Colleges and universities face threat of losing federal funds
The U.S. Department of Justice (DOJ) is raising the stakes with a broad new initiative targeting what it calls “illegal DEI.” In a May 19, 2025 internal memorandum, Deputy Attorney General Todd Blanche outlines a Civil Rights Fraud Initiative to vigorously enforce the False Claims Act (FCA) against those who accept federal funds while violating civil rights laws.
The FCA provides for the imposition of treble damages and significant penalties for individuals and businesses found to have knowingly submitted false claims to the federal government. Defrauding the government can also lead to criminal exposure, including fines and imprisonment.
Federal Funding at Risk for Colleges in DEI Crackdown
Although the scope of those subject to the FCA includes all federal contractors, DOJ initially appears to be targeting colleges and universities:
“…a university that accepts federal funds could violate the False Claims Act when it encourages antisemitism, refuses to protect Jewish students, allows men to intrude into women's bathrooms, or requires women to compete against men in athletic competitions. Colleges and universities cannot accept federal funds while discriminating against their students.”
For most schools, the loss of federal funds, including the ability of students to qualify for federal financial aid, is a death knell.
DOJ declares that: “The False Claims Act is also implicated whenever federal-funding recipients or contractors certify compliance with civil rights laws while knowingly engaging in racist preferences, mandates, policies, programs, and activities, including through diversity, equity, and inclusion (DEI) programs that assign benefits or burdens on race, ethnicity, or national origin….”
DOJ also will be targeting any recipient of federal funds, including businesses which “continue to adhere to racist policies and preferences - albeit camouflaged with cosmetic changes that disguise their discriminatory nature.”
Multi-Agency Push Amplifies DOJ DEI Crackdown
The broad initiative involves DOJ’s criminal, civil fraud and civil rights divisions along with the Department of Education, the Department of Health and Human Services, the Department of Housing and Urban Development, and the Department of Labor.
Each United States Attorney’s Office is required to appoint an Assistant United States Attorney to be responsible for prosecuting cases. DOJ also will coordinate with some state attorneys general.
DOJ Invites Whistleblowers to Join DEI Enforcement
Private parties, known as relators, are permitted to file lawsuits and litigate claims under the FCA’s Qui Tam provisions. Successful lawsuits permit plaintiffs to share in any governmental recovery. The memo “strongly encourages” private parties to file FCA lawsuits and to report discrimination by federal-funding recipients to appropriate authorities so that the DOJ may investigate.
Federal Contracts Now Require DEI Law Certification
This initiative flows from Executive Order 14173 which requires each agency of the government to include two terms in every contract or grant award: one requiring a recipient “to certify that it does not operate any programs promoting DEI that violate any applicable Federal antidiscrimination laws,” and another requiring it to agree that compliance with those laws “is material to the government’s payment decisions for purposes of” the FCA.
While several lawsuits have challenged these requirements, the litigation landscape changes almost daily.
The Takeaway
It would be prudent for colleges and universities and all federal contractors and grant recipients to contact legal counsel and review DEI policies and practices to minimize risk and, if necessary, to establish that they acted in good faith. Importantly, this should take place before any certifications are signed.
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