On January 31, 2025, President Trump issued Executive Order 14173, entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (“EO”). The stated purpose of the EO “is to ensure that [the federal government enforces civil rights laws] by ending illegal preferences and discrimination.”
Importantly, the EO provides that the head of each federal agency “shall include in every contract or grant award” a provision where the grant recipient agrees “that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions for purposes of [the False Claims Act]” as well as a term requiring the grant recipient “to certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.”
This language is notable in that it makes clear that the government plans to utilize the FCA to investigate and punish federal grant recipients who operate any sort of DEI programs or initiatives. The FCA prohibits knowingly submitting to the government false or fraudulent claims for payment or making a false statement or representation in connection with such a claim.
To violate the FCA, the falsity must be “material” to the government’s payment decision, which means that the government likely would not have paid the claim had it known of the falsity. Presumably, the language of the EO attempts to satisfy this materiality requirement, although wether the FCA’s materiality requirement can be met by issuing an EO is questionable and yet to be litigated. In addition to falsity and materiality, the FCA also requires proof of knowledge, which is defined to include actual knowledge or reckless disregard of the truth.
To investigate potential violations of the FCA, the DOJ is permitted to issue Civil Investigative Demands (CIDs) for documents, interrogatory responses, and testimony. If the government finds a violation, it can bring a civil action under the FCA, which if successful could result in treble (3x) damages and per claim penalties of up to $28,619. Violations of the FCA could also result in significant administrative penalties, including debarment.
All federal grant recipients and federal government contractors should take the mandates of EO 14173 seriously and ensure compliance with all contract and grant terms and conditions. Such entities should also consider whether eliminating DEI programs and initiatives in compliance with the EO would violate state or local anti-discrimination laws.
If you receive a CID or any other communication from the government regarding grant compliance, you should contact an attorney as soon as possible, before you respond.
The attorneys at Chilivis Grubman represent businesses of all types and sizes in connection with False Claims Act investigations and litigation. If you need assistance with such a matter, please contact us