HHS-OIG Decertifies New York Medicaid Fraud Control Unit, Escalating Federal Scrutiny of State Medicaid Fraud Enforcement
The Administration has taken another significant step in its effort to increase pressure on state Medicaid Fraud Control Units (“MFCUs”). On July 2, 2026, the United States Attorney’s Office for the Northern District of New York announced the U.S. Department of Health and Human Services Office of Inspector General (“HHS-OIG”) denied recertification of New York’s MFCU and suspended its federal funding effective July 1. The decision follows the Administration’s announcements earlier this year that it would closely scrutinize state MFCU performance, including through funding consequences for states perceived as failing to aggressively investigate and prosecute Medicaid fraud.
In House Hearing, DAAG Jenny Discusses FCA Enforcement Priorities Related to Grants, Faces Questioning on Using FCA to Target Discrimination
On June 24, 2026, the Investigations and Oversight Subcommittee of the U.S. House of Representatives Committee on Science, Space, and Technology held a hearing on “Federal Research Funds: The False Claims Act’s Role in Combating Grant Fraud.” Brenna Jenny, DOJ’s Deputy Assistant Attorney General for Commercial Litigation, testified on three FCA enforcement “focus areas” related to federal grants, before responding to questions regarding the use of the statute to target discrimination.
DOJ Reaches $507,144 Settlement with Defense Contractor, Signals Increased FCA Scrutiny of Cybersecurity Self-Assessments
On June 18, 2026, DOJ announced a settlement with LOGZONE Inc., a defense contractor, to pay $507,144 to resolve allegations that it violated the False Claims Act through its failure to satisfy cybersecurity requirements in its contracts with the Department of the Navy (“the Navy”). This settlement involves yet another coordinated enforcement effort through the recently created Task Force to Eliminate Fraud, previously reported on here and here. DOJ reached this settlement with assistance from the Department of the Navy, the Department of the Army, and the Defense Contract Management Agency (“DCMA”). This settlement underscores cybersecurity compliance as a focus of FCA enforcement.
Challenging Executive Order on DEI, States Say It Gets FCA Materiality Wrong
On June 10, 2026, nineteen states and the District of Columbia filed suit challenging President Trump’s Executive Order No. 14398, which seeks to eliminate diversity, equity, and inclusion (DEI) initiatives among federal contractors and expressly links DEI-related conduct to potential False Claims Act (FCA) liability. The lawsuit, brought under the Administrative Procedure Act, targets the Order’s anti-DEI contracting provisions and the federal government’s efforts to implement them.
The states argue that the Executive Order’s attempt to designate compliance with its anti-DEI requirements as “material” to government payment decisions conflicts with the Supreme Court’s FCA materiality standard articulated in Universal Health Services v. Escobar. The complaint also challenges the Order on broader administrative law grounds, arguing that key terms are impermissibly vague and that agencies have failed to justify the Order’s underlying policy assumptions.
Read the full post for a closer look at the states’ materiality arguments and the potential implications for federal contractors facing increased FCA scrutiny of DEI-related practices.
DOJ’s Civil Rights Fraud Initiative Raises False Claims Act Risks for Healthcare and Life Sciences Companies
In a Reuters article, Sidley partners Jaime Jones, Kristin Graham Koehler and Boyd Greene examine how the U.S. Department of Justice’s Civil Rights Fraud Initiative could create new False Claims Act (FCA) exposure for healthcare and life sciences companies that receive federal funding or contract with the federal government. The initiative seeks to use the FCA to pursue organizations that allegedly violate federal civil rights laws while certifying compliance with contractual, grant or funding requirements.
DOJ Announces Accelerated Review of FCA Qui Tams Alleging Fraud Against State-Administered Benefits Programs
It is not business as usual at DOJ. In the latest announcement related to the Department’s efforts to fight alleged fraud, on May 27, 2026, Assistant Attorney General Brett Shumate issued a memorandum directing DOJ’s Civil Division and U.S. Attorneys’ Offices to accelerate the review of qui tams alleging fraud against federally funded state-administered benefits programs, including programs involving housing, food assistance, medical care, and cash assistance. The memorandum, titled “Accelerating Review and Enhancing Enforcement in Benefits Fraud Matters,” implements President Trump’s March 2026 Executive Order establishing the “Task Force to Eliminate Fraud,” which we reported on here, and which directed the Department to take appropriate action to promote “meritorious” qui tams and to complete investigations sooner, including within the 60-day statutory period.
DOJ and Texas AG Announce First Settlement in National Investigation of Gender-Affirming Care for Minors
On May 15, 2026, the U.S. Department of Justice and the Texas Attorney General announced the first publicly disclosed settlement arising from the federal government’s nationwide investigation into gender-affirming care for minors. The resolution with Texas Children’s Hospital reflects a coordinated federal-state enforcement approach grounded in False Claims Act (“FCA”) and Federal Food, Drug, and Cosmetic Act (“FDCA”) theories, alongside significant non-monetary remedies extending beyond traditional healthcare fraud settlements. In addition to a substantial monetary payment, the agreements impose operational, clinical, and governance-related obligations that may signal how enforcement authorities intend to pursue similar matters going forward.
This blog post examines the settlement terms, the broader federal policy and enforcement framework underlying the investigation, and the implications for healthcare providers and life sciences companies navigating areas of aligned federal and state enforcement focus. Click to read more about the resolution and what it may signal for future DOJ and state attorney general enforcement activity.
Supreme Court’s First Choice Decision May Expand Federal Court Options to Recipients of State Attorney General CIDs
The U.S. Supreme Court’s recent decision in First Choice Women’s Resource Centers, Inc. v. Davenport may create a new strategic consideration for recipients of state attorney general civil investigative demands (CIDs). In a unanimous opinion, the Court held that a nonprofit could pursue a Section 1983 challenge to a New Jersey Attorney General subpoena in federal court based on alleged First Amendment associational harms arising from compelled donor disclosure.
Although the Court emphasized the narrow nature of its holding, the decision potentially opens the door to federal court challenges where state attorney general CIDs implicate donor anonymity, expressive association, advocacy activities, or other constitutional interests. The ruling also reflects the Court’s continued willingness to recognize Article III standing based on alleged chilling effects tied to First Amendment rights.
Our latest post examines the decision, the arguments raised by a coalition of state attorneys general, and what the ruling may mean for companies, nonprofits, trade associations, and other recipients of state attorney general investigative demands.
