DOJ Announces First FCA Settlement Secured Under its Civil Rights Fraud Initiative
On April 10, 2026, the Department of Justice (“DOJ”) announced the first False Claims Act (“FCA”) settlement secured under its “Civil Rights Fraud Initiative,” which now-Acting Attorney General Todd Blanche announced in May 2025. According to DOJ, the initiative utilizes the FCA “to investigate and, as appropriate, pursue claims against any recipient of federal funds that knowingly violates federal civil rights laws.” Under this settlement agreement, International Business Machines Corporation (“IBM”) agreed to pay approximately $17 million to resolve allegations that it knowingly submitted false claims and made false statements to the U.S. Government by certifying compliance with federal civil rights laws while maintaining employment practices that DOJ contended were violative of federal civil rights law.
Certain contract clauses, such as FAR 52.222-26, Equal Opportunity, require federal contractors like IBM to certify their compliance with federal anti-discrimination requirements set forth in Title VII of the Civil Rights Act of 1964. This statute protects individuals from discrimination in employment based on certain protected characteristics, such as race, color, national origin, and sex. According to DOJ, several of IBM’s employment practices violated Title VII, such as: (1) conditioning compensation in ways that encouraged employees to take protected characteristics into account when making employment decisions—for example, by using “a diversity modifier that tied bonus compensation to achieving demographic targets”; (2) considering protected characteristics as part of employment decisions, including by the use of “diverse interview slates” and “diverse sourcing” and “by altering interview eligibility criteria based on race, color, national origin, or sex”; (3) developing demographic goals for business units that encouraged the use of protected characteristics in employment decisions; and (4) offering benefits and resources such as training, partnerships, mentorships, and leadership development opportunities only to employees with certain protected characteristics. DOJ also alleged that IBM sought reimbursement for costs associated with these employment practices under its federal government contracts.
As part of the settlement agreement, IBM denied that it engaged in this conduct.
Notably, the settlement agreement indicates that DOJ’s investigation focused on activity that allegedly began in 2019, well before the current Trump Administration and at a time when these types of employment practices were generally considered legal, and at least in some cases, federal contractors were encouraged to implement them (for example, to satisfy their obligations to maintain certain affirmative action programs). This agreement highlights how much has changed for federal contractors in just a few years with respect to federal civil rights law. And we should expect enforcement actions like this one to increase in regularity—just last month, President Trump signed an executive order requiring executive departments and agencies to include a new compliance clause in their contracts prohibiting “any racially discriminatory DEI activities.” Contractors will be required to acknowledge that compliance with the clause is material to the Government’s payment decisions; materiality is a key prong of any FCA claim.