DOJ Secures First False Claims Act Settlement Under Civil Rights Fraud Initiative Against IBM for DEI Practices

The Department of Justice has reached a landmark $17 million settlement with IBM, marking the first resolution under its Civil Rights Fraud Initiative. The settlement, announced on April 10, 2026, resolves allegations that IBM violated the False Claims Act by failing to comply with anti-discrimination requirements in federal contracts through diversity, equity, and inclusion practices that the government contends were discriminatory.

According to the settlement agreement, the DOJ alleges that IBM knowingly submitted false claims and made false statements by certifying compliance with anti-discrimination requirements while maintaining practices that discriminated against employees and applicants based on race, color, national origin, or sex.

The investigation targeted practices dating back to 2019, including programs that had become common in corporate America prior to the Trump Administration’s return to office. These practices included mentorship programs with race or gender-based eligibility restrictions, “diverse slates” requirements for hiring, and demographic targets tied to compensation.

The settlement specifically outlined four categories of “Covered Conduct” that the government considered problematic: modifications to pay and bonuses based on demographic targets; hiring and promotion practices that considered protected characteristics; demographic goals for business units; and training, mentoring, and development programs with eligibility limited by race, color, national origin, or sex.

IBM has denied engaging in the alleged conduct but agreed to pay over $17 million to resolve the claims, with approximately $8.2 million designated as restitution. The company received credit for cooperation, including early disclosure of relevant facts and voluntary remedial measures.

This enforcement action aligns with President Trump’s executive initiatives since returning to office in January 2025. Executive Order 14173, issued that month, instructed federal agencies to include provisions in contracts requiring certification that contractors don’t operate DEI programs violating federal anti-discrimination laws. The order explicitly framed such violations as material to government payment decisions under the False Claims Act.

The initiative was further formalized in May 2025 when then-Deputy Attorney General Todd Blanche established the Civil Rights Fraud Initiative. This program brings together attorneys from the DOJ’s Civil Rights Division and Civil Division’s Fraud Section to “aggressively pursue” claims against federal fund recipients violating civil rights laws.

What makes this settlement particularly notable is that it doesn’t appear to be based on violations of new Trump-era certifications, but rather on existing Federal Acquisition Regulations and anti-discrimination laws. This suggests the administration believes current legal frameworks provide sufficient basis for False Claims Act liability regarding DEI practices they view as discriminatory.

Acting Attorney General Todd Blanche emphasized the department’s commitment, stating the initiative aims to “root out this misconduct, hold offenders accountable, and end this practice for good.” Associate Attorney General Stanley Woodward added that the settlement “proves this Department’s commitment to ensure companies are not using taxpayer funded work to further woke unconstitutional practices in American workplaces.”

For government contractors, this settlement sends a strong warning that DEI practices common during previous administrations may now create substantial liability risk. The investigation’s reach back to 2019 indicates that even contractors who have adjusted their practices since Trump’s return to office may not be fully protected from scrutiny of their past activities.

Legal experts recommend that government contractors conduct privileged audits of their DEI and related practices to minimize risk. Even organizations that have already reviewed their initiatives should consider fresh evaluations in light of this settlement and the “Addressing DEI Discrimination by Federal Contractors” Executive Order.

With DOJ officials signaling that this settlement represents only the beginning of enforcement efforts under the Civil Rights Fraud Initiative, contractors should expect continued scrutiny of diversity programs and increased use of the False Claims Act as an enforcement mechanism in this area.