The Trump administration’s focus on reducing government spending, its policies on trade and tariffs, and its focus on paring back diversity, equity, and inclusion (“DEI”) mandates may result in an increase in private suits, investigations, and government enforcement activity under the False Claims Act (“FCA”). 

I. The FCA Generally

First passed in the wake of the Civil War, the FCA, at its core, imposes civil liability for obtaining money from, or avoiding payments to, the federal government through the making of false statements or certifications. The statute has seven enumerated theories of liability, see 31 U.S.C. § 3729(a), including the “reverse” false claims theory, discussed more below.

Violations of the FCA can carry significant financial penalties, including up to three times the amount of damages the government sustains as a result of the acts of the defendant. 31 U.S.C. § 3729(a)(1).

FCA cases can be initiated either by a private citizen, called a “qui tam relator,” who files the action under seal and serves the complaint on the DOJ but not the defendant, or by the DOJ itself. In the case of a qui tam complaint, the government can choose to intervene, meaning it essentially steps into the shoes of the relator; not intervene; or dismiss the case, even over the relator’s objection. 

II. Trump Administration Policies May Result in Increased False Claims Act Enforcement

Early signals are that, while it may pare back other areas of enforcement, the Trump administration may see an increase in FCA cases, including through policies that encourage qui tam realtors, intervening more frequently in qui tam cases, and bringing more of its own investigations. 

There are several reasons for this. For one, the FCA dovetails with the administration’s overall focus on reducing government spending, Indeed, on February 26, 2025, the President issued an executive order directing a review of all existing discretionary federal spending through contracts and grants, and this review itself may result referrals to DOJ and resulting enforcement actions.

In addition, as discussed below, the administration’s policies around trade and DEI also may lead to more FCA investigations and cases. 

A. Use of the FCA for Customs and Trade Enforcement 

While, in recent years, most FCA cases have involved the healthcare industry,¹ the FCA may become an important tool for the Trump administration to carry out its trade policy aims. 

U.S. customs laws and regulations require that the “importer” of goods into the U.S. declare, among other things, the country of origin of the goods, the value of the goods, whether the goods are covered by antidumping or countervailing duties, and the amount of duties owed. It is the importer’s affirmative duty to use “reasonable care” to make sure that such information is accurate so that CBP can assess the proper duties.

In the past, DOJ has used the FCA to enforce customs laws and regulations, typically under a theory of liability called a “reverse” false claim. 

Specifically, in addition to imposing liability on persons or entities that make an affirmatively false statement or certification to the government, the FCA imposes liability on persons who “knowingly make[], use[], or cause[] to be made or used, a false record or statement material to an obligation to pay or transmit money . . .  to the Government, or knowingly conceal[] or knowingly and improperly avoid[] or decrease[] an obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(1)(G) (emphasis added).

For example, in 2020, DOJ announced that a German engineering company and its U.S.-based subsidiary had agreed to pay over $20 million to settle a customs-related FCA action. The qui tam realtor and the government had alleged that that the company made false statements on customs declarations misrepresenting the nature, classification, and valuation of imported merchandise, as well as the applicability of free trade agreements, when importing piping and other steel products into the U.S. from China, to avoid paying import duties on Chinese-made products. See United States ex rel. Johnson v. Linde AG, et al., No. 17-cv-1012 (E.D. Pa.).

In 2023, the U.S. Attorney’s Office for the Southern District of New York announced a $22.8 million settlement against a vitamin company for misclassifying dozens of products imported from China under the Harmonized Tariff Schedule (“HTS”). The complaint alleged that the company made thousands of entries of its products, including raw and bulk vitamins and nutritional supplements, into the United States while materially misreporting to Customs and Border Protection the duty rates applicable to those products under the HTS in order to avoid paying duties owed. The vitamin company also failed to remit underpaid duties and persisted in using its incorrect classifications for these goods even after it retained a consultant to analyze the propriety of its classifications, and the consultant confirmed that the classifications the company had used were incorrect. United States ex rel. Zachary Welin v. Int’l Vitamin Corp., No. 19 Civ. 9550 (MKV) (S.D.N.Y.).

Defenses to liability in these cases often rely on the “obligation” and knowledge elements of reverse False Claims Act liability. With respect to the former, the False Claims Act itself defines “obligation” to mean “an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from the retention of any overpayment[.]” 31 U.S.C. § 3729(b)(3). Several federal courts of appeal have clarified that an obligation is only “established” when it triggers an “immediate” and “self-executing” duty to pay. See, e.g., United States ex rel. Billington v. HCL Techs. Ltd., 126 F.4th 799, 804 (2d Cir. 2025) (re-affirming holding in prior case that a duty to pay is only “established” when it meets those two conditions). Thus, defendants may be able to raise arguments that the obligation to pay customs or other duties was not sufficiently certain or was contingent in some manner. See, e.g., United States v. Southland Gaming of the Virgin Islands, Inc., 182 F. Supp. 3d 297, 317 (E.D. Pa. 2016) (dismissing False Claims Act claim “because the putative obligation in this case is contingent on governmental discretion.”).  

B. Potential Use of the FCA to Enforce The Administration’s DEI Executive Order

In addition, the Trump administration’s executive order on ending DEI programs explicitly references the possibility of FCA liability. 

Specifically, on January 21, 2025, President Trump signed Executive Order 14173, titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” The executive order states that DEI policies “violate the text and spirit of our longstanding Federal civil-rights laws” and directs federal agencies to investigate and deter DEI programs and race- or sex-conscious employment, procurement, and contracting practices. 90 Fed. Reg. 8633 (Jan. 21, 2025).

In addition, the executive order requires the head of each agency to include “in every contract or grant award” two provisions with respect to DEI programs that appear intended to trigger potential FCA liability.

• First, contracts and grant awards must state that the contractual counterparty or grant recipient agrees “that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code,” a provision of the FCA that defines “materiality.”
• Second, contractual counterparties or grant recipients must “certify that [they] do[] not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.”

On February 21, 2025, a federal judge in the District of Maryland granted a temporary injunction blocking portions of both the executive order and another DEI-related executive order nationwide. Nat’l Ass’n of Diversity Officers in Higher Education v. Trump, __ F. Supp. 3d __, 2025 WL 573764 (D. Md. Feb. 21, 2025). The decision is currently being appealed and thus, while the more permanent status of the executive order is unclear, companies and organizations should remain vigilant of the potential for the order, if upheld, to significantly increase the number of private suits, investigations, and government enforcement activity under the FCA. 

More broadly, the order’s explicit references to FCA liability provide further evidence of the administration’s view of the statute as a primary tool to police government contracts and grants. 

III. Takeaways

In light of the above, companies, organizations, and individuals, particularly federal contractors, entities receiving federal grants, or other entities that submit claims for payment, may want to:

1. Examine internal processes for making claims for payment and ensure they are designed to mitigate the risk of improper avoidance of an obligation to pay;
2. To the extent they are involved in the importation of goods into the United States, conduct a supply-chain risk assessment for potential FCA liability and other potential compliance issues; and
3. Conduct internal assessments of current DEI policies and programs, particularly those applicable in contracts with the federal government. 

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¹See U.S. Dep’t of Justice, Press Release, False Claims Act Settlements and Judgments Exceed $2.9B in Fiscal Year 2024, available at https://www.justice.gov/opa/pr/false-claims-act-settlements-and-judgments-exceed-29b-fiscal-year-2024 (noting that of the $2.9 billion in False Claims Act settlements and judgments reported by the Justice Department this past fiscal year, over $1.67 billion related to matters that involved the health care industry”). 

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