December 29, 2025
The False Claims Act (FCA), a 162-year-old statute originally designed to combat fraud by defense contractors during the American Civil War.
The Department of Justice has launched an expansive investigation into the diversity, equity, and inclusion (DEI) programs of several of the nation’s most prominent corporations, signaling a significant escalation in the Trump administration’s efforts to dismantle race-conscious policies in the private sector.
According to a Dec. 29 report by The Wall Street Journal, federal investigators have issued demands for documents and internal information from companies, including Google and Verizon, targeting hiring and promotion initiatives that critics argue may violate federal law.
The probes are being conducted under the False Claims Act (FCA), a 162-year-old statute originally designed to combat fraud by defense contractors during the American Civil War. By utilizing this specific legal mechanism, the administration appears to be testing a theory that companies receiving federal contracts may have defrauded the government by misrepresenting their compliance with neutral hiring standards or by utilizing federal funds to support prohibited diversity quotas.
The investigation is not limited to the tech and telecommunications sectors. According to sources familiar with the inquiry, the Justice Department’s Fraud Section has extended its reach into the automotive, pharmaceutical, defense, and utility industries. Several executives from these sectors have reportedly met in person with DOJ officials in recent weeks to discuss their workplace programs.
Spokespeople for Google, Verizon, and the Department of Justice did not immediately respond to requests for comment.
Using the False Claims Act is a high-stakes tactical shift. Under the statute, any entity found to have “knowingly” submitted false claims to the government can be held liable for triple the damages sustained by the government, plus substantial inflation-linked penalties. Perhaps more critically, the FCA allows for “qui tam” lawsuits, enabling private citizens—often referred to as whistleblowers—to file suits on behalf of the government and share in the financial recovery.
This legal framework allows the relator to receive a share—typically 15% to 30%—of any recovered funds as an incentive for reporting the misconduct. Covering fraud in healthcare, defense contracts, education, and now potentially corporate diversity compliance, these suits serve as a crucial tool to combat government waste and corruption by holding wrongdoers accountable through the eyes of internal insiders.
The move follows a series of executive actions taken by President Donald Trump shortly after his inauguration in January, aimed at purging DEI frameworks from federal agencies. Those efforts have included the termination of diversity officers and the rescinding of grant funding for programs deemed to prioritize identity-based metrics over merit.
Legal experts suggest that by targeting private-sector firms through the lens of government contracting, the administration is seeking to create a de facto ban on DEI initiatives for any company doing business with the United States.
“The administration is clearly signaling that DEI is no longer just a cultural debate, but a financial and legal liability,” said one industry consultant who requested anonymity due to ongoing litigation. “By framing these initiatives as potential fraud against the taxpayer, they are putting every major federal contractor on notice.”
The DOJ remains aggressive in its use of the FCA, having obtained more than $2.9 billion in settlements and judgments related to civil fraud cases in the fiscal year ending Sept. 30, 2024. While the vast majority of those cases have historically involved healthcare and defense spending, the pivot toward workplace diversity represents a novel and potentially lucrative application of the law for the Treasury.
As the investigation continues, legal observers expect a wave of corporate policy shifts as firms weigh the benefits of their diversity initiatives against the risk of multi-million dollar federal penalties and the loss of government contracts.
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