DOJ Announces First False Claims Act Settlement of Alleged ‘Illegal DEI Practices’ by IBM

On April 10, 2026, the DOJ Civil Division announced a $17 million settlement with IBM, the Division’s first False Claims Act (FCA) settlement under a Civil Rights Fraud Initiative announced in May 2025. The settlement resolves allegations of the Division that IBM violated the FCA by failing to comply with anti-discrimination provisions in its federal contracts through the adoption of programs and policies promoting diversity, equity and inclusion (DEI) practices.

As outlined in the settlement agreement, the Division alleged that IBM engaged in the following practices that violated federal anti-discrimination statutes:

    • Establishing pay, bonus and other compensation policies that encouraged managers to take race, color, national origin or sex into account, including tying bonuses to achieving demographic targets.
    • Considering race, color, national origin sex in the decisions to hire, transfer or promote by using “diverse interview slates” and other practices.
    • Developing and pursuing race and sex demographic goals.
    • Selecting employees for training, mentoring, leadership development programs, educational opportunities and other resources to promote DEI policies and initiatives.

This settlement follows several major actions from the administration and DOJ emphasis on eliminating “illegal DEI.”

    • January 21, 2025: The White House issued Executive Order (EO) 14173, which requires federal contracts and grants to include certifications that recipients do not operate DEI programs and acknowledge that compliance is material under the FCA.
    • February 5, 2025: The Attorney General issued a memorandum to DOJ employees titled “Ending Illegal DEI and DEIA Discrimination and Preferences,” stating that DOJ will “investigate, eliminate, and penalize illegal DEI and DEI preferences, mandates, policies, programs, and activities in the private sector and educational institutions that receive federal funds.”
    • May 19, 2025: DOJ launched the Civil Rights Fraud Initiative, a joint effort between DOJ’s Civil Division (Fraud Section) and DOJ Civil Rights Division, that will use the FCA to investigate recipients of federal funds that violate civil rights law through “discriminatory practices,” including DEI programs.
    • July 29, 2025: DOJ issued guidance to all federal funds' recipients that federal anti-discrimination laws apply regardless of whether a program is labeled “DEI,” and identifying examples of such programs.
    • March 26, 2026: The White House issued a second EO, addressing DEI Discrimination by Federal Contractors. The EO requires federal agencies to incorporate a clause in federal contracts prohibiting DEI policies and programs and provides DOJ and agencies access to books and records for investigations. The EO advises that noncompliance could result in FCA liability, contract termination and debarment.

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