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April 27, 2026 | Article

Jonathan Kotlier, chair of Nutter’s White Collar Defense practice group, Kelly Begg Lawrence, and Bryan Connor, a partner and an associate, respectively, in Nutter’s Litigation Department, authored an article on the first resolved False Claims Act (FCA) enforcement action under the U.S. Department of Justice's (DOJ) Civil Rights Fraud Initiative in Law360. In the article, “What We Did And Didn't Learn From DOJ's 1st Illegal DEI Deal,” the trio discussed how the settlement tells us something important about where the DOJ is on its FCA enforcement journey now, but tells us considerably less about where the DOJ is going next.

While the settlement is a significant waypoint, “it would be a mistake to read this initial out-of-court settlement as a sign that the government's enforcement ambitions are so limited,” the authors noted. “The reality of expanded enforcement could have significant practical and legal consequences. For example, acceptance of the proxy theory would reach employers that restructured their DEI programs after January 2025, but retained selection criteria that correlate with protected characteristics. This would effectively penalize good faith remediation efforts and inject uncertainty into future compliance efforts. Similarly, pursuit of third-party liability would expose prime contractors for their subcontractors' DEI practices, over which the prime contractor may have limited visibility and control.”

“Implementing the requisite compliance oversight throughout the contractual chain would add substantial cost and friction to the procurement process. A criminal referral would carry increased risk of exposure, not only for the company, but also for individual employees, and almost certainly alter the settlement calculus,” the authors concluded. “Legally, all these expanded enforcement paths are untested and raise substantial questions of falsity, scienter and materiality under established FCA case law.”