DOJ Using Fraud Law to Target Companies on DEI

The ⁠Trump administration has started investigations into the use of diversity initiatives in hiring and promotion at major U.S. companies, The Wall Street Journal reported Sunday.

Google and Verizon are among a list of companies that have received Justice Department (DOJ) demands for documents and information ⁠about their workplace programs, the report said, citing people familiar with the probes.

President Donald Trump moved rapidly after taking office in January to eliminate federal DEI programs and discourage them in the private sector and ⁠education.

The civil probes are being carried out under the umbrella of the False Claims Act, which has traditionally been used to go after contractors who bill the government for work that was never performed or inflate the cost of services provided.

Now the DOJ is contending that holding a federal contract while still taking into consideration diversity when hiring is in effect fraud against the government that entitles it to recoup potentially millions of dollars.

In addition to Google and Verizon, companies under scrutiny include firms in the automotive, pharmaceutical, defense, and utilities sectors, and some have met in person with Justice Department officials.

False-claims probes are usually begun after a whistleblower or an internal government watchdog has tipped the DOJ off to alleged fraud.

The DEI investigations, however, have been spurred by politically appointed officials in the department who contend that companies with contracts are not abiding by their obligations to the government if they still embrace DEI programs, according to Journal.

In a May enforcement memo, Deputy Attorney General Todd Blanche ordered the department "to investigate and, as appropriate, pursue claims against any recipient of federal funds" who knowingly engages in preferences that create benefits or burdens based on race, ethnicity, or national origin.

Blanche's memo said the department would be working to penalize private-sector companies with government contracts if they still use DEI policies after Trump issued an executive order to end what he said are discriminatory race- and sex-based preferences in government work.

Blanche said the False Claims Act would be the "weapon" used to pursue corporations and schools that "continue to adhere to racist policies."

Lawyers who practice in the area said it is unusual for the antifraud law to pursue conservative policy objectives.

Companies have been closely re-evaluating their workplace policies in light of the federal government's stance, according to Lisa Dykstra, a partner at Morgan Lewis.

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