On April 10, 2026, the United States Department of Justice (DOJ) announced the first False Claims Act (FCA) resolution under the agency’s Civil Rights Fraud Initiative. Acting Attorney General Todd Blanche announced that International Business Machines Corporation (IBM) agreed to pay nearly $17.1 million to resolve allegations that the company violated anti-discrimination rules for federal contractors by discriminating against employees and applicants. The settlement is the first FCA case brought by DOJ that has been made public implementing the Trump Administration’s strategy of using FCA for civil rights enforcement.
Here is what federal contractors and employers need to know about the Government’s allegations against IBM and compliance steps to take today.
The Government’s Allegations Against IBM
Under the settlement, IBM agreed to pay $17,077,043 to resolve allegations that it “fail[ed] to comply with anti-discrimination requirements in its federal contracts due to practices the United States contends discriminated against employees and applicants for employment because of race, color, national origin, or sex.” The Government alleged that these practices included taking “race, color, national origin, or sex into account when making employment decisions.” According to the allegations, this includes “using a diversity modifier that tied bonus compensation to achieving demographic targets,” “alter[ing] interview criteria” through “diverse interview slates,” “develop[ing] race and sex demographic goals for business units,” and “offer[ing] 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.”
While IBM settled these claims, there was no determination of liability, and notably, IBM did not admit to any wrongdoing. Moreover, DOJ’s release acknowledged IBM for taking “significant steps entitling it to credit for cooperating with the government in its investigation.” IBM also ended and/or changed various programs and practices at issue in the Government’s investigation.
Key Takeaways and Considerations for Federal Contractors
DOJ’s announcement underscores the importance of careful analysis and evaluation of employment, promotion, mentorship opportunities, and programs to ensure adherence to civil rights laws. We expect to see increased investigative scrutiny on DEI-related programs for organizations utilizing race or sex as a factor in evaluating candidates for hiring and/or advancement.
Federal contractors must take the FCA and federal contracting obligations seriously. This is likely the first of many settlements to come during the remainder of the Trump Administration, and we expect whistleblowers to report DEI-hiring and employment practices. We will continue to monitor DOJ’s use of the FCA to prosecute contractors and entities receiving federal funding. We recommend that companies immediately take the following proactive steps as a result of this news:
- Audit current and historic programs. The Government’s investigation assessed IBM’s DEI-related programs dating back to 2019, and federal contractors must be aware that there may be scrutiny on historic practices, not only programs currently in- place.
- Conduct a privileged review of any DEI-related programs, including third-party agreements and internal programs.
- Update policies and procedures to ensure compliance controls to monitor and quickly address compliance concerns.
- Evaluate the benefits of prompt cooperation with the Government in the event compliance issues are identified.
