Date: May 21, 2025
On May 19, Deputy U.S. Attorney General Todd Blanche issued a memo establishing the Civil Rights Fraud Initiative, which will use the False Claims Act to "aggressively pursue" civil rights-related claims. Law360 spoke with TELG's Scott Oswald and other attorneys on the impact the initiative may have on companies with DEI policies — including universities, which are explicitly listed as potential targets — and on other stronger FCA claims that may get shunted to the side as the Department of Justice is spread thinner.
Quoteworthy:
"The Blanche memo is based on a theory of law that I don't find very convincing, but we evaluate every case individually. I look for cases where the harm to taxpayers is plain — where healthcare providers are ripping off Medicare, for instance, or where defense contractors aren't delivering to our armed forces. That is the true heart of the False Claims Act."
R. Scott Oswald
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[EXCERPT]
False Claims Act Gives Trump ‘Sledgehammer’ To Battle DEI
The U.S. Department of Justice’s vow to invoke the False Claims Act to police alleged civil rights violations tees up a powerful weapon for the Trump administration to wield against contractors and federal grantees with diversity, equity and inclusion programs it claims are discriminatory, experts say.
Deputy U.S. Attorney General Todd Blanche issued a two-page memo on May 19 establishing the “Civil Rights Fraud Initiative,” described as a collaborative effort among federal prosecutors to use the False Claims Act to investigate and “aggressively pursue” civil rights-related claims. Colleges and universities were explicitly referenced as potential enforcement targets, but the DOJ in its memo said the initiative will pursue FCA allegations against “any recipient of federal funds that knowingly violates federal civil rights laws.”
[…]
“The FCA is an extraordinarily powerful statute because of its remedies: treble damages plus penalties that can be enormous,” said R. Scott Oswald, managing principal of The Employment Law Group PC. “Defendants who try to fight a meritorious FCA case are taking a huge risk — sometimes an existential risk — and that’s why so many of these cases settle. If you’re going to weaponize the DOJ, a sledgehammer is a great weapon.”
[…]
Oswald, who is a former chair of the Federal Bar Association’s qui tam section, said there will “absolutely” be more qui tam cases asserting civil rights fraud since “anytime the DOJ says it ‘strongly encourages’ a certain type of whistleblower action, that type of action will surge.”
“Because of the FCA’s unique structure, the DOJ’s support is a crucial factor in getting a monetary recovery for taxpayers — and for the whistle-blower,” Oswald said. “If the DOJ will stand behind these cases, whistleblowers will emerge.”
While Oswald believes the legal theory laid out in the DOJ memo is questionable, his firm represents whistleblowers “who identify knowing efforts to defraud U.S. taxpayers,” and he said those claiming to have identified civil rights fraud will be given due consideration.
[…]
Oswald similarly said the Justice Department “is spread thin” and “many FCA actions already take years to investigate and move toward resolution.”
“The meetings alone will be a big distraction, and the requirement to ‘aggressively pursue’ the initiative likely means that they’ll try for a few quick wins,” Oswald said. “Meanwhile my firm’s whistleblower clients, who have identified real losses for taxpayers, may get less attention, even though their cases have more merit. It’s early days, but simple math says that we’ll see slower investigations, fewer interventions, and more dismissals. That’s bad for the U.S. Treasury.”
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