In the wake of President Trump’s “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” Executive Order (the “Executive Order”) (discussed further here), many companies are in the process of revisiting their existing diversity, equity, and inclusion (“DEI”) programs and initiatives to reconfirm their legal viability. Close examination of the Executive Order reveals that the Administration hopes to rely on the False Claims Act (“FCA”) as another statutory weapon aimed at eliminating what it perceives as a scourge of “illegal,” “demean[ing],” and “immoral” DEI programs. The False Claims Act, 31 U.S.C. §3729, is a whistleblower statute intended to prevent companies from defrauding the government. Its inclusion in the Executive Order opens federal contractors and federal grant recipients to the possibility of substantial criminal and/or civil liability where they operate DEI programs deemed to violate the law. We discuss the FCA and its impact under the Executive Order more below.
The False Claims Act
The FCA serves as the primary mechanism by which the federal government combats fraud in government programs, imposing potential substantial penalties where companies materially fail to comply with statutory, regulatory, or contractual requirements or otherwise knowingly submit false claims for payment. Like all fraud claims, the requirements to allege an FCA claim are subject to heightened pleading standards, but because of the lengthy statute of limitations...
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