On April 10, 2026, Acting Attorney General Todd Blanche announced a first-of-its kind resolution of False Claim Act allegations against International Business Machines Corporation relating to that company’s diversity, equity and inclusion program. Under the terms of the resolution, IBM denied that it engaged in any misconduct and did not admit liability, but agreed to pay more than $17 million dollars in restitution and civil penalties. The company also explicitly received credit under Section 4-4.112 of the Justice Manual for cooperating by disclosing facts to the government and taking remedial measures, including the termination or modification of certain challenged programs. This resolution, which is consistent with prior words and actions challenging DEI from President Donald Trump and his Department of Justice (DOJ), provides an important model for companies of what enforcement activity in this area might look like going forward.

DEI Facing Scrutiny

On the campaign trail, President Trump criticized “woke equity” programs and decried a “bias against white” people, which he vowed to combat. Upon taking office in January 2025, President Trump issued an executive order ending DEI programs, including environmental justice programs, within the federal government. Another executive order that month directed the attorney general to make recommendations about how federal civil rights laws could be used “to encourage the private sector to end illegal discrimination and preferences, including DEI.” On February 5, 2025, then-Attorney General Pam Bondi issued a memorandum providing that DOJ’s Civil Rights Division would “investigate, eliminate and penalize illegal DEI and DEIA preferences, mandates, policies, programs and activities in the private sector and in education institutions that receive federal funds.” And in March 2026, President Trump issued another executive order stating that DEI programs are “unethical and often illegal” and “cause inefficiencies, waste, and abuse.” DEI programs, that order reasoned, “impose artificial costs in hiring, promotion, and operations by precluding implementation of merit-based principles; creating excessive workforce turnover by elevating immutable characteristics over job performance; and jeopardizing the sort of employee collaboration and problem-solving that is essential to fostering efficient and high-quality work.” The order required government contractors to certify that they would not engage in any racially discriminatory DEI activities.

The IBM Resolution

The resolution with IBM DOJ announced this month is consistent with these prior statements. In his remarks, Blanche stated that “[r]acial discrimination is illegal, and government contractors cannot evade the law by repackaging it as DEI,” adding that “[t]he Department launched the Civil Rights Fraud Initiative to root out this misconduct, hold offenders accountable, and end this practice for good.” DOJ faulted IBM’s DEI program specifically for allegedly:

• Making modifications to compensation that caused employees to take race, color, national origin or sex into account when making employment decisions, including a diversity modifier that tied bonus compensation to achieving demographic targets;
• Taking these same factors into account as part of decisions to hire, transfer or promote through the use of “diverse interview slates,” “diverse sourcing,” and other related practices, including by altering interview eligibility criteria based on race, color, national origin or sex;
• Developing race and sex demographic goals for business units; and
• Offering certain training, partnerships, mentoring, leadership development programs, educational opportunities or resources only to certain employees, taking race, color, national origin or sex into account.

IBM denied that it engaged in this conduct, but agreed to pay $17,077,043 to resolve the allegations, of which $8,204,348 was restitution. Discussing the resolution, Associate Attorney General Stanley Woodward stated “[M]erit drives promotion and opportunity. Not someone’s sex or race. Today’s settlement proves this Department’s commitment to ensure companies are not using taxpayer funded work to further woke unconstitutional practices in American workplaces.”

The False Claims Act

The False Claims Act imposes liability on anyone who, among other things, “knowingly mak[ing], us[ing], or caus[ing] to be used, a false record or statement material to a false or fraudulent claim.” It is especially powerful because the government is entitled to treble damages when it establishes liability, as well as the costs of the civil action brought to recover those damages. As noted above, President Trump’s March 2026 executive order required government contractors to certify that they would not “engage in any racially discriminatory DEI activities.” DOJ could point to this certification as a “false or fraudulent claim” under the False Claims Act if it concluded that the government contractor actually engaged in such DEI activities. It is not uncommon for False Claims Act actions to be based on allegedly false certifications. For example, in February 2025, DOJ reached an $11 million FCA settlement of allegations a company failed to meet certain cybersecurity controls and falsely certified compliance with them in annual reports to the Defense Health Agency. In 2006, DOJ even brought an FCA complaint against a county in New York alleging that it had falsely certified that it met its fair housing obligations in order to obtain federal grants. So while requiring government contractors to certify that they do not engage in discriminatory DEI activities may be a relatively new development, relying on such certifications as a basis for False Claims Act liability is not unprecedented.

Takeaways for Companies

In light of DOJ’s resolution with IBM and the heavy price tag that accompanied it, companies should take notice that the Trump administration is serious about taking on what it views as racially discriminatory DEI activities. They should consult counsel about whether their DEI programs could be targeted as racially discriminatory, which the executive order has defined as involving “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.” As the IBM matter illustrates, programs that set specific demographic targets and/or tie compensation to achieving those targets may be particularly vulnerable. On the positive side, the IBM resolution also shows that the Trump administration is serious about its stated commitment to encouraging companies to voluntarily disclose wrongdoing and cooperate with investigations. IBM received cooperation credit for disclosing facts about its DEI program to the government and taking remedial measures; other companies should consider doing the same as DOJ’s efforts to address these issues continue. Of course, companies should also consider the potentially competing views of state law enforcement officials on DEI programs and keep in mind that federal administrations and priorities can change. But it is clear that simply ignoring federal guidance on DEI programs is not an option; the Trump administration is clearly ready to take enforcement action.