Enforcement and Prosecution Policy and Trends, Government Contracts July 14, 2026

DoW Suspends CMMC Phase II Requirements – Launches 60-Day Review

By Edwin O. Childs, Andrew Konia, Abram J. Pafford, Jack White, Jason M. Vespoli, Léa Dickinson, Sophie Marsh and John Sullivan

Overview

On July 13, 2026, the Department of War (DoW) announced the immediate suspension of all Cybersecurity Maturity Model Certification (CMMC) Phase II requirements, which had originally been scheduled to take effect November 10, 2026, including the transition to mandatory third-party assessments by CMMC Third-Party Assessment Organizations (C3PAOs) for contractors handling Controlled Unclassified Information (CUI). The DoW simultaneously established a CMMC Reform Task Force charged with delivering a comprehensive report within 60 days recommending “realistic, scalable security measures” for the Defense Industrial Base (DIB).

The suspension, announced by DoW Chief Information Officer Kirsten A. Davies, aligns with Secretary of War Pete Hegseth’s Acquisition Transformation System (ATS) directives and the broader “Arsenal of Freedom” initiative. Critically, the action does not relieve contractors of their underlying obligations to protect federal data, which includes the current DFARS 252.204-7012 (Safeguarding Covered Defense Information and Cyber Incident Reporting) and the NIST SP 800-171 Rev. 2 security controls upon which the CMMC Phase II requirements are based.

Compliance June 24, 2026

OFAC Details Sanctions Compliance Expectations for the Stablecoin Industry

By Patrick Rowan, Alex J. Brackett and David Hirsch

The Office of Foreign Assets Control (“OFAC”) recently issued a proposed rule that will require the implementation and maintenance of a sanctions compliance program (“SCP”) for permitted payment stablecoin issuers (“PPSIs”).

The proposed rule, which directs that PPSIs put in place a SCP that includes at least five specific elements, deserves immediate attention from the stablecoin industry because, even if the rule is not ultimately adopted, it describes the compliance measures OFAC currently expects from issuers of payment stablecoins. More generally, this proposal is the first time that OFAC was directed by Congress to adopt rules for a mandatory SCP. OFAC responded to that direction by drafting a rule describing the required SCP with some precision. The resulting proposed rule impacts PPSIs directly, but also represents an opportunity for all businesses that face sanctions risk to evaluate their compliance efforts against OFAC’s detailed SCP expectations.

Fraud, Deception and False Claims June 16, 2026

AI-Assisted Billing Could Create FCA Pitfalls: How Healthcare Companies Can Get Ahead of Risk

By Garen S. Marshall, Justin Givens, Mindy Sauter, Brett Barnett, Rhea Shahane and Katherine Richardson

Across the healthcare industry, providers are increasingly relying on AI-assisted billing tools to automate medical coding, prior authorization workflows, and the submission of claims to Medicare, Medicaid, and other federal payors. Some vendors advertise “clean” claim rates exceeding 98%, meaning payors almost always accept submitted claims without further intervention or correction. But a high clean-claim rate is an operational metric, not a compliance safe harbor. It does not establish that the claim was properly coded, medically necessary, supported by documentation, or free from overpayment risk. The efficiency gains can be substantial, as can the heightened False Claims Act (“FCA”) exposure these systems can create. At the same time, many of these tools may improve consistency and reduce certain forms of human error when implemented and monitored appropriately. As AI continues to develop and becomes more widely integrated into healthcare billing, relators and prosecutors are likely to explore new avenues for evaluating, and litigating, how these tools are deployed, monitored, and overseen.

Sanctions, Trade Embargo, and Export Controls June 15, 2026

Federal Circuit Stays Injunctions Against Section 122 ‘Balance-of-Payments’ Tariffs Pending Appeal

By Alex J. Brackett, Ryan M. Bernstein, Mimi Bair and Chelsea Smith Press

On June 11, 2026, the U.S. Court of Appeals for the Federal Circuit granted the federal government’s motions for a stay pending appeal in State of Oregon v. Trump (Nos. 2026-1804, 2026-1805), consolidated appeals from two decisions of the U.S. Court of International Trade (CIT) that had enjoined enforcement of tariffs imposed under Proclamation No. 11012 and Section 122 of the Trade Act of 1974. While the appeal proceeds on the merits, the government may continue to collect the Section 122 “balance-of-payments” tariffs as to the parties covered by the underlying injunctions, including the State of Washington, Burlap and Barrel, Inc., and Basic Fun, Inc., pending further order of the Federal Circuit.

Enforcement and Prosecution Policy and Trends June 10, 2026

The Great American AI Act: What It Means — and Doesn’t Mean — for Companies Using AI

By Garen S. Marshall, Justin Givens, David Hirsch and Jake Pryor

On June 4, 2026, Representatives Jay Obernolte and Lori Trahan released a discussion draft of the Great American Artificial Intelligence Act (GAAIA). The proposal has generated significant attention, but many organizations may be overestimating its practical significance for their day-to-day operations. The bill is directed primarily at developers of “frontier” AI models, so for most companies using AI models in their daily operations, these requirements will not apply. Nonetheless, the bill has sparked conversation—it incorporates multiple bipartisan bills on AI, its drafters wrote an op-ed calling on the U.S. to create a national framework covering AI, and the U.S. House Democratic Commission on AI and the Innovation Economy released a statement that the draft “does not meet the enormity of the moment.”

Key Takeaways

The bill is primarily aimed at the biggest AI developers with more than $500 million in revenue that are building cutting-edge AI models rather than most typical businesses developing in-house AI or deploying commercial AI models.
The proposed preemption provision would leave many state-law obligations governing AI deployment intact, including employment, privacy, consumer protection, healthcare, financial services, and common-law claims.
The draft would increase fraud-related penalties and reflects a broader enforcement trend toward applying existing fraud and misconduct frameworks to AI-enabled conduct.
If this bill passes, many of the legal risks businesses face when using AI will remain unchanged.

Sanctions, Trade Embargo, and Export Controls June 8, 2026

As Courts Wrestle With Tariff Refund Cases, Importers Should Confirm Submission of Key Information and Assess Options

By Alex J. Brackett, Ryan M. Bernstein, Chelsea Smith Press and Mimi Bair

Parallel proceedings in two U.S. Court of International Trade cases, Euro-Notions Florida, Inc. v. United States (No. 25-00595) and V.O.S. Selections, Inc. v. United States (No. 25-00066), are rapidly converging on what may be the central unresolved question in the IEEPA tariff refund process: must the government refund duties on entries that have liquidated and become final, even for importers who have not filed suit?

Enforcement and Prosecution Policy and Trends, Fraud, Deception and False Claims, Government Contracts June 8, 2026

How Federally Funded Organizations Should Prepare for OMB Proposed Overhaul of Grants Oversight, DEI Bans, Easier Terminations

By John S. Moran, Sarah Wake, Edwin O. Childs, Jack White, Jason M. Vespoli, Sophie Marsh and John Sullivan

Key Takeaways

The Office of Management and Budget (OMB) proposed sweeping revisions to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards that, among other changes, would prohibit the use of federal funds to support DEI policies that violate federal anti-discrimination laws.
The proposed rule introduces a broad discretionary termination provision, modeled after the FAR’s termination-for-convenience clause, that would allow agencies to terminate awards that no longer advance “agency priorities or the national interest.”
New oversight measures include mandatory E-Verify participation, expanded conflict-of-interest disclosures, pre-issuance review criteria under which the government will evaluate applicants’ civil-rights compliance and foreign affiliations, and enhanced subaward reporting on SAM.gov.
Comments are due 45 days after publication in the Federal Register July 13, 2026, with OMB targeting an ultimate effective date of October 1, 2026.
Organizations receiving federal funding should continue to review DEI-related programs and policies, assess internal controls, and evaluate the impact of the expanded termination authority on current and future awards.

Government Contracts May 28, 2026

Canadian Steel Companies and Owner to Pay $19M to Settle False Claims Act Allegations Relating to Evaded Customs Duties

By Patrick Rowan, Alex J. Brackett, John Padgett, Edwin O. Childs, Brett Barnett, Michael J. Podberesky, Abram J. Pafford, Jack White, Jason M. Vespoli, Sophie Marsh and John Sullivan

On May 20, 2026, the U.S. Department of Justice (DOJ) announced a settlement under the False Claims Act (FCA) with two Canada-based steel companies, Farjess Inc. and Royal Canadian Steel Inc., and their part-owner and president, Feroz Jessani, pursuant to which the companies and Jessani agreed to pay $19 million to resolve allegations that they knowingly and improperly misrepresented the country of origin and failed to pay duties owed on flat-rolled steel manufactured in Europe and Asia. The settlement underscores the government’s continued and aggressive use of the FCA to pursue Trump Administration policy priorities, including the active implementation of tariffs and customs duties, and reinforces the importance of accurate country-of-origin declarations when importing foreign materials and products.

Government Contracts May 27, 2026

DoW Proposed Rule Would Impose New FOCI Disclosure and Risk Mitigation Requirements on Thousands of Defense Contractors

By Edwin O. Childs, Patrick Rowan, Abram J. Pafford, Jack White, Jason M. Vespoli, John Sullivan and Sophie Marsh

On May 7, 2026, the Department of War (DoW) published a proposed rule that would dramatically expand the population of defense contractors that are required to disclose beneficial ownership and foreign ownership, control, or influence (FOCI) information to the Defense Counterintelligence and Security Agency (DCSA) and to mitigate identified FOCI risks. At present, DCSA addresses FOCI only when a contractor requires access to classified information in the performance of a classified contract. The proposed rule, which amends the Defense Federal Acquisition Regulation Supplement (DFARS), would require reporting and mitigation of FOCI for DoW contractors and subcontractors that seek to perform on unclassified non-commercial contracts, as well as certain unclassified commercial contracts. The proposed rule would apply to DoW contracts and subcontracts valued in excess of $5 million and implements provisions of the National Defense Authorization Acts (NDAAs) for Fiscal Years 2020 and 2021 and DoD Instruction 5205.87.

Government Contracts May 18, 2026

New Executive Order Mandates Shift to Fixed-Price Contracting, Requires Review of Largest Cost-Reimbursement Contracts

By Edwin O. Childs, Jason M. Vespoli, Abram J. Pafford, Jack White, John Sullivan and Sophie Marsh

On April 30, 2026, President Trump signed an Executive Order titled “Promoting Efficiency, Accountability, and Performance in Federal Contracting” (the “Order”), directing executive branch agencies to default to fixed-price contracts and contracts that tie contractor profit to performance-based metrics in federal procurement. The Order also requires agencies to review and, to the maximum extent practicable, modify, restructure, or renegotiate their largest non-fixed-price contracts. For context, a companion White House Fact Sheet states that in Fiscal Year 2024, approximately $120 billion was obligated on cost-reimbursement consulting contracts, underscoring the scale of the shift the Order contemplates.

This alert summarizes the key provisions of the Order, analyzes its practical implications for federal contractors and subcontractors, and outlines recommended steps for compliance.

Subject to Inquiry

THE LATEST ON GOVERNMENT INQUIRIES AND ENFORCEMENT ACTIONS