Heightened False Claims Act Enforcement Risks Highlight the Importance of Compliance

DOJ’s enforcement of the FCA (31 U.S.C. §§ 3729-3733)—the government’s primary civil remedy to combat fraud against the government—tends to be relatively stable from one administration to the next, and DOJ has typically recovered billions of dollars of settlements and judgments under the statute every year. There are several indications, however, that the FCA will play an even more central role in a wide variety of areas involving government programs and funds. In the first few months of the Trump administration, DOJ has announced more than 40 settlements with defendants resolving alleged FCA violations in cases alleging fraud involving defense contracting, pharmaceutical manufacturing, health insurance, pandemic relief funds, and customs. DOJ has also filed a brief in a pending case defending the constitutionality of the qui tam statute against attack, signaling DOJ’s support for whistleblower suits alleging fraud. Also, a surge in the number of qui tam actions filed in Fiscal Year 2024 (979)—the highest number in a single year—produced a fresh pipeline of new DOJ investigations,¹ which often take years to resolve. For government contractors, the picture is gaining complexity based upon the administration’s initiatives to overhaul the federal procurement system and streamline regulations on short timetables. In the fast-changing regulatory and enforcement climate, now is the time for companies receiving government funding to strengthen and adapt their compliance programs and internal controls to account for these new risks.

In this update, we highlight key developments under the new administration, provide an overview of recent FCA settlements and enforcement actions in two key areas—cybersecurity and international trade— and summarize high-level takeaways.

Recent Administration Actions Related to FCA Enforcement

Several signs indicate that the FCA will continue, and likely increase, as an important enforcement tool in the new administration.

For example, in a case before the U.S. Court of Appeals for the 11th Circuit focusing on the constitutionality of the qui tam statute, DOJ has defended the qui tam process against challenge.² In a reply brief filed on April 30, 2025, in United States ex rel. Zafirov v. Fla. Med. Associates, LLC, the government argued that the U.S. District Court for the Middle District of Florida erred when it struck down the qui tam statute as a violation of the Appointments Clause.³ In a novel decision breaking with past precedent issued by the U.S. District Court for the Middle District of Florida, the district court held that relators pursuing qui tam cases act as officers of the United States that therefore must be appointed by the President. On appeal, DOJ intervened, arguing that, according to the government, relators are not officers of the United States, and do not exercise executive power in a manner inconsistent with Article II of the Constitution. Qui tam suits filed under seal in district courts nationwide produce the large majority of FCA cases year after year. According to DOJ’s public statistics, more than $2.4 billion of the more than $2.9 billion in FCA settlements and judgments recovered in Fiscal Year 2024 arose from qui tam cases.⁴ Zafirov has potentially seismic implications for FCA enforcement. In the meantime, DOJ’s position in Zafirov sends a clear message to whistleblowers and their counsel that DOJ will continue to support new qui tam cases.

In a Criminal Division memorandum published on May 12, 2025, DOJ reemphasized its commitment to priority areas of white-collar enforcement, specifically identifying procurement fraud, healthcare fraud, and trade and customs fraud, among other areas.⁵ Although FCA litigation is overseen by the Civil Division (specifically, the Civil Fraud Section in the Commercial Litigation Branch), the Criminal Division’s enforcement priorities and policies are indicative of the administration’s approach to general corporate enforcement, including civil FCA cases, which can sometimes involve parallel criminal proceedings.

Also, senior DOJ officials have publicly reaffirmed their commitment to supporting qui tam whistleblowers and enforcing the FCA. In remarks before the Federal Bar Association’s annual Qui Tam conference in February 2025, the recently departed Deputy Assistant Attorney General (“DAAG”) of Commercial Litigation in DOJ’s Civil Division, Michael Granston, emphasized that DOJ will pursue “aggressive” enforcement of the FCA “consistent with the new administration’s stated focus on achieving governmental efficiency and rooting out waste, fraud, and abuse.”⁶ DAAG Granston, who has been a steadfast leader in the FCA space during his three decades of public service at DOJ, highlighted areas of focus to include illegal foreign trade practices. The FCA could thus play a prominent role in the context of the administration’s high-profile tariff policies.

Another significant development is the administration’s recent focus on enforcement regarding alleged discrimination related to diversity, equity, and inclusion (“DEI”) policies and certifications. In a recent memorandum issued by Deputy Attorney General Todd Blanche, DOJ announced a Civil Rights Fraud Initiative that will use the FCA to pursue claims where illegal discrimination is alleged to have occurred, strongly encouraging qui tam lawsuits in this area.⁷ Relatedly, President Trump has reinforced this commitment by specifically referencing the FCA in an Executive Order (“EO”) targeting DEI programs and certifications among government contractors.⁸ The EO, titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” contains specific language directing the inclusion of new terms in government contracts and grants making compliance with “applicable” federal anti-discrimination laws “material” for FCA purposes, and calling for a new requirement that contractors certify that they do not “operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.”⁹ Enforcement of the EO is the subject of pending litigation and injunction orders, thus the timing regarding enforcement remains in judicial limbo. Nevertheless, it is notable that the administration included specific references to the FCA in an Executive Order.

The prospect of heightened FCA risks comes at a time of significant regulatory change for government contractors. A series of additional EOs implemented by President Trump focusing on overhauling the federal procurement system and the Federal Acquisition Regulation (“FAR”) is likely to result in major changes for contractors, underscoring the importance of robust compliance programs.¹⁰

Recent FCA Settlements & Enforcement Actions

Several recent DOJ enforcement actions highlight two areas of increased FCA enforcement risk: cybersecurity for government contractors and international trade.

Cybersecurity

United States ex rel. Berich v. MORSECORP Inc. et al.

On March 26, 2025, DOJ announced a $4.6 million settlement with MORSECORP Inc. (“MORSE”) over allegations that MORSE failed to comply with cybersecurity requirements in various contracts with the Departments of the Army and Air Force in violation of the FCA.¹¹ In the complaint, DOJ alleged that MORSE knowingly submitted false or fraudulent payment claims despite having knowledge of non-compliance with required Department of Defense (“DoD”) cybersecurity measures for safeguarding sensitive government information.¹² In turn, DOJ stated that these false representations and false submissions fraudulently induced the government to award MORSE tens of millions of dollars in contracts with DoD.¹³

In this qui tam case filed under the FCA’s whistleblower provision, the relator will receive an $851,000 share of the settlement amount.

United States ex rel. Doe v. Raytheon Co. et al.

On May 1, 2025, DOJ announced a $8.4 million settlement with Raytheon and other affiliated entities (“Raytheon”) stemming from purported violations of the FCA related to cybersecurity non-compliance in contracts with DoD.¹⁴ More specifically, the government alleged that Raytheon failed to implement and comply with federal cybersecurity regulations—such as those contained in the Defense Federal Acquisition Regulation Statement (“DFARS”) and the FAR—in their performance of cyber offense capabilities and other services, despite certifying its compliance to DoD.¹⁵ These false certifications or representations of compliance allegedly fraudulently induced DoD to enter into and renew the contracts at issue and were material to DoD’s decision to reimburse otherwise ineligible claims for payment.¹⁶

Because this was also a qui tam lawsuit initially filed by a former employee of Raytheon, the whistleblower will receive approximately $1.5 million of the settlement.

International Trade

United States ex rel. Urban Global LLC v. Struxtur, Inc, et al.

On March 25, 2025, DOJ announced a $8.1 million FCA resolution with Evolutions Flooring Inc. (“Evolutions”), a California-based importer of multilayered wood flooring, and its owners.¹⁷

According to the government, Evolutions knowingly submitted false information to U.S. Customs and Border Protection (“CBP”) regarding the country of origin and identity of wood flooring manufactured in China and imported into the United States. This alleged conduct allowed the company to avoid paying applicable antidumping, countervailing, and Section 301 duties (which are extra tariffs imposed on imports to address unfair, unreasonable or discriminatory trade practices). The complaint invoked the “reverse false claims” provision of the FCA,¹⁸ which imposes liability on persons who knowingly conceal or improperly avoid payment obligations to the government.¹⁹

The case originated from a qui tam lawsuit filed by a competitor. Under the settlement, the relator will receive approximately $1.2 million of the settlement proceeds.

United States ex rel. Lee v. Barco Uniforms Inc., et al.

In another recent case signaling a potential uptick in customs fraud cases, on April 18, 2025, DOJ announced that it was intervening in a case in district court in California alleging that Barco Uniforms Inc. (“Barco”), two of its executives, and several affiliates, were involved in a scheme to underpay customs duties on imported apparel.²⁰

According to the government’s allegations, the defendants conspired to misrepresent the value of goods purchased from foreign suppliers in order to avoid or reduce the amount of customs duties owed.²¹ Specifically, the complaint asserts that the defendants used a double-invoicing scheme, submitting false entry summaries to CBP that deliberately undervalued imported products, thereby reducing their reported duty obligations.²²

As with the Evolutions Flooring matter, this case was initiated through a qui tam lawsuit (this time brought by a former Barco employee).

Key Takeaways

By all indications, FCA risks remain significant for companies doing business with the government or receiving government funds. This is especially true in light of the continued role of whistleblowers in driving FCA investigations. As a result, businesses should remain vigilant and forward leaning in their compliance efforts. Especially with major changes in the federal procurement system underway, it is critical for government contractors to proactively strengthen their internal controls and focus on advancing compliance to specifically address new risks.

Likewise, companies involved in imports need to consider FCA risks. Companies importing goods subject to antidumping, countervailing, or Section 301 duties are particularly exposed, as even inadvertent errors or misstatements on import documentation can give rise to potential investigations and allegations of fraud, even if ultimately without merit.

The following best practices can help mitigate FCA risk:

• Review Compliance Programs: Conduct targeted assessments of existing compliance programs and consider engaging counsel to assist with updating policies and procedures to ensure alignment with evolving regulatory requirements and risk areas.
• Oversee Third Parties: Closely monitor third parties (including subcontractors, vendors, and partners) to ensure that contractual agreements require adherence to your company’s compliance standards and flow-down requirements under prime contracts.
• Employee Training: Implement comprehensive training programs for employees to ensure awareness of applicable regulations and FCA exposure.
• Internal Reporting and Whistleblower Protections: Establish robust internal reporting mechanisms and whistleblower protections to identify and address potential violations before they escalate.
• Mandatory Disclosures and Contractor Code of Business Ethics and Conduct: Companies with government contracts subject to standard acquisition clauses should be familiar with their obligations to timely disclose to the government when they possess “credible evidence” of an FCA violation (and certain criminal violations) in connection with the award, performance, or closeout of their government contracts (FAR 52.203-13). Failure to report a mandatory disclosure can be grounds for potential suspension or debarment. Contractors subject to this clause are also required to have a written code of business ethics and conduct.

By adopting these measures, companies can reduce their risk of FCA liability and demonstrate a strong commitment to compliance with applicable laws, regulations, and contract requirements.

¹Press Release, False Claims Act Settlements and Judgments Exceed $2.9B in Fiscal Year 2024, Justice.Gov (Jan. 15, 2025), https://www.justice.gov/archives/opa/pr/false-claims-act-settlements-and-judgments-exceed-29b-fiscal-year-2024.

²See United States ex rel. Zafirov v. Fla. Med. Associates, LLC, No. 24-13581, -13583, (11th Cir. 2025).

³Id. at Dkt. No. 124.

⁴Press Release, supra note 2.

⁵Memorandum from Matthew R. Galeotti, Head of the Criminal Division, U.S. Dep’t of Justice, Justice.Gov (May 12, 2025), https://www.justice.gov/opa/media/1400141/dl?inline.

⁶Daniel Wilson, DOJ Official Flags ‘Aggressive’ FCA approach Under Trump, Law360 (Feb. 20, 2025), https://www.law360.com/articles/2300751/doj-official-flags-aggressive-fca-approach-under-trump.

⁷Memorandum from the Deputy Attorney General, U.S. Dep’t of Justice, Justice.Gov (May 19, 2025), https://www.justice.gov/dag/media/1400826/dl?inline=&utm_medium=email&utm_source=govdelivery.

⁸Exec. Order No. 14173, 90 Fed. Reg. 8633 (Jan. 21, 2025).

⁹Id.

¹⁰Vinson & Elkins, Trump Executive Orders: Key Developments for Government Contractors, May 12, 2025, https://www.velaw.com/insights/trump-executive-orders-key-developments-for-government-contractors/.

¹¹Press Release, Defense Contractor MORSECORP Inc. Agrees to Pay $4.6 Million to Settle Cybersecurity Fraud Allegations, Justice.Gov (Mar. 26, 2025), https://www.justice.gov/opa/pr/defense-contractor-morsecorp-inc-agrees-pay-46-million-settle-cybersecurity-fraud.

¹²Compl., United States ex rel. Berich v. MORSECORP Inc. et al., No. 1:23-cv-10130, (D. Mass. Jan. 19, 2023).

¹³Id.

¹⁴Press Release, Raytheon Companies and Nightwing Group to Pay $8.4M to Resolve False Claims Act Allegations Relating to Non-Compliance with Cybersecurity Requirements in Federal Contracts, Justice.Gov (May 1, 2025), https://www.justice.gov/opa/pr/raytheon-companies-and-nightwing-group-pay-84m-resolve-false-claims-act-allegations-relating.

¹⁵Compl., United States ex rel. Doe v. Raytheon Co. et al., No. 1:12-cv-2343, (D.D.C. Aug. 31, 2021).

¹⁶Id.

¹⁷Press Release, Evolutions Flooring Inc. and Its Owners to Pay $8.1 Million to Settle False Claims Act Allegations, Justice.Gov (Mar. 25, 2025), https://www.justice.gov/opa/pr/evolutions-flooring-inc-and-its-owners-pay-81-million-settle-false-claims-act-allegations.

¹⁸31 U.S.C. § 3729(a)(1)(G).

¹⁹Compl., United States ex rel. Urban Global LLC v. Struxtur, Inc, et al., No. 2:20-cv-7217, (C.D. Cal. Aug. 10, 2020).

²⁰Compl., United States ex rel. Lee v. Barco Uniforms Inc., et al., No. 2:16-cv-1805, (E.D. Cal. Aug. 1, 2016).

²¹Id.

²²Id.