Last year, we blogged about the DOJ’s announcement of a “Civil Rights Fraud Initiative” targeting DEI programs. Last week, the DOJ announced that the initiative claimed its first scalp – and a high-profile one to boot:

Today, Acting Attorney General Todd Blanche announced the first False Claims Act resolution secured under the Civil Rights Fraud Initiative, which he launched in May 2025. International Business Machines Corporation (IBM) has agreed to pay the United States $17,077,043, inclusive of civil penalties, to resolve allegations that it violated the False Claims Act by failing 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.

According to the DOJ’s statement, the government alleged that the company took race, color, national origin, or sex into account when making employment decisions, altered interview criteria based on race or sex through the use of “diverse interview slates” in order to identify diverse candidates for hiring, transfer, or promotion. The company also allegedly considered race and sex when making employment decisions to achieve progress towards demographic goals, and offered certain career development programs participation in which was limited on the basis of race or sex.

Latham & Watkins’ memo on the settlement offers these recommendations for federal contractors to mitigate the risk of their own liability:

– Conduct a Privileged Compliance Review: Contractors should conduct a privileged review of any DEI-related policies and programs, including vendor agreements and internal programs, to ensure compliance with current interpretations of civil rights and anti-discrimination laws. Programs and practices that run afoul of anti-discrimination laws should be promptly terminated or modified for compliance. Practices that link compensation to diversity-related goals or metrics or that involve workforce representation goals or race- or sex-based eligibility criteria may present particular risk.

– Monitor Regulatory and Contract Changes: Contractors should closely monitor guidance and memoranda from their contracting agencies regarding how new executive orders surrounding discrimination or DEI will be implemented and enforced. Agencies are likely to begin including new anti-DEI clauses in solicitations and contract modifications.

– Ensure Proper Compliance Controls: Contractors should have policies and processes in place to monitor and promptly address compliance concerns, including subcontractor compliance given the new reporting obligations set forth in the March 26, 2026 executive order.

The DOJ’s announcement noted that IBM received credit for its significant cooperation in the investigation, and Latham’s memo recommends that if potential compliance issues are identified, contractors should carefully evaluate the benefits of early cooperation with the government.

– John Jenkins