Major Change at the U.S. Department of Justice Civil Division – Consequences for False Claims Act Enforcement in the Second Trump Administration

This past week saw a major change of the guard at the U.S. Department of Justice – one that may have significant impacts for the Civil Division’s use of the False Claims Act in the second Trump administration.

Michael Granston, who has led the Civil Division’s Commercial Litigation Branch since 2019, stepped down from his position as a Deputy Assistant Attorney General (DAAG) on May 9. Before serving as the DAAG for Commercial Litigation Branch, Granston was the Director of the Commercial Litigation Branch’s Civil Fraud Section for over 6 years, which is tasked with the enforcement of the False Claims Act (FCA).  Prior to that, he served for over 16 years in the Civil Fraud Section.  The Civil Fraud Section includes several practice areas, including Healthcare Fraud (which has traditionally provided the greatest share of FCA recoveries), Customs Fraud, Procurement Fraud, and Defense Contracting Fraud, among others.

On May 21, 2025, Brenna Jenny was announced as the new Deputy Assistant Attorney General for the Commercial Litigation Branch and the first political appointee to hold the position. (We note in full disclosure that Ms. Jenny was previously a partner at Sidley Austin focused on FCA enforcement and litigation on behalf of clients in the healthcare and life sciences industry.)  We anticipate that DAAG Jenny, working with Civil Division Assistant Attorney General Designate Brett Shumate and longtime Civil Frauds Director Jamie Yavelberg, will continue to pursue recoveries under the FCA as the federal government’s primary fraud-recovery mechanism. There are, however, indications that the second Trump administration may pursue FCA actions in different areas than those pursued by past administrations, including reverse-FCA claims where money is alleged to have been wrongfully withheld from the federal government.

Tariffs and Customs Fraud

Former DAAG Granston and Director Yavelberg each spoke on February 20 at the Federal Bar Association’s Annual Qui Tam Conference. Notably, both committed that DOJ would aggressively use the FCA to pursue tariffs and customs avoidance. Given the second Trump administration’s high-profile use of tariffs in formulating trade policy, we expect to see DOJ focus far more on tariff and customs enforcement than it has historically.

Tariff and customs enforcement causes of action would presumably include misreporting countries of origin and/or undervaluing, misclassifying or undercounting goods.  Relatedly, we anticipate that DOJ will continue to investigate and pursue FCA cases involving compliance with the Trade Agreements Act and the Buy American Act in the area of alleged procurement fraud.

According to DOJ, since 2012, the Civil Fraud Section has recovered more than $115 million in unpaid customs duties under the FCA. That is a fraction of what it has recovered in cases premised on alleged healthcare fraud over that time. However, as the second Trump administration pursues its trade agenda, we anticipate that the FCA will be a key tool to ensure that importers are complying with the law and honoring their financial obligations to the United States. We therefore expect that FCA recoveries in this space may increase significantly.

Diversity, Equity & Inclusion

Next, as we covered here, in a May 19, 2025 memorandum DOJ announced the Civil Rights Fraud Initiative, which aims to use the FCA to investigate and “pursue claims against any recipient of federal funds that knowingly violates federal civil rights laws” via “racist preferences, mandates, … and activities” — including diversity, equity, and inclusion programs. While the May 19 memorandum focuses on universities, it explicitly advises that the initiative covers all “federal-funding recipients or contractors” that “certify compliance with civil rights laws.” Indeed, the memorandum goes out of its way to allege that “many corporations … continue to adhere to racist policies.” Thus, any company that does business with or receives funds directly or indirectly from the federal government or federal programs has risk, including in the healthcare and life sciences, defense, and education industries.

The initiative will involve nationwide collaboration among federal and state law enforcement agencies. The Civil Fraud Section and the Civil Rights Division will co-lead the initiative. They will engage with the Criminal Division “as well as with other federal agencies that enforce civil rights requirements for federal funding recipients,” including the Departments of Education, Health and Human Services, Housing and Urban Development, and Labor. The memorandum also directs that the Civil Fraud Section and Civil Rights Division “establish partnerships with state attorneys general and local law enforcement to share information and coordinate enforcement actions.”

Given that this initiative has been identified as a key DOJ priority and dovetails with the second Trump administration’s focus on examining the legality of DEI, we expect that DOJ will be devoting significant resources to potential FCA claims in this space.

Healthcare

Finally, we anticipate that alleged healthcare fraud will remain the largest part of DOJ’s FCA docket. In the 2024 fiscal year, for example, DOJ reported that of the more than $2.9 billion in FCA resolutions reported by DOJ, over $1.67 billion related to matters that involved the health care industry.

In terms of specifics, both DAAG Granston and Director Yavelberg identified fraud impacting the Medicare Advantage (Medicare Part C) program as a particular area of focus. To that end, the March 6, 2025 settlement between the United States and Seoul Medical Group may be instructive. Seoul Medical Group Inc. and its subsidiary, Advanced Medical Management Inc., agreed to pay $58,740,000 and their former president and majority owner has agreed to pay $1,760,000 for allegedly violating the FCA by causing the submission of false diagnosis codes for two spinal conditions to increase payments from the Medicare Advantage program. At the same time, the Department of Health and Human Services, Office of Inspector General, has recently published a Special Fraud Alert on certain arrangements in the Medicare Advantage industry that can implicate the False Claims Act, as we previously reported here.   And Dr. Oz, the Director of the Centers for Medicare and Medicaid Services announced last week a plan to comprehensively audit all Medicare Advantage plan contracts and to pursuing recoupments of overpayments as part of his commitment to “crushing fraud, waste and abuse” in the federal healthcare programs.  Of course, those overpayments can also be pursued by DOJ and whistleblowers under the FCA.  Thus, all Medicare Advantage plans and participating healthcare providers need to prepare for enhanced scrutiny, including through FCA investigations and enforcement actions/

Conclusion

While the priorities under the FCA do change from administration to administration, it remains a potent and relied-upon tool by both Republicans and Democrats to pursue fraud recoveries on behalf of the United States. The change in leadership of the Commercial Litigation Branch coupled with the Trump administration’s stated intention to use the FCA to pursue fraud, including in different areas of focus, makes this a time for companies to ensure their compliance with the law and prepare for potential government inquiries.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.