DOJ Announces Second Settlement Resolving FCA Allegations Based on Employment Discrimination
Earlier this week, the Department of Justice (“DOJ”) announced a $21.5 million settlement agreement with five Deloitte entities to resolve allegations that they violated the FCA by engaging in conduct DOJ alleges violated Title VII and Federal Acquisition Regulation (“FAR”) clause 52.222-26. Guided by three still-effective executive orders, on which we have reported here and here, the Trump Administration is using the FCA and a variety of other tools, including the Equal Credit Opportunity Act, in a broad, cross-agency enforcement initiative focused on alleged discrimination and touching companies in every industry.
This latest settlement, arising from a Northern District of Texas qui tam filed by The American Alliance for Equal Rights, is the second secured under DOJ’s Civil Rights Fraud Initiative, on which we have reported here, here, and here. Similar alleged conduct drove the first settlement, on which we reported here. As in connection with the first settlement, it is important to note that the most recent settlement reflects that (1) the defendants denied the allegations and did not admit liability; (2) the defendants settled to avoid the risks of litigation; and (3) DOJ did not compel the defendants to make any changes to their internal practices or policies or to adopt any prospective compliance obligations.
DOJ contended that the Deloitte defendants submitted false claims and false statements to the government by certifying compliance in its federal contracts with Title VII and FAR clause 52.222-26 when they were alleged to be out of compliance, during the period January 1, 2017 through August 21, 2026. The defendants also allegedly sought payment under their federal contracts for costs related to practices DOJ alleged to be discriminatory. Those practices fell into two categories. First, considering race or sex in hiring, promotion, and staffing decisions to achieve progress towards race- and sex-based workforce composition goals—including for staffing on federal contracts. Business units allegedly received monthly summaries tracking demographic goals and some managers were allegedly evaluated and compensated in part based on contributions to efforts to achieve the goals.
Second, using race and sex to determine eligibility for opportunities and resources such as sponsorship and networking. Sponsors were allegedly instructed to advocate publicly for participants’ promotions. And networking opportunities were allegedly designed to help participants make connections “‘to influential network members.’” The defendants allegedly advertised sponsorship, in particular, as potentially yielding pay raises and more promotions.
The question remains whether, if put to the test, the whistleblower or DOJ could have established the materiality of the alleged violations to any government payment decision.
In reaching this settlement, DOJ acknowledged and credited the defendants’ cooperation with the investigation, pursuant to Justice Manual Section 4-4.112—DOJ’s Guidelines for Taking Disclosure, Cooperation and Remediation into Account in False Claims Act Matters.
Every company operating in the United States today, and particularly those that do any form of business with the government or accept federal dollars, needs to be attentive to the DOJ and whistleblower risk they face under the FCA related to what were often perceived as common employment practices, as well ask the risk of enforcement and scrutiny by federal regulators and state Attorneys General.
The settlement agreement is available here.
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.
