DAAG Jenny Reinforces Commitment to FCA Enforcement Premised on Discrimination
At the Federal Bar Association’s Qui Tam Conference, Brenna Jenny, the Deputy Assistant Attorney General of DOJ’s Commercial Litigation Branch, offered the most detailed description yet of the Trump Administration’s effort to employ the FCA to combat practices that violate federal antidiscrimination laws, as we have previously reported here, here, and here. Jenny noted that while promoting diversity is not itself unlawful, it is also “not a protective talisman.” She stated that she believed some companies had “lost their way” in the pursuit of DEI and engaged in unlawful discrimination by pressuring their employees to make hiring and promotion decisions based on race or sex.
After emphasizing DOJ’s intent to use the FCA to address these alleged violations, Jenny mapped the theory of liability onto the FCA’s elements.
First, Jenny addressed the falsity element. She clarified that while companies can discriminate via DEI programs, it is not the operation of DEI programs that is unlawful or that will trigger FCA liability. She also noted that companies can discriminate without DEI programs. She underscored that even before the Trump Administration initiated its focus on discrimination-based FCA cases federal acquisition regulations demanded that to receive federal funds, companies must agree to treat their employees without regard to race or sex. Jenny conveyed that DOJ already has “strong” FCA cases built on evidence of unlawful discrimination she described as including efforts to create and track “demographic goals” and tying compensation or otherwise pressuring employees meeting those goals.
Second, Jenny addressed materiality—which requires that the claim’s falsity matter to the government. She acknowledged but rejected views that noncompliance with federal discrimination laws may not satisfy FCA materiality. She emphasized that when the government chooses contractors, it chooses “partners.” Jenny believes unlawful practices by those partners could raise concerns about how taxpayer dollars are used and that juries would understand why that conduct is material. She specifically dismissed defense arguments to materiality based on the dearth in prior FCA cases premised on this conduct, noting that enforcement priorities always shift and that a “headcount” of prior suits has never been the crux of the materiality inquiry.
Third, Jenny discussed scienter and staked out the view that in discrimination-based FCA cases, scienter would not be hard to prove. She referenced evidence she has seen in cases of companies giving clear direction to undertake unlawful discrimination—for example, by pressuring hiring managers to meet certain race or sex outcomes.
Jenny concluded by examining damages and penalties. She suggested that damages could be based on whether the government would not have contracted with the defendant in the first place had the government known of the unlawful activity. And as to the FCA damages multiplier that will be applied, Jenny indicated that DOJ would consider the following five factors: (1) the defendant’s cooperation; (2) the extent of the defendant’s self-disclosure; (3) the duration and scope of the alleged misconduct; (4) whether senior leadership was involved; and (5) the extent of the defendant’s commitment to remediation. She noted that DOJ would seek penalties in connection with at least some of these resolutions in the effort to further deterrence efforts.
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