The U.S. Justice Department launched fraud investigations into Google and Verizon's diversity programs this week, deploying a 162-year-old Civil War-era statute against corporate DEI initiatives. The Wall Street Journal reported Sunday that federal investigators issued document demands to both companies and others across multiple industries.
Deputy Attorney General Todd Blanche outlined the initiative in a May memo directing officials to pursue claims against federal fund recipients using DEI in hiring. The administration contends companies holding federal contracts while maintaining diversity programs committed fraud against taxpayers.
Google and Verizon received Justice Department demands for workplace program documents and internal information, according to people familiar with the investigations. Both companies scaled back DEI initiatives earlier this year - Google in February and Verizon in May - but investigators are examining whether compliance came swiftly enough after Trump's January executive order.
The probes utilize the False Claims Act, a statute traditionally targeting defense contractor overbilling and healthcare fraud. Under the administration's legal theory, companies certifying merit-based hiring compliance while pursuing diversity goals may have submitted false claims for government payment.
Investigations extend beyond tech and telecom into automotive, pharmaceutical, defense, and utility sectors. Some companies have already met in person with Justice Department officials, indicating advanced rather than preliminary review stages.
The False Claims Act allows the government to recover triple damages plus penalties for knowingly submitted false claims. The DOJ obtained $2.9 billion in fraud settlements and judgments in fiscal year 2024, primarily from healthcare and defense cases.
Legal experts note the unprecedented application of antifraud law to workplace diversity policies. To prevail in court, prosecutors must prove DEI programs were "material" to contracts - meaning the government would have withheld payment had it known about them.
Corporate America faces significant financial exposure. Verizon, already experiencing three consecutive quarters of customer losses, could face particularly severe penalties if found liable under the statute's triple-damages provisions.
The administration's approach follows Trump's January executive order eliminating federal DEI programs and directing agencies to fire diversity officers. The policy shift represents a broader effort to dismantle race-conscious initiatives across government and private sectors.
Companies are reassessing workplace policies amid the legal uncertainty, according to industry consultants. One anonymous consultant told Black Enterprise the administration is "signaling that DEI is no longer just a cultural debate, but a financial and legal liability."
The Justice Department declined to comment on the investigations. Google and Verizon did not immediately respond to requests for comment from multiple news organizations.
Legal observers anticipate corporate policy shifts as firms weigh diversity program benefits against multimillion-dollar penalty risks and potential loss of government contracts. The outcome remains uncertain given the novel legal theory being tested.
