On April 10, 2026, IBM and the U.S. Department of Justice entered into a settlement agreement to resolve the DOJ’s allegations that IBM violated the False Claims Act (FCA) through its diversity, equity and inclusion (DEI) practices. Without admitting liability, and denying wrongdoing, IBM agreed to pay the DOJ approximately $17 million to resolve all claims alleging the company “fail[ed] to comply with anti-discrimination requirements in its federal contracts due to practices” that allegedly “took race, color, national origin, or sex into account when making employment decisions.” This is the first resolution secured by the Civil Rights Fraud Initiative, which was formed in March 2025 (discussed here).
Alleged DEI-Related Practices at Issue
The DEI practices challenged by the DOJ include:
(1) Tying compensation to achieving certain demographic targets, including using a “diversity modifier that tied bonus compensation to achieving demographic targets”;
(2) Taking race, color, national origin or sex into account as part of employment decisions, including through use of “diverse interview slates” and “diverse sourcing”;
(3) Using race and sex demographic goals for business units and making employment decisions to achieve those goals; and
(4) Offering certain training, partnerships, mentoring, leadership development programs, educational opportunities or resources only to certain employees, with eligibility, participation, access or admission limited on the basis of race, color, national origin or sex.
The resolution covered the period of January 1, 2019 (so prior to President Trump’s issuance of Executive Order 14173 entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (discussed here)) to present. Of the approximate $17 million settlement, approximately $8.2 million constituted restitution. The agreement alleges that IBM “allocated costs to its federal government contacts relating to” the challenged practices. Notably, the DOJ stated that IBM received “cooperation credit,” given the “significant steps” taken by the company, including the implementation of “voluntary remedial measures,” by terminating and/or modifying the policies at issue, and making “early disclosure of facts relevant to the government’s investigation.”
This settlement further underscores the increased scrutiny being placed on DEI-related practices, particularly for federal contractors, together with DOJ’s intent to seek recovery of any costs allocated to federal contracts in connection with challenged DEI practices.