This transcript has been auto generated
00;00;00;00 - 00;00;29;00
Jonathan Porter
Welcome to another episode of Husch Blackwell's False Claims Act Insights podcast. I'm your host, Jonathan Porter. Six months ago, we put out a podcast episode on how President Trump issued an executive order that decreed DEI programs be material for False Claims Act purposes. My law partner, Michael Schrier, told our listeners about what that meant for government contractors, and we talked about how these investigations and cases may play out.
00;00;29;03 - 00;00;56;22
Jonathan Porter
A lot has happened in the last six months in this space, and DEI based FCA investigations are still a really big topic. So today on the podcast, we're talking about the current state of FCA enforcement when it comes to DEI programs as the thing making claims false. We're doing this episode on the heels of a thorough white paper that Husch Blackwell put out on this topic a few weeks back, which we will link to in the show notes.
00;00;56;24 - 00;01;21;21
Jonathan Porter
I found it to be a helpful resource. I'm sure anyone wrestling with lingering DEI program issues or investigations will as well. The group that wrote the white paper includes some of Husch Blackwell's finest lawyers, a group from our defense contracting team, a group from our higher ed team, both fields where we're seeing a lot of DEI focused investigations, and a group from our White Collar and False Claims Act team.
00;01;21;22 - 00;01;49;16
Jonathan Porter
And one of those authors is our guest on today's episode, Julia Kopcienski. Julia is a well-respected member of our White Collar and False Claims Act teams and practices out of Husch Blackwell's growing Washington, D.C. office. Julia's niche is helping government contractors, both with proactive compliance advice and reactive responses to government investigations. And I've heard a rumor, Julia, that you were the workhorse behind this DEI white paper.
00;01;49;16 - 00;01;56;01
Jonathan Porter
So I'm happy that you're joining the podcast to talk about how DEI programs can turn into False Claims Act trouble.
00;01;56;05 - 00;02;03;00
Julia Kopcienski
Well, I appreciate it, Jonathan. It was a team effort, so I'll say that up front. But thank you so much for having me. It's great to be here.
00;02;03;03 - 00;02;23;20
Jonathan Porter
Thanks, Julia. Michael told us in our last episode about the executive order at issue and his initial thoughts on what it means for government contractors. But it's been six months since then, so, Julia, could you refresh our memories on what the executive order said and how it changed the way government contractors need to govern themselves?
00;02;23;23 - 00;02;56;02
Julia Kopcienski
Absolutely. So just as a reminder, I think it it makes sense to listen to Michael Schrier’s explanation of the executive order and the background there before jumping into this. But to refresh, we're talking about Executive Order 14173. This is one of many that was issued just the day after President Trump's inauguration, and really made a clear line and a clear announcement about the sort of civil rights, fraud and anti-discrimination agenda that this administration would espouse.
00;02;56;02 - 00;03;32;08
Julia Kopcienski
And those are the phrases that are being used by the administration. So EO 14173 expanded on the administration's view of discrimination, anti-discrimination and civil rights at both the federal government level, at the level of contractors and higher education institutions receiving federal funding and even beyond into other private entities, and really emphasized that the administration would be focused on going after what it framed as illegal DEI and DEIA policies, in particular the executive order.
00;03;32;08 - 00;04;05;28
Julia Kopcienski
And this is the part that was important for contractors and entities receiving federal funds. But the executive order did a few things that were relevant for contractors. First, it revoked a longstanding executive order 11246, which was focused on EEO equal employment opportunities at government contractors. It also directed the OFCCP, the Office of Federal Contract Compliance Programs, to make some major shifts in how it talked about and emphasize diversity efforts for contractors and contractors.
00;04;06;00 - 00;04;45;14
Julia Kopcienski
Including things like stopping what we would think of traditionally as affirmative action policies, stop promoting other with the administration is now framing as discriminatory activities. And probably most importantly, and the focus of a lot of what we're going to talk about today is that this executive order implemented a new certification requirement for contractors. That was fairly vague, and we'll talk about how that played out in the six months or so following this executive order, but basically said that any contractors receiving new contracts would need to sign a certification stating that they would be complying with all federal, quote unquote, anti-discrimination laws.
00;04;45;15 - 00;04;56;04
Julia Kopcienski
Now, what that means is a topic to be explored here, but there were definitely some significant changes and signals for contractor policy was going to be shifting pretty heavily.
00;04;56;10 - 00;05;15;06
Jonathan Porter
Thanks, Julia. That's helpful. Background on the executive order. And as I said at the top, since that time, there have been some major events that impact how all of this could play out under the False Claims Act. And I know in the white Paper you discussed DOJ's new Civil Rights Fraud Initiative. You talked about a new memo from Attorney General Pam Bondi in July.
00;05;15;07 - 00;05;20;06
Jonathan Porter
So Julie gets up to speed on what those say and how they impact enforcement now.
00;05;20;08 - 00;05;49;10
Julia Kopcienski
Absolutely. Thanks, Jonathan. So DOJ pretty quickly picked up this torch from EO 14173. Pretty quickly espoused the principles therein. And that was done primarily in a February memo from Attorney General Pam Bondi, who essentially said, we're affirming our commitment to this executive order. And she indicated that the department's intent to investigate and prosecute violations of civil rights fraud generally.
00;05;49;12 - 00;06;17;24
Julia Kopcienski
So that still left things vague as to what enforcement would look like. But in May, as you mentioned, Jonathan, we got the announcement of this, the RFI, the civil rights fraud initiative. Now, this is novel for a number of reasons. First of all, as we've seen in other administrations and even in this administration, this is sort of a recombining and re shifting of resources within the department and throughout nationally, throughout U.S. Attorney's offices as well.
00;06;17;27 - 00;06;47;10
Julia Kopcienski
And it combines resources and a couple of different offices and programs to focus on this stated intent to investigate and enforce and prosecute, if appropriate, violations of federal anti-discrimination laws specifically. And what was significant about this announcement of the initiative is that it announced the department's intent to use the False Claims Act to make these investigations and prosecute alleged violations of.
00;06;47;10 - 00;07;18;10
Julia Kopcienski
And again, I'm putting in quotes and we'll get into why this is so but quote unquote federal anti-discrimination laws. And that's significant because the history of federal entities termination violation enforcement has not been done in the False Claims Act realm. It's traditionally been private plaintiffs entitled to remedies for violations of those laws or injunctive efforts against organizations that are violating discrimination for one or another reason under federal anti-discrimination law.
00;07;18;11 - 00;07;43;26
Julia Kopcienski
But here, DOJ is intending to use the False Claims Act now to go after violations of federal anti-discrimination law. And the significance there again, as your listeners know, is that false claims carries hefty penalties. We're talking about treble damages, you know, penalties associated with each false claim, things like that. And so it's definitely a more significant approach, a more pointed approach, I'll say.
00;07;43;26 - 00;08;12;27
Julia Kopcienski
And it signals the administration's intent to root out this type of civil rights fraud as they claim. It also mentioned that in July, the attorney general put out another memo that clarified specifically what it might look like to actually violate a federal anti-discrimination law. Now, I will say this is still very much up in flux, but it detailed examples in training, in hiring and promoting, in things like promoting employee resource groups.
00;08;12;27 - 00;08;39;08
Julia Kopcienski
And we speak to this in the article, and my labor and employment colleagues do a great job of identifying the shift that this represents in antidiscrimination enforcement law. But essentially, what we're seeing is a shift from protection of minority status. Individuals to a more equal application, a more, a view of discrimination as across the board. Right. And so we want everyone to be treated equally.
00;08;39;15 - 00;09;07;05
Julia Kopcienski
You'll hear the phrase merit based being thrown around quite a bit. And so this is intended to make sure that diversity programs that they exist and that federal contractors are using them are applying their policies, hiring policies, training policies, promotion policies equally to all employees, regardless of potential minority status. And the July memo goes into specifics and talks about how proxy should not be used.
00;09;07;05 - 00;09;23;07
Julia Kopcienski
So you can't use a proxy for protected characteristic things like that, and gives a lot of detail. Like I said, as my colleagues kind of explore in the white paper, however, there's still a lot to be determined about what that means for violation of quote unquote, anti-discrimination law.
00;09;23;09 - 00;09;52;22
Jonathan Porter
Thanks, Julia. That's fantastic background. I think we're up to the current timeline now, so thanks for getting us up to speed on all of that. So one thing that is bipartisan is the Justice Department relies on whistleblowers to largely enforce the False Claims Act. I think we've talked in a bunch of past episodes about how the majority of DOJ's False Claims Act recoveries are started by key taps, started by whistleblowers who are filing something under seal, and DOJ runs off in that direction.
00;09;52;28 - 00;10;07;17
Jonathan Porter
And that's really what's happened here. The administration invited whistleblowers to come in and report these programs that could violate the False Claims Act. So, Julia, tell our listeners about that and how you see that playing out in the coming months and years.
00;10;07;20 - 00;10;32;14
Julia Kopcienski
Sure. Yeah. And as you call it out, Jonathan did this intent to use and rely on whistleblowers and key Tamara leaders to both call out and call attention to and bring, you know, inappropriate cases. These civil rights fraud, False Claims Act cases. And that's fairly unique and notable. And indeed, it's one of the key takeaways that we call out in our white paper for a couple of reasons.
00;10;32;15 - 00;11;01;08
Julia Kopcienski
So first of all, and the administration alludes to this in various publications and the ways that it's spoke on this sort of issue. But it makes sense to use whistleblowers in this context. And I think that's because if you're looking at a very like, let's say, the most basic traditional False Claims Act case, right? So a government contractor said that it's delivering this amount of product and instead delivers this amount, but still cements a claim for the original amount.
00;11;01;08 - 00;11;25;17
Julia Kopcienski
So that's something that a few people are going to notice in the company. Government auditor is also and you know, even the contracting officer in that situation can have a clear line to be able to see that potential violation. So there's a traditional way that violations might be called out or noticed in this context. So in the civil rights fraud context, you're going inside an organization.
00;11;25;17 - 00;11;50;28
Julia Kopcienski
You're going into the training rooms, you're going into hiring rooms, you're going, especially what we've seen a lot of entities do, both in the federal funding space and without. We've seen entities look at their own sort of DEI diversity focused programs and adjust language. Right. Like we see diversity programs now being called people focus programs, things like that.
00;11;50;28 - 00;12;24;01
Julia Kopcienski
So the point there is that these potential or alleged violations might fly under the radar a little bit more and are also particularly susceptible to being recognized by insiders, right, by potential whistleblowers. The other piece here, this is, I would argue, a novel way or a jump, right? This is a new level of doing that, because DEI in this Trump administration and the last Trump administration and just generally in the nation, is a hotbed political issue widely.
00;12;24;08 - 00;12;49;17
Julia Kopcienski
People will join a company depending on the company's approach to DEI and diversity, people will be prohibited from perhaps being hired or joining a company, depending on that company's approach. And in some cases, that's legally required. You know, there's affirmative action programs, there is diversity hiring, things like that that are happening throughout the country. Most everybody has some sort of opinion or personal experience of this issue.
00;12;49;17 - 00;13;33;20
Julia Kopcienski
And so in contrast to it, maybe an accounting fraud issue or something, cost and pricing, FCPA claim where, you know, only a few people in the company might have the insight or even understand that a potential violation exists. This is pretty easily recognizable. If you're in an HR training session and you feel that your company is providing training that discriminates against a particular class of individuals, maybe in favor of another class, or promotes a narrative that a particular class of individuals even has a minority status, or that that affords them different considerations in terms of hiring or promotion, anything like that, anything that could make a group feel discriminated against or an individual feel
00;13;33;20 - 00;14;15;01
Julia Kopcienski
discriminated against, is going to be something that an employee might feel on a personal level and then have heard about this enforcement agenda through the news and find their way to an FCA qui tam case. So I think this particular enforcement agenda lends itself very well to the use of whistleblowers. How we see that playing out on its own, I think, is similar to how we traditionally see whistleblowers and key leaders approaching these cases, but it may be that the department or particular U.S. attorney's offices decide to pick up certain qui tam relator cases or to join those cases because of the narrative that's being told.
00;14;15;01 - 00;14;39;16
Julia Kopcienski
We're expecting to see some very especially at the outset of this enforcement scheme. We're expecting to see some sort of example cases. Right. You're going to see a contractor where a particular class and I won't use examples here because I think this is such a political issue. So I'll just say a particular class might have been passed over or let's say not allowed to join an employee resource group, right?
00;14;39;18 - 00;15;09;27
Julia Kopcienski
You might see that being a very emotional sort of hot button political issue. And that's picked up by the department. So whether or not and how qui tam cases get pursued, I think we'll see play out. And that might follow traditional sort of patterns that we've seen. I also think there might be a risk because this is so, individualized and emotional and sort of socio political, that you might see whistleblowers getting a little overeager with qui tam sort of approaches.
00;15;09;27 - 00;15;32;24
Julia Kopcienski
So we'll see if that plays out. But I do think that this really hones in on the rooms and the departments and the hallways and the offices within organizations where these conversations are really happening. So I'm not surprised that the administration is trying to leverage the use of whistleblowers, in particular, to enact this enforcement scheme.
00;15;32;27 - 00;15;54;20
Jonathan Porter
Great insights, Juliet. Thanks for that. My prediction is whistleblowers will do well on this. I think that in general, whistleblowers figure out a way to make a bunch of money on this, so I'm sure they'll do quite well when it comes to debased exams. How do you think we should be defend knowing our clients in these cases? What about these FCA theories based on DEI programs?
00;15;54;20 - 00;15;57;05
Jonathan Porter
What makes them susceptible from a defense perspective?
00;15;57;10 - 00;16;33;18
Julia Kopcienski
Absolutely. The biggest question upfront, I think, for contractors is going to be whether they have signed an express certification, especially under EO 14173. Once that happens, you're looking at a completely different analysis. So if you have an express certification for compliance with anti-discrimination laws, you are going to have a harder time, right? Saying that you didn't know, you didn't have the knowledge that the materiality was not there, that falsity is not there, because that's the purpose of an express certification.
00;16;33;18 - 00;16;58;29
Julia Kopcienski
That's why, right out of the gate on January 21st, this first executive order included the instruction for future contracts to include the certification. That's the first place that contractors should look and that will guide the remainder of the strategy. It doesn't necessarily defeat the case from the outset. If we have an express certification, there's still a lot of wiggle room.
00;16;58;29 - 00;17;29;05
Julia Kopcienski
I don't say, because the certification itself, the language basically says we are certifying compliance with federal anti-discrimination laws. So if you're looking at the express certification, even if you've signed one of these express certifications under EO 14173, and if you've gotten a new federal contract or even a new contract vehicle since January of this year, you probably did sign that certification unless there was some legal workaround that may be included in your contract.
00;17;29;05 - 00;18;02;01
Julia Kopcienski
So definitely take a look at that. However, what does it mean? And this is where, you know, we put our defense hat on. What does it mean to violate an anti-discrimination law. So one thing that we might argue is that if these contractors had, let's say, a long standing diversity program in place for 20 years and it emphasized anti-discrimination across the board, but maybe it had some programs that provided opportunities for historically marginalized, protected classes.
00;18;02;03 - 00;18;33;19
Julia Kopcienski
The question in an FCA case would be whether continuing that program, after having signed a certification would violate a federal anti-discrimination law. And the reason why we wrote this white paper, Jonathan, is because when these enforcement actions start happening, the questions are going to be limitless. Essentially, we're looking at not only understanding how this is going to play out in FCA context, but backing out from that.
00;18;33;22 - 00;18;36;07
Julia Kopcienski
What does it mean to discriminate?
00;18;36;09 - 00;18;56;15
Jonathan Porter
Thanks, Julio. Those are all great points. You know, I keep going back to thinking about the ways that courts have narrowed up FCA enforcement in the past. It was just nine years ago that the Supreme Court said the false claims. That is not an all purpose anti fraud statute. And that's just one case of many that narrowed up what the FCA is.
00;18;56;18 - 00;19;14;24
Jonathan Porter
And so I can't believe that a court would review this and look at all of the history of tightening up the False Claims Act into something other than an anti all purpose anti fraud statute and say, okay, well yeah, we're going to just blow with the wind and just change the definition of fraud every four years. I don't think that's the way it can work.
00;19;14;24 - 00;19;35;19
Jonathan Porter
I don't see how we could possibly function if that's the way it works. So that's my general opinion. I think at some point you can do that. But I know there are a bunch of colleges right now that are suffering real consequence from getting on this administration's bad side. And so this is not one where we're saying, hey, you know, you're going to win in court, go push it all the way.
00;19;35;21 - 00;19;52;20
Jonathan Porter
If you're getting grant funds, you probably want to think seriously about this. But I know a lot of higher ed institutions, after students for Fair Admission were changing their DEI policies. Anyway, I know a lot of our smart higher ed team. They're helping clients implement those immediately. I think our clients were hopefully ahead of the curve, but we'll see.
00;19;52;22 - 00;20;16;13
Jonathan Porter
So thanks, Julia. Yeah, extremely complex is a good way of summarizing all of this. When we're dealing with something like Dei and trying to layer that on top of the false claims Act, which is a really complex thing, you better be sure that you've got a team that understands how the FCA works, because, again, not an all purpose anti-fraud statute is intended to go after specific types of fraud.
00;20;16;13 - 00;20;22;21
Jonathan Porter
And so, Julia, I'm grateful that you came on the podcast and tackled this big issue for our listeners. Julia, thanks for joining us.
00;20;22;25 - 00;20;26;11
Julia Kopcienski
Thanks so much, Jonathan. Appreciate the opportunity to close.
00;20;26;11 - 00;20;45;08
Jonathan Porter
The False Claims Act is continuing to be used in new and novel ways. Our team here at Husch Blackwell is going to continue to figure out the best way to defend our clients. And so it's a pleasure to work here with this amazing group. Me personally, I'm against fraud, but I'm also against us calling a bunch of stuff that isn't fraud fraud.
00;20;45;08 - 00;21;02;02
Jonathan Porter
And so we're going to continue to figure out where is that line, what can be enforced under the False Claims Act and what can't. And hopefully, I think the courts are going to continue to speak to this, and we'll be tracking it, and we'll be bringing you all of this good stuff here on the podcast and in whitepapers and blog posts and all sorts of stuff to come.
00;21;02;02 - 00;21;07;24
Jonathan Porter
So to our listeners, thanks for joining us, and we'll see you next time.