On December 28, 2025, media outlets, including the Wall Street Journal, reported that the Department of Justice (DOJ) had begun investigating large private sector entities for their diversity, equity, and inclusion (DEI) practices. Companies, including Alphabet’s Google and Verizon Communications, have reportedly received civil investigative demands (CIDs) from DOJ relating to DEI practices. To further its policy objectives, the administration has turned to an old tool — the False Claims Act (FCA) — in a novel application.

What Changed — and Why It Matters

Immediately after his inauguration on January 20, 2025, President Trump issued Executive Order (EO) 14148 terminating a slew of DEI executive orders from the Biden administration. The same day, he also issued EO 14151 terminating all DEI “mandates, policies, programs, preferences, and activities in the Federal Government[.]”

The next day, President Trump extended this policy goal from the federal government to the private sector, issuing EO 14173. That order required that “[t]he head of each agency shall include in every contract or grant award . . . [a] term requiring such counterparty or recipient to certify that it does not operate any programs promoting DEI[.]” It also directed the attorney general to “take all appropriate action” to end DEI “in the private sector[.]” 

Following these orders, the government has aggressively pursued DEI investigations and enforcement actions. Until now, the government’s DEI enforcement actions were civil rights actions—not FCA cases—focused almost exclusively on educational institutions and state and local governments. From the DOJ:

• Attorney General Pamela Bondi Intervenes in Lawsuit Against Illinois for Unlawfully Requiring Nonprofits to Publicly Post Race Based Data, March 4, 2025
• Attorney General Pamela Bondi Launches Compliance Review Investigation into Admissions Policies at Stanford University and Several University of California Schools, Advancing President Trump’s Mandate to End Illegal DEI Policies, March 27, 2025
• Unlawful Illinois DEI Scholarship Program Suspended After Justice Department Threatened Lawsuit, April 11, 2025
• U.S. Department of Justice Announces Civil Rights Investigation into the Consideration of Race in Prosecutorial Decision making by Minnesota’s Hennepin County, May 5, 2025
• Justice Department Opens Investigation into the State of Minnesota for Race- and Sex-Based Hiring Practices, July 10, 2025
• Justice Department Investigates Austin, Texas for Racially Discriminatory Employment Practices, September 18, 2025
• Justice Department Opens Investigation into Des Moines Public Schools for Race-Based Employment Practices, September 30, 2025
• The Justice Department Announces Agreement with University of Virginia, October 22, 2025
• The United States Announces Agreement with Cornell University, November 7, 2025
• Justice Department Sues Minneapolis Public Schools for Racial Discrimination Against Teachers, December 10, 2025
• United States Department of Justice Files Lawsuit Against Minnesota’s ‘Affirmative Action’ Regime, January 14, 2026

Practical Exposure for Companies

If press reports are true, an investigation into a private sector powerhouse like Google signals the administration’s intent to escalate its already aggressive use of enforcement tools to address its DEI priorities. This proliferation of DEI enforcement will likely impact industries beyond those who typically face FCA investigations. While the Wall Street Journal was unable to obtain a full list of companies under investigation for DEI practices, it noted that, according to sources familiar with the investigations, the targets include “industries ranging from automotive and pharmaceuticals to defense and utilities[.]” The article seems to suggest that targets, including Google and Verizon, receive federal funds through government contracts. Ostensibly, these contracts contain certifications from EO 14173, or similar language, where the companies stipulated that they were not engaged in activities or programs promoting DEI. That order directed the same language to be included in federal grant applications. Any company who receives federal funds subject to these certifications has potential exposure if the government believes it still considers diversity when hiring. 

While this novel theory that it would be fraudulent to maintain DEI practices while receiving government funds remains untested in court, companies face real exposure. Complying with a CID is costly, time intensive, and can cause significant business disruption. These costs, coupled with the specter of treble damages under the FCA, may act as a significant deterrent for entities receiving government funds, causing them to change or abandon DEI initiatives.

There may be viable legal routes to challenge this new application of the FCA, namely whether the DEI certifications from EO 14173 are material to a government contract or grant application. Mere noncompliance with a certification is not enough to trigger FCA liability. In order to meet the materiality requirements of the FCA, noncompliance with a contractual term must be “so central to” the purpose of the government contract that the government “would not have paid the [ ] claims had it known of the[ ] violations” (Universal Health Servs., Inc. v. United States, ex rel. Escobar, 579 U.S. 176, 196 (2016)). While the administration has clearly made elimination of DEI a priority, it is less clear if failure to comply with DEI certifications is “central” to a government technology or telecommunications contract. Similarly, the administration’s executive orders describe DEI generically, as considering “race, color, sex, sexual preference, religion, or national origin” in hiring practices. This could open the door to additional defenses, such as whether a particular company practice actually qualifies as “programs promoting DEI” within the meaning of a EO 14173 certification. Companies could argue that their programs were not in fact promoting DEI, attacking the FCA’s falsity element. They could similarly argue that, due to the lack of guidance on what specific DEI practices are prohibited, the company did not have the requisite scienter, the knowledge element of the FCA. Finally, under the Supreme Court’s SuperValu opinion, good faith belief that a company’s program complies with the strictures of the executive order and related guidance may nullify the scienter requisite for an FCA violation. Nonetheless, by issuing CIDs, DOJ is warning the private sector that eliminating DEI remains an administration priority, with the government continuing to use the FCA as an important tool to advance its objectives.

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