White House Executive Order Addresses DEI Discrimination by Federal Contractors

White House Executive Order Addresses DEI Discrimination by Federal Contractors

President Trump signed an Executive Order (EO) targeting diversity, equity, and inclusion (DEI) activities by federal contractors. According to the EO, “DEI activities are not only unethical and often illegal, but also cause inefficiencies, waste, and abuse.” The EO defines “racially discriminatory DEI activities” as disparate treatment based on race or ethnicity in the recruitment, employment, contracting, program participation, or allocation or deployment of an entity’s resources. “Program participation” is further defined to include membership or participation in, or access or admission to, training, mentoring, or leadership development programs; educational opportunities; clubs; associations; or similar opportunities sponsored or established by the contractor or subcontractor.

The EO directs executive departments and agencies to ensure that government contracts include a new clause, under which a contractor must agree not to engage in racially discriminatory DEI activities, furnish all information and reports necessary for the contracting agency to ascertain compliance, and report subcontractor noncompliance. The clause further provides that noncompliant contracts may be canceled, terminated, or suspended, and that noncompliant contractors or subcontractors may be debarred. Notably, the clause requires contractors to acknowledge that compliance is material to the government’s payment decisions for purposes of the False Claims Act (FCA).

The EO also directs the Attorney General to consider whether to bring FCA actions against contractors or subcontractors found to violate the clause. This approach mirrors the Administration’s broader strategy of leveraging the FCA to enforce its EOs. Another recently issued EO established a Task Force to Eliminate Fraud that similarly directed the Attorney General to maximize the pursuit of fraud involving taxpayer dollars and promote the meritorious pursuit by private persons of FCA qui tam actions. 

Read the EO here.

FCA Claims Against Novartis Allowed to Proceed 

On March 30, the US District Court for the Southern District of New York denied Novartis Pharmaceuticals Corporation’s motion to dismiss a FCA case premised on alleged violations of the Anti-Kickback Statute (AKS). 

The Second Circuit remanded the case after finding that the relator sufficiently pled AKS violations with respect to three types of alleged conduct: (1) compensation of physicians for speaking at events with no legitimate attendees, (2) excessive compensation for speaking events that were canceled, and (3) selecting and retaining physicians as speakers to reward and induce high prescribers.

On remand, the district court rejected Novartis’ argument that the Third Amended Complaint lacked the specificity required under Rule 9(b), finding it provided sufficient detail to put Novartis on notice of the alleged scheme, and adequately pled scienter and materiality. 

The case is United States ex rel. Camburn v. Novartis Pharmaceuticals Corp., Case No. 13-CV-3700, in the US District Court for the Southern District of New York. 

Telemedicine Company Owner Pleads Guilty in $46 Million Medicare Fraud Conspiracy

On March 27, the owner of a telemedicine company pleaded guilty to orchestrating a $46.2 million Medicare fraud conspiracy that operated for more than six years. The guilty plea is the latest in a series of federal enforcement actions in the telemedicine space, which has drawn heightened government scrutiny as telehealth utilization has expanded in recent years.

The case follows a pattern frequently seen in telemedicine-related prosecutions: the use of telehealth platforms to generate orders for medically unnecessary products billed to Medicare. The defendant owned and operated TelevisitMD and allegedly used the company’s internet-based platform to produce and sell fraudulent doctors’ orders for durable medical equipment (DME) and genetic testing, even though the physicians generally had no contact with or a provider-patient relationship with the individuals. The government alleged that the scheme resulted in at least $46.2 million in false claims submitted to Medicare.

Harwood pleaded guilty to conspiracy to commit health care fraud and wire fraud and agreed to pay $17.9 million in restitution. He faces a statutory maximum sentence of 20 years in prison, and a sentencing date has not yet been set. 

The case is United States v. Harwood, Case No. 0:25-CR-60138, in the US District Court for the Southern District of Florida. 

The US Department of Justice’s (DOJ) press release can be found here.

Fugitive DME Operator Receives 12.5-Year Prison Sentence Following $61 Million Medicare Fraud Scheme

On March 25, Robert Leon Smith III, 50, of Archer City, Texas, was sentenced to 150 months in prison and two years of supervised release in connection with a $61.5 million health care fraud and wire fraud conspiracy that targeted Medicare beneficiaries through deceptive telemarketing practices.

Court filings indicate that Smith owned and operated seven DME supply companies and a marketing company. Through these entities, Smith and his co-conspirators allegedly used an offshore call center in the Philippines to run telemarketing campaigns that sold medically unnecessary orthotic braces, foot baths, and genetic tests to Medicare beneficiaries, generating millions of dollars in fraudulent claims. To obtain orders for these unnecessary products and tests, Smith allegedly paid kickbacks to illegitimate telemedicine companies and forged physician signatures.

After a four-day trial in 2025, Smith changed his plea to guilty on one count of conspiracy to commit health care fraud and wire fraud and one count of health care fraud. He then fled and failed to appear for sentencing, evading authorities for over a month before being apprehended. In addition, Smith was ordered to pay more than $39 million in restitution and forfeiture.

The case is United States v. Smith III, Case No. 9:23-cr-80211, in the US District Court for the Southern District of Florida. 

The DOJ’s press release can be found here.