DOJ's Fraud Division Expands Manpower and Regional Coordination

This announcement closely follows DOJ's July 30, 2026, announcement of organized cooperation efforts between federal and state prosecutors and investigators across seven southeastern states – Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, and South Carolina – with "unprecedented" enforcement actions in those same seven states. Additionally, the Fraud Division announced specific "federal-state anti-fraud task forces" in North Carolina, Mississippi, and Florida.

To formalize these updates and further strengthen the Fraud Division's enforcement powers, DOJ's Office of the Attorney General issued a final rule on August 17, 2026, amending the Code of Federal Regulations (CFR) to delegate functions to the Assistant Attorney General (AAG) for the Fraud Division. These functions include criminal proceedings arising under internal revenue laws, matters involving trade fraud, and cases involving health care fraud and abuse. The rule is set to take effect August 24, 2026.

1. What does all this mean for those operating within heavily regulated industries and who receive any government funding for any aspect of those operations?

First, these moves represent the continued growth of the National Fraud Enforcement Division (the Fraud Division). Initially announced as a planned major reorganization of key litigating components of the DOJ months ago by the White House, the Fraud Division is to be a major player in DOJ's prosecution priorities and commands considerable resources that for decades had been formerly assigned to DOJ's Fraud Section, the former Public Integrity Section, aspects of the National Security Division, the Tax Division, and related investigative and operational resources. These pooled resources include the hundreds of prosecutors who work (or did work) for those former divisions and who fanned out across the country on an ad hoc basis, in addition to and alongside the attorneys of the 94 U.S. Attorneys' Offices. This concentration and reorganization of attorneys, resources, and priorities command the attention of those in any arena regulated by or funded by the government.

Second, the organization of federal and state resources into a coordinated effort makes permanent and expands certain DOJ task force strategies that have long been employed in a range of priority matters, including drug trafficking, violent crime, and certain aspects of health care fraud. In short, by formally bringing together prosecutors, law enforcement resources, and support functions across both levels of government and across regions of the country in the form of task forces, the organization allows coordination of efforts, better ensures the streamlining of those efforts, the sharing of information, and avoids duplication of effort. It also opens the door to federal court (and its more predictable sentencing results) to a host of investigators and cases which might not otherwise make it to prompt sentencing necessary for meaningful deterrence. And, in opening the doors to federal courtrooms, it likely means that an army of attorneys employed by state government entities will now be deputized as "Special Assistant United States Attorneys" fully empowered to push these matters into those federal courtrooms.

Third, interestingly, there is no mention of whistleblowers, qui tam actions, or incentivizing those with knowledge of fraud in support of building these cases. Still, make no mistake, these tools remain top of list in building fraud investigations. Indeed, the DOJ, at the beginning of this administration, reaffirmed the value of whistleblowers and has consistently touted the value of those investigations at every turn, including in its press releases announcing the recoveries achieved in matters commenced by qui tam relators and whistleblowers. This is evidenced by the Trade Fraud Task Force's $1 billion in settlements since its formation a year ago, with most of those arising out of False Claims Act cases.

Fourth, DOJ's Fraud Division announcement highlights that it will "use cutting-edge data analysis to target [specifically] . . . telemedicine programs, Medicare or Medicaid fraud, controlled substance diversion, home health and hospice schemes, and companies and individuals that deceptively market unsafe products and services." Data mining, as it's more commonly known, really means sifting and dissecting data supplied by those operating in regulated industries and sectors, identifying the outliers and deviations from broader reporting patterns, and investigating those deviations for potential wrongdoing – through invasive inquiries, Civil Investigative Demands, grand jury subpoenas, interviews of employees and company leadership, and the use of any other tool which can arguably uncover the reason for the deviation. Previously featured only on a case-by-case basis and/or in selected U.S. Attorneys' Offices which embraced that focus, data mining (discussed previously in more detail here) has both proven effective in the investigations of a host of matters and been more fully embraced by federal and state investigators over the years. Now, data mining is plainly a priority feature of the new, sprawling Fraud Division.

2. What can I do to protect my company?

A top-down commitment to compliance is the primary way in which those operating in regulated industries can address this growing army of prosecutors and investigators. Rigorous adherence to governing rules, careful monitoring and immediate attention to potential issues flagged, regular review and exercise of compliance procedures and practices, a commitment to the self-disclosure of problems discovered in appropriate circumstances, and ongoing training of employees at all levels are key components of that commitment to compliance.

Companies seeking to align with best practices (which would curry favor if and when an investigation does come along) should:

1. conduct proactive data reviews periodically and regularly evaluate public datasets that relators and regulators are likely to analyze and use, including reimbursement, procurement, customs pricing, and disclosure data;
    
2. review certifications and supporting controls made in connection with federal programs and ensure they maintain adequate documentation supporting compliance representations;
    
3. strengthen internal reporting and investigation processes to ensure robust whistleblower reporting channels with prompt investigation procedures;
    
4. take early indicators of potential issues very seriously, as they may indicate the filing of a qui tam suit or an actual or likely government investigation; and
    
5. engage with counsel and data analytics professionals on a proactive basis to identify problems, check for trends, and determine if any type of outlying or questionable information has a legitimate explanation.

These recent announcements are a deliberate and further push by the DOJ and its law enforcement partners across the federal and state governments to tackle what it perceives to be a massive level of fraud in government-funded and government-supported operations, with losses estimated by the Government Accountability Office to be in the $233 billion to $521 billion range. The Fraud Division's initiatives will accelerate the pace of cases and will likely dramatically increase the impact on those operating in regulated industries and those that contract with or use funds sourced from the federal government's public fisc. Companies in these spaces should operate under the assumption that all aspects of their operations will be scrutinized.

Baker Donelson's Government Enforcement and Investigations Group regularly advises clients navigating complex, data-driven government investigations and matters involving the DOJ, U.S. Attorneys' Offices across the country, and state agencies that are now more formally partnering with the federal government. If you have questions about how this increased emphasis may affect your organization, please contact a member of Baker Donelson's Government Enforcement and Investigations Group.