DOJ Secures First-Ever DEI-Related FCA Settlement With IBM

In a first-of-its-kind resolution, the U.S. Department of Justice (DOJ) announced on April 10, 2026 that International Business Machines Corporation (IBM) agreed to pay approximately $17.1 million to resolve allegations that it violated the False Claims Act (FCA) by falsely certifying compliance with anti-discrimination requirements in its federal contracts while maintaining employment practices the government views as discriminatory.

The announcement is notable as the first FCA settlement related to a federal contractor’s diversity, equity, and inclusion (DEI) practices. The current administration has been signaling its intent to use fraud-based enforcement tools to target corporate DEI programs since President Trump took office in January 2025. As Arnold & Porter has previously covered, President Trump, on his second day in office, issued an executive order directing agency heads to “encourage the private sector to end illegal DEI discrimination and preferences.” In a May 2025 follow-on memorandum entitled “Civil Rights Fraud Initiative,” DOJ articulated for the first time its position that federal contractors or federal funds recipients may face FCA liability by certifying compliance with federal civil rights laws while “knowingly engaging in racist preferences, mandates, policies, programs, and activities, including through [DEI] programs that assign benefits or burdens on race, ethnicity, or national origin.” And then in July 2025, Attorney General Bondi issued guidance providing specific examples of DEI-related practices that DOJ considers unlawful and discriminatory. In January 2026, the General Services Administration proposed changes to the certifications that federal financial assistance applicants must make in order to register with the System for Award Management, adding certifications explicitly addressing DEI programs. Most recently, on March 26, 2026, President Trump issued a new executive order specifically targeting “DEI Discrimination by Federal Contractors” and imposing new contractual obligations for federal contractors and subcontractors.

Federal contractors and federal funds recipients generally must certify that they will not discriminate on the basis of protected characteristics such as race, color, national origin, or sex and that they are in compliance with federal anti-discrimination laws. In the IBM settlement agreement, DOJ alleges that IBM certified compliance with Title VII of the Civil Rights Act of 1964 and the Federal Acquisition Regulation in its federal contracts while:

1. Modifying compensation based on employees’ achievement of demographic targets, which caused employees to take protected characteristics into account when making employment decisions
2. Taking protected characteristics into account as part of employment decisions through the use of “diverse interview slates” and related employment practices
3. Developing demographic goals for business units based on protected characteristics, then making employment decisions based on those goals
4. Offering training, mentoring, and similar programs only to certain employees on the basis of protected characteristics

DOJ further alleges that, in addition to certifying compliance, IBM “allocated costs to its federal government contracts relating to these practices” and sought payments from the government for these costs. IBM denied the allegations and did not admit liability.

The IBM practices singled out in the agreement resemble the examples provided in prior DOJ guidance on what constitutes unlawful DEI practices. Both the July 2025 Bondi memorandum and the February 2026 remarks given by Deputy Assistant Attorney General (DAAG) Brenna Jenny at a Federal Bar Association conference focused on corporate practices that cause compensation, employment decisions, or access to training to be based on protected characteristics or diversity metrics. Under the government’s theory of FCA liability, corporate diversity initiatives are not automatically discriminatory, but practices that explicitly tie the receipt of employment benefits to protected characteristics create significant enforcement risk.

Several other features of the settlement warrant attention. First, it was signed by DAAG Jenny and Associate Attorney General Stanley Woodward, and the press release announcing the resolution includes a quote from Acting Attorney General Todd Blanche. This level of involvement by high-ranking DOJ officials is unusual for a resolution of this magnitude and illustrates the significance the Trump administration attaches to this enforcement priority. Second, the covered conduct period runs from January 2019 through the effective date of the agreement. That start date long predates the second Trump administration’s DEI-related executive orders and DOJ guidance, as well as the Supreme Court’s decision in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, 600 U.S. 181 (2023). Finally, IBM received cooperation credit under DOJ’s guidelines for disclosure, cooperation, and remediation, having conducted an internal investigation, made early disclosures, and voluntarily terminated or modified programs at issue. That cooperation likely reduced the ultimate settlement figure.

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