IBM agreed to pay $17,077,043 to settle allegations from the U.S. Department of Justice that its diversity, equity and inclusion (DEI) policies violated civil‑rights laws under the False Claims Act. The settlement is the first resolution under the DOJ’s Civil Rights Fraud Initiative, launched in May 2025 to target discriminatory employment practices by federal contractors.
The DOJ alleged that IBM falsely certified compliance with federal anti‑discrimination requirements while knowingly maintaining race‑ and sex‑based hiring and promotion practices. Allegations included a “diversity modifier” that tied bonus compensation to demographic targets, altered interview criteria based on race or sex, set race and sex demographic goals for business units, and offered certain training and development opportunities based on race or sex.
IBM denies unlawful conduct and says the settlement is not an admission of liability. An IBM spokesperson said, "Our workforce strategy is driven by a single principle: having the right people with the right skills that our clients depend on."
Acting Attorney General Todd Blanche said, "Racial discrimination is illegal, and government contractors cannot evade the law by repackaging it as DEI." He added, "The Department launched the Civil Rights Fraud Initiative to root out this misconduct, hold offenders accountable, and end this practice for good."
The $17.077 million penalty represents a modest financial impact relative to IBM’s annual revenue, but the settlement signals heightened regulatory scrutiny of DEI programs in federal contracting and may prompt internal policy reviews and additional compliance expenses. IBM had previously settled a False Claims Act case in 2019 for $14.8 million over a different issue.
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