrimination standards more narrowly and rigorously, particularly when taxpayer money is involved.
As 2026 begins, the full implications of the Justice Department’s expanded interpretation of the False Claims Act remain to be seen. What is clear, however, is that corporate DEI programs are now under closer legal scrutiny than ever before, with the potential for landmark cases that could redefine the boundaries of civil rights compliance in both the public and private sectors.
