False Claims Act and Procurement Fraud Archives - Government Contracts Navigator

E‑Verify, FAR 52.222‑54, and Renewed FCA Risk: What Contractors Need to Know

Jennifer A. Short, and Oliver E. Jury ●

The current administration’s focus on immigration played out in a recent False Claims Act (“FCA”) matter in which a federal contractor was alleged to have billed for unauthorized workers in violation of FAR 52.222‑54 (Employment Eligibility Verification, “E-Verify”).

On September 18, 2025, the Department of Justice (“DOJ”) announced that Bayonne Drydock and Repair Corporation (“Bayonne”) agreed to pay $4,043,810.56 to resolve allegations that unauthorized workers worked on Bayonne’s Navy contracts over multiple years.

According to DOJ’s press release, in 2016, the Department of Homeland Security (“DHS”) sent a “Notice of Suspect Documents” to a subcontractor controlled by Bayonne’s Risk Manager, questioning the work authorization of certain subcontractor employees. While the Risk Manager terminated the unauthorized employees, she re-hired some of them through another subcontractor that she controlled. Bayonne’s settlement agreement with DOJ asserts that between 2016 and 2020, Bayonne billed the government for the work of approximately 52 unauthorized employees working for entities owned or controlled by Bayonne’s Risk Manager. The settlement agreement also confirmed that the Risk Manager pled guilty to criminal charges stemming from her role with Bayonne and its subcontractors.

DOJ Issues July 2025 Guidance on Unlawful Discrimination: Navigating Diversity, Equity, and Inclusion in a New Legal Landscape

Dominique L. Casimir, Brooke T. Iley, and Jennifer A. Short ●

From the outset of his current term in office, President Trump has made it a signature policy objective to target and dismantle diversity, equity, and inclusion (“DEI”) and so-called “gender ideology” in both the public and the private sectors. Blank Rome has covered these policy initiatives extensively, along with the various lawsuits challenging them. In the courts and elsewhere, the government has been questioned about what the phrase “illegal DEI” actually means.

Perhaps in response to those queries, on July 29, 2025, the Department of Justice (“DOJ”) issued a memorandum titled “Guidance for Recipients of Federal Funding.” The memo’s stated objective is to offer “non-binding suggestions to help entities comply with federal antidiscrimination laws and avoid legal pitfalls,” thereby aiming to “minimize the risk of violations.”

This memo provides the most comprehensive insight about DOJ’s perspective on DEI and gender ideology practices to date, and thus serves as a valuable resource for recipients of federal funding as they review their current policies. Private employers, too, may find the memo a useful framework to evaluate potential risks associated with DEI initiatives and to discern what actions the Administration considers to violate civil rights laws. That said, the DOJ memo does not address certain practical questions that entities will face in trying to adhere to its guidance. Below, we summarize the memo and provide our analysis of its most significant aspects for federally funded entities and companies.

Read the full client alert on our website.

This alert was published in The Government Contractor, Volume 67 Issue 30, on August 13, 2025.

Beyond the Balance Sheet: The Continued Importance of Cybersecurity in M&A

Merle M. DeLancey Jr., Samarth Barot, and Michael Joseph Montalbano ●

In our August 1 post, we discussed how companies that acquire government contractors can inherit the False Claims Act (“FCA”) exposure based on their targets’ cybersecurity violations. Now, the Department of Justice (“DOJ”) delivered another vivid real-world example: a $1.75 million settlement in which a private equity (“PE”) firm, Gallant Capital Partners LLC, was named jointly and severally liable for its portfolio company’s cybersecurity violations on a U.S. Air Force contract.

The outcome underscores two critical truths. First, DOJ will pursue financial sponsors when a contractor in their portfolio fails to comply with its contractual cybersecurity requirements. Second, investors that fail to ask about, document, and remediate a target’s security shortcomings can find themselves financing both the acquisition and the government’s recovery.

Buyer Beware: Cybersecurity Compliance in M&A

Merle M. DeLancey Jr. and Samarth Barot ●

A recent Department of Justice (“DOJ”) settlement highlights the importance of assessing cybersecurity compliance for government contractors during mergers and acquisitions (“M&A”). In April 2025, DOJ announced an $8.4 million settlement with a defense contractor resolving alleged cybersecurity noncompliance by a company it acquired. Notably, under the settlement, the acquiring company was liable for cybersecurity noncompliance that occurred prior to the acquisition.

In the M&A context, successor liability arises when an acquiring company becomes responsible for liabilities, obligations, or wrongful acts committed by the company to be acquired prior to the acquisition. Fundamentally, successor liability ensures that a corporate acquisition does not allow the acquired entity to escape accountability. In the settlement, DOJ explicitly named the acquiring company as the “successor in liability” for the acquired company’s alleged violations, even though the conduct at issue occurred years before the acquisition. This underscores the importance for acquirers to add cybersecurity compliance to the issues vetted during due diligence.

Department of Justice Announces New Initiative to Combat Civil Rights Fraud Using the False Claims Act

Dominique L. Casimir, Jennifer A. Short, and Brooke T. Iley ●

From time to time, the Department of Justice (“DOJ”) has established initiatives, task forces, or strike teams to advance its enforcement priorities. In recent years, DOJ has announced a Procurement Collusion Strike Force, a COVID-19 Fraud Enforcement Task Force, and a Civil Cyber-Fraud Initiative, in each instance explicitly invoking a plan to use the False Claims Act (“FCA”) for civil enforcement.

DOJ announced the latest version of this enforcement approach on May 19, 2025, when Deputy Attorney General Todd Blanche issued a memorandum announcing a new Civil Rights Fraud Initiative (“the Initiative”), described as a coordinated and “vigorous” effort to leverage the specter of FCA liability against recipients of federal funding alleged to be violating civil rights laws. The types of alleged civil rights violations targeted by this Initiative relate to diversity, equity, and inclusion (“DEI”) programs, antisemitism, and transgender policy, all of which dovetail with a number of Executive Orders (“EOs”) expressing President Trump’s approach to these issues.

Relevant Executive Orders

Some of the EOs relevant to the Civil Rights Fraud Initiative include:

EO No. 14151: Ending Radical and Wasteful Government DEI Programs and Preferencing (January 20, 2025). This EO directs federal government agencies to end DEI and diversity, equity, inclusion, and accessibility (“DEIA”) programs, to eliminate positions such as “Chief Diversity Officer,” and to terminate grants and contracts related to DEI and DEIA. It also orders a review of federal employment practices to ensure they focus on individual merit rather than DEI factors.

EO No. 14168: Defending Women From Gender Ideology Extremism and Restoring Biological Truth to the Federal Government (January 20, 2025). This EO declares, as United States’ policy, that there are two immutable sexes (male and female), based on biological reality. It requires changes to government-issued identification documents and prohibits federal funding for so-called “gender ideology.”

EO No. 14173: Ending Illegal Discrimination and Restoring Merit-Based Opportunity (January 21, 2025). This EO requires that all federal contracts and grants include a certification that recipients do not operate any DEI programs that violate applicable antidiscrimination laws and affirms that compliance with federal anti-discrimination laws is material to government payment decisions. Additionally, the EO directs DOJ to identify key sectors and entities for DEI-related enforcement, and to recommend strategies to end “illegal DEI discrimination” in the private sector.

EO No. 14188: Additional Measures To Combat Anti-Semitism (January 29, 2025). This EO reaffirms EO 13899 from December 11, 2019, which aimed to combat antisemitism, particularly in educational institutions. It directs various federal agencies to identify actions to curb antisemitism and recommends monitoring foreign students and staff for antisemitic actions.

EO No. 14201: Keeping Men Out of Women’s Sports (February 5, 2025). This EO aims to exclude transgender individuals from competing in women’s sports. It directs the Secretary of Education to rescind funding from educational institutions that do not comply.

Read the full client alert on our website.

An Update on the DEI Certification Provision of Executive Order 14173

Dominique L. Casimir ●

On May 2, 2025, the United States District Court for the District of Columbia denied Plaintiffs’ Motion for a Preliminary Injunction in National Urban League et al. v. Trump, et al., 25-471, a case that seeks to halt enforcement of President Trump’s executive orders (“EOs”) related to diversity, equity, and inclusion (“DEI”), EO 14151 and EO 14173, as well as EO 14168, regarding so-called “Gender Ideology.” At this point two tribunals have ruled that the DEI-related EOs should not be enjoined pending legal challenges. (The other tribunal to take this position is the U.S. Court of Appeals for the Fourth Circuit which stayed a nationwide preliminary injunction of the DEI-related EOs issued by the District Court of Maryland.)

Government contractors are particularly interested in the DEI Certification provision in Section 3(b)(iv)(A) and (B) of EO 14173, which requires each agency of the government to include two terms in every contract or grant award: one requiring the counterparty “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 False Claims Act (“FCA”), 31 U.S.C. § 3729(b)(4). (We have previously done a deep dive on FCA liability premised on DEI programs.)

The Government Contractor: False Claims Act Liability Based On A DEI Program? Let’s Think It Through

Dominique L. Casimir, Jennifer A. Short, and Robyn N. Burrows ●

One of the more attention-grabbing aspects of Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” is the specter of False Claims Act liability for federal contractors based on their Diversity, Equity, and Inclusion (DEI) programs. Many workplace DEI programs have been viewed as a complement to federal anti-discrimination law—a tool for reducing the risk of discrimination lawsuits. The new administration, however, views DEI programs as a potential source of discrimination. EO 14173 proclaims that “critical and influential institutions of American society … have adopted and actively use dangerous, demeaning, and immoral race- and sex-based preferences under the guise of so-called ‘diversity, equity, and inclusion’ (DEI) or ‘diversity, equity, inclusion, and accessibility’ (DEIA) that can violate the civil- rights laws of this Nation.” To counteract this potential “illegal” use of DEI programs, the Trump administration is leveraging the FCA, a powerful anti-fraud statute, to enforce its policy within the Federal Government contractor community.

We discuss below the framework of the FCA, how it might apply to federal contractor DEI programs under the administration’s orders, and potential hurdles the Government may face in pursuing FCA claims based on a contractor’s allegedly illegal DEI program. We recommend steps contractors can take to mitigate potential FCA risks when evaluating their own DEI programs.

To read the full article, please click here.

“False Claims Act Liability Based On A DEI Program? Let’s Think It Through,” by Dominique Casimir, Jennifer Short, and Robyn Burrows was published in The Government Contractor, Volume 67 Issue 10, on March 12, 2025.

This article originally appeared as a Blank Rome LLP alert.

Preliminary Injunction Granted Related to DEI-Related Executive Orders—Takeaways for Government Contractors

Dominique L. Casimir ●

In the four weeks since President Trump issued Executive Order (“EO”) 14151 (“Ending Radical and Wasteful Government DEI Programs and Preferencing”) and EO 14173 (“Ending Illegal Discrimination and Restoring Merit-Based Opportunity”), virtually all sectors of American society have been scrambling to understand their compliance obligations and seeking to reduce legal risk. Businesses have taken a range of approaches, from preparing to defend their diversity, equity, and inclusion (“DEI”) commitments to removing public-facing references to DEI. Some government contractors have received DEI-related certifications required by EO 14173, which implicate enforcement under the False Claims Act (“FCA”).

In a significant new development, on February 21, 2025, the United States District Court for the District of Maryland issued a nationwide preliminary injunction against both EO 14151 and EO 14173. Here’s what federal contractors need to know.

Time for Compliance with DOD’s Cybersecurity Regulations is NOW

Michael Joseph Montalbano and Samarth Barot ●

On February 19, 2024, the Department of Justice (“DOJ”) notified the U.S. District Court for the Northern District of Georgia that it would intervene in a False Claims Act (“FCA”) case filed against Georgia Tech Research Corporation and Georgia Institute of Technology (collectively “Georgia Tech”) for not complying with the requirements of DFARS 252.204-7012 and National Institute of Standards and Technology Special Publication 800-171 (“NIST 800-171”).

All Department of Defense (“DOD”) solicitations and contracts contain DFARS clause 252.204-7012. DFARS 252.204-7012 requires a contractor to assess its compliance with 110 cybersecurity controls set out in the NIST 800-171 if the Company has controlled unclassified information. Specifically, pursuant to DFARS 252.204-7012, contractors must implement all of the NIST 800-171 requirements and upload the results of that assessment to the Department of Defense’s Supplier Performance Risk System (“SPRS”), or have a plan of action and milestones in place for any requirement the contractor has not yet implemented.

OMB Issues Guidance on Application of Section 889 to Federal Assistance Recipients—and Confirms No Part B “Use” Prohibition

Robyn N. Burrows ●

On April 22, 2024, the Office of Management and Budget (“OMB”) issued final guidance regarding the application of the Section 889 telecommunications ban to federal grants, loans, and cooperative agreements under 2 C.F.R. § 200.216. As a quick recap, Part A of Section 889 prohibits contractors from providing the federal government covered telecommunications equipment and services from certain Chinese manufacturers, whereas Part B prohibits contractors from using covered equipment and services. Section 889 also applies to grant, loan, and cooperative agreement recipients and subrecipients through 2 C.F.R. § 200.216, with certain differences. Most notably, OMB recently clarified that the Part B “use” prohibition does not apply to recipients and subrecipients, meaning they may use covered telecommunications equipment and services as long as they are not purchased with federal funds.

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