Trump Admin Should Unleash The False Claims Act To End Discrimination In Higher Education

Trump Admin Should Unleash The False Claims Act To End Discrimination In Higher Education

As readers of this site are well aware, the Trump administration has wasted no time in launching long-overdue reactions to higher education’s refusal to abide by federal nondiscrimination laws.  By Executive Orders, “Dear Colleague” letters from the Department of Education, and most recently by withdrawing federal funding from elite universities, the administration has made it clear that the old days of academia ignoring federal law and continuing to receive billions in federal funding are no more.

Yet as I and others have long noted, many schools (including almost all “elite” universities) view their maintenance of Kendian “discrimination for the right reasons” programs in admissions, hiring, promotions, tenure, and funding to be moral imperatives, and thus either are flatly refusing to abide by the Trump administration’s demands, and/or are continuing their discriminatory programs sub rosa.  As National Association of Scholars’ President Peter Wood has observed:

“Our colleges and universities are the moral and practical equivalent of the Jim Crow South. They are privileged, in some cases immensely wealthy, and, because they act as a law unto themselves, are practically lawless. The battle at hand is whether we will have lawful higher education or rule by these well-entrenched cultural warlords. They amount to a state-within-a-state dedicated to perpetual discrimination and authoritarian illiberalism. They are, moreover, the Jim Crow South of the 1910s rather than the 1950s, which engages routinely in arbitrary persecution of dissenters and does not even follow its own laws. If we follow our ordinary rules, it will be DEI today, DEI tomorrow, DEI forever.”

To its credit, the Trump administration is employing a wide array of sanctions on such recalcitrant schools. Billions in federal funding are being frozen or withdrawn, revocation of schools’ tax exempt status is being considered, and even their eligibility to enroll foreign students may be yanked.

Yet the Trump administration has yet to use one of the most potent weapons in its arsenal – one that, if deployed, could represent an existential economic threat to all but the wealthiest universities that insist on continuing their discriminatory practices.

This weapon is the federal False Claims Act, and it is time to unleash it on woke academia.

The False Claims Act

The False Claims Act (31 U.S.C. § 3730; the “FCA”) was passed over 150 years ago to address a seemingly intractable problem: widespread fraud by defense contractors during the Civil War.  Under the FCA, a person who knowingly submits a false claim to the government is liable for three times the government’s damages plus additional penalties.   For example, a hospital that knowingly obtains $10 million from the federal government on bogus Medicare invoices would be liable to the government for over $30 million.

But while the government can bring such claims itself, the FCA has another important component: the ability for whistleblowers (i.e., people with inside information of the fraud) to bring FCA suits in the government’s name, and receive a reward of up to 30% the funds recovered.  Such private prosecutions are known as qui tam actions, and the vast majority of the billions recovered annually under the FCA arise from them.

For example, suppose you are an employee of the hospital in the foregoing hypothetical, and you discover that it is fraudulently billing Medicare for MRI’s that never occurred.  You find a lawyer who specializes in FCA qui tam cases, who then prepares and files the qui tam action in federal court under seal, and serves the Department of Justice a copy of the complaint and a comprehensive memorandum explaining the claim and the evidence that the whistleblower has.   The Department of Justice can then choose to intervene in the case and thereafter prosecute it, or it can decline to do so and allow you to do so.   Either way, if the FCA qui tam suit is successful, the whistleblower receives a reward of up to 30% of the funds recovered (typically, 15-20% where the government takes over the case).

So in the hypothetical set forth above, if the government immediately intervened and ultimately collected $30 million, the whistleblowing employee would collect a reward of $4.5 to $6 million (which typically would be split with his attorney, if the attorney handled the case on a contingency fee basis).  These financial inducements – along with provisions in the FCA (31 U.S.C. § 3730(h)) imposing draconian additional penalties on employers who retaliate against FCA whistleblowers – make the FCA a powerful weapon against defrauding the federal government.

Application to Higher Education

In order to receive federal funding (including its students’ eligibility for federally guaranteed student loans), a school must annually certify that it does not engage in discrimination that violates federal law (e.g., race, color, ethnicity, national origin, etc.).  These certifications are typically contained in a Program Participation Agreement or a federal grant application, and are signed by the CEO of the university under oath.

If a school fails or refuses to provide such certifications, then it is ineligible to receive federal funds.   Stated differently, but for the school certifying that it does not discriminate in violation of federal law, it would not have obtained any of the federal funds it subsequently received.

Through a recent “Dear Colleague” letter, the Trump administration has warned schools that any programs or practices that favor or disfavor anyone based on race, color, ethnicity, national origin, etc. are illegal under federal law, and thus the annual nondiscrimination certifications require the school to aver that they do not have any such programs or practices.

But faced with the choice of foregoing federal funds (which would be fiscally impossible for most schools) and ending DEI programs (which the school may view as a moral imperative, regardless of their illegality), most schools will likely choose door number 3: they will falsely certify that they do not have discriminatory programs or practices, but will continue them sub rosa.   This is the same attitude evidenced by UC Berkeley law school Dean Erwin Chemerinski’s admission (on video) that notwithstanding the Supreme Court’s SFFA decision, his school continues to engage in “unstated affirmative action,” but that “if ever I’m deposed I’m going to deny I said this to you.”

Were a school to submit such false certifications, and thereafter receive its annual haul of federal funds (including federally guaranteed loans to its students – loans that would not have been made but for the nondiscrimination certification), then it has violated the FCA, and could be required to repay over three times the funds the federal government provided based on the fraudulent nondiscrimination certification.

Think about the magnitude of such potential liabilities.   Harvard receives (well, used to receive) billions annually in federal funds, as do many other “elite” universities, and most schools receive a substantial portion of their annual budget from federal funds.   How many could afford to repay three times those amounts – especially after those funds have been spent?

Think also about the interpersonal dynamics and game theory implications of such huge potential liabilities.   Say that you are an employee (or even a professor or administrator), and are privy to the school’s hush-hush communications on how it is going to “resist” the Trump administration and the Supreme Court by continuing their race preferences in admissions and hiring, and that the school’s administration is behind the effort.

If the school signs a nondiscrimination certification, and thereafter receives, say, $500 million in federal funds, turning whistleblower could yield you upwards of $75 million (which, even net of a 40% contingency fee for your lawyers, would be still be a huge payday).  Now add the fact that the potential reward goes to the first person to blow the whistle (i.e., “you snooze, you lose”), and you can see the incentives this creates.   Even for those insiders who may nominally support the school’s DEI objectives, the lure of such a huge potential payday may prove irresistible (especially if, for instance, they had already decided to retire, had some other grievance against the school, or were financially strapped).

Lest you think such FCA liabilities are just a pipe dream, look at what various BigLaw firms (which are no friends of the Trump administration or its anti-DEI positions) have recently been warning their university and other clients who obtain federal funds under nondiscrimination certifications.  (Examples here, here, here, and here.)  While many of these firms clearly do not like it, they still recognize that these potential FCA liabilities are very, very real and could well be catastrophic.

While the Supreme Court’s SFFA decision removed any doubt that racial preferences in education are indeed illegal under federal law, the Biden administration’s refusals to enforce federal law against what it viewed as “acceptable” racial discrimination in education made such FCA qui tam actions a fool’s errand, as the government would almost assuredly have simply intervened and then dismissed such cases.

The Trump administration, on the other hand, has no such compunctions about “acceptable” discrimination.  Were the Justice Department to give a full-throated public endorsement that it supports FCA qui tam suits against schools who collect federal funds but are determined to continue these discriminatory practices, the economic incentives created by the FCA (to say nothing of the ingenuity,  tenacity, and resources of the business plaintiff’s bar) would likely put a stop to such practices in very short order.

It’s time to unleash the hounds.

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Louis K. Bonham is an intellectual property litigator. He is a graduate of the University of Texas (BA ’83, JD ’86), was an Articles Editor on the Texas Law Review, and served as a law clerk to the Hon. Edith H. Jones of the US Court of Appeals for the Fifth Circuit.

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