IBM has become the first company to settle with the US government under the Trump administration’s Civil Rights Fraud Initiative, a program aimed at ensuring diversity programs don’t cross a line and result in discrimination.
The administration defined its position on Diversity, Equity, and Inclusion (DEI) in Executive Order 14173, issued in January 2025, which points out that US civil rights laws prevent discrimination based on race, color, religion, sex, or national origin. The order argues that organizations that run DEI programs may “actively use dangerous, demeaning, and immoral race and sex-based preferences” in violation of civil rights laws.
The order sought to stop federal contractors from operating DEI programs. In May 2025, the administration backed the order by creating the Civil Rights Fraud Initiative to investigate allegedly illegal DEI programs and handle whistleblower complaints. The instrument for those investigations is the False Claims Act (FCA), a law that imposes liability on organizations that provide false information to the federal government.
A March 2026 Executive Order added a requirement for federal government contractors to report on any DEI activity that contravenes the orders.
Last Friday, the Department of Justice announced the Initiative’s first success: a settlement with IBM that will see the tech giant pay the US government $17,077,043 “to resolve allegations that it violated the False Claims Act by failing to comply with anti-discrimination requirements in its federal contracts.”
The feds allege IBM pursued illegal DEI in three ways:
- Constructed “diverse interview slates” when hiring staff
- Developed “race and sex demographic goals for business units and took race and sex into account when making employment decisions” then measured progress against those goals
- “Offered certain training, partnerships, mentoring, leadership development programs and educational opportunities only to certain employees, with eligibility, participation, access or admission limited on the basis of race or sex”
A settlement document [PDF] reveals IBM did not admit liability for the allegations, but assisted the feds with their inquiries.
Big Blue has also denied that it practices age discrimination on many occasions.
The feds did not concede that its claims were unfounded.
Deputy Assistant Attorney General Brenna E. Jenny welcomed the settlement, saying: “When a company accepts federal funding while engaging in practices that sort, prefer, or disadvantage employees on the basis of race or sex, the company is stepping outside the conditions under which the government agreed to contract with them, and we will hold them accountable.”
Law firm Latham & Watkins LLP observed that the matter appears to relate to contracts IBM entered into before the 2025 executive order.
The firm also asserted that “IBM received settlement credit for cooperating with DOJ’s investigation, including making early factual disclosures, assisting in the calculation of damages and penalties, and voluntarily terminating or modifying the programs and practices at issue.”
“The scope of covered conduct and settlement methodology provide insight into the way DOJ is evaluating FCA liability based on alleged discrimination, and underscore DOJ’s commitment to aggressively pursue FCA claims,” Latham & Watkins advised.
Another firm, Epstein Becker Green, advised organizations for which “DEI remains a core mission or value” to “stay informed about changes in the law related to DEI and remain ‘a step ahead’ of any federal DEI investigation or enforcement action.”
So perhaps it will be possible to run DEI programs without following IBM’s lead. ®
