The DOJ’s $17 million settlement with IBM — the first resolution under the Civil Rights Fraud Initiative — is the opening salvo of an active prosecution strategy using False Claims Act enforcement against contractor DEI programs.
On April 10, 2026, DOJ announced that IBM agreed to pay $17,077,043 to resolve allegations that certain DEI-related employment practices violated federal anti-discrimination requirements applicable to federal contractors. Acting Attorney General Todd Blanche touted what he described as the first settlement under the Civil Rights Fraud Initiative, a task force DOJ launched in May 2025. In a DOJ press release, Mr. Blanch asserted that the Civil Rights Fraud Initiative exists to root out racial discrimination repackaged as DEI. In this instance, DOJ’s method was to use the False Claims Act to allege that IBM certified compliance with of FAR 52.222-26, Equal Opportunity, while knowingly maintaining employment practices that DOJ contented discriminated against employees and job applicants based on race, color, national origin or sex. IBM did not admit liability but cooperated with DOJ’s investigation, including terminating programs, according to the settlement.
The specific allegations in the IBM settlement give insight into what the Trump DOJ is targeting in its anti-DEI investigations. According to the settlement, DOJ alleged that IBM tied bonus compensation to employees under a “diversity modifier” that aimed to achieve demographic targets. It allegedly altered interview criteria through “diverse interview slates” and “diverse sourcing” which took into account race, color, national origin, or sex. It also allegedly developed race and sex demographic goals which drove employment decisions to achieve progress towards those goals. Finally, it allegedly restricted eligibility for certain mentorship, training, and leadership development programs based on protected characteristics. The theory underlying each allegation is that IBM certified compliance with anti-discrimination requirements under FAR 52.222-26 in its federal contracts while knowingly maintaining these practices. The mandatory FAR certification is the hook for DOJ’s False Claims Act allegations.
The Opening Salvo
The IBM settlement is best seen as an opening act to the Trump Administration’s anti-DEI push. IBM’s alleged knowingly false certification was under FAR 52.222-26, which has been in existence in its current form since 2016. However, the administration has since created new tools specifically for eliminating DEI. On March 26, 2026, the White House issued Executive Order 14398 “Addressing DEI Discrimination by Federal Contractors.” It takes the step of defining “racially discriminatory DEI activities” as “disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring, promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of an entity’s resources.” While not totally clear, one must infer that this definition takes aim at conduct beyond that which was already prohibited under Title VII and FAR 52.222-26. EO 14398 directs the creation of a clause to be included in all contracts and contract-like instruments, as well as a contractor’s subcontracts and lower tier subcontracts. That clause now exists as FAR 52.222-90.
FAR 52.222-90 requires that “[t]he contractor will not engage in any racially discriminatory DEI activities,” as one might expect. It also includes provisions for suspension and debarment for noncompliance, a reporting requirement for “any subcontractor’s known or reasonably knowable conduct that may violate [the] clause,” and a statement that the contractor “recognizes that compliance with the requirements of this clause are material to the Government’s payment decisions for purposes of 31 U.S.C 3729(b)(4),” which is the False Claims Act. The last part is an attempt by the administration to avoid having to prove that the certification is material to the contractor’s claims for payment under the contract. Whether that will work has yet to be seen. Regardless, this clause gives the Government a lot more latitude in how it frames allegations to “root out” DEI, as Mr. Blanche put it.
What This Means for Certification Risk
False Claims Act exposure is not theoretical. FAR 52.222-90 demonstrates that the Administration is consciously preparing for the use of False Claims Act allegations against contractors who run afoul of the Administration’s interpretations of anti-discrimination law. The False Claims Act provides for civil penalties of between $5,000 and $10,000 as well as treble damages sustained by the government. And what are the damages sustained by the government for a false certification in the government contracts context? Under the reasoning of United States v. Rogan, 459 F. Supp 2d 692, 726-727 (N. Dist. Ill. 2006) it would be 100% of the amount paid under the contract since, but for the false certification, the Government would have paid the contractor nothing. Obviously, this is concerning. Such extreme damages give DOJ a lot of leverage to extract settlements, even on weaker cases. Federal Contractors, whether they agree with the Administration’s positions on DEI or not, would wisely be extremely scrupulous in avoiding any indication that it has taken protected categories into account while conducting its business.
Key Takeaways
- Audit all programs that might be considered DEI or DEI-adjacent now: compensation structures with demographic modifiers, diverse slate requirements, restricted mentorship or training programs, and demographic-based hiring or promotion processes are the specific practices DOJ identified in IBM.
- Do not take the anti-DEI certification requirements in FAR 52.222-90 lightly. If you are a federal contractor or subcontractor to a federal contractor this clause is coming to you.
Primary Source: “IBM Pays $17 Million to Resolve Allegations of Discrimination Through Illegal DEI Practices” DOJ Press Release (April 10, 2026) Read the source.
Case Cited: United States v. Rogan, 459 F. Supp 2d 692, 726-727 (N. Dist. Ill. 2006)