International Business Machines Corp. (NYSE:IBM) agreed to pay $17.07 million to settle federal allegations of illegal diversity, equity and inclusion (DEI) hiring practices on Friday, marking the Justice Department's first False Claims Act resolution under its Civil Rights Fraud Initiative.

IBM Settles Federal DEI Allegations

The Department of Justice (DOJ) alleged IBM falsely certified compliance with federal anti-discrimination requirements while knowingly maintaining race- and sex-based hiring and promotion practices.

Acting Attorney General Todd Blanche said in the official press release, “Racial discrimination is illegal, and government contractors cannot evade the law by repackaging it as DEI."

An IBM spokesperson told CNN the company’s workforce strategy is driven by “having the right people with the right skills.” The settlement is neither an admission of liability by IBM nor a concession by the U.S. that its claims are not well-founded.

IBM did not immediately respond to Benzinga‘s request for comment.

The settlement marks the first resolution under the DOJ’s Civil Rights Fraud Initiative, launched in May 2025, using the False Claims Act to target alleged discriminatory employment practices in federal contracting. The Trump administration began dismantling DEI programs four days into President Donald Trump‘s second term, ordering federal agencies to terminate all DEI offices and positions.

A High-Stakes Legal Weapon

The Civil War-era False Claims Act allows the government to recover up to three times the damages incurred, plus penalties. It also permits private citizens to file suit and claim a portion of any recovered funds.

DEI Under the Microscope

The settlement comes amid growing corporate scrutiny over DEI practices.

In 2023, IBM’s CEO Arvind Krishna was criticized by Tesla (NASDAQ:TSLA) CEO Elon Musk for implementing what was described as “obviously illegal” DEI practices.

Other major companies have also faced scrutiny over their DEI practices. In February 2026, Nike (NYSE:NKE) was under federal investigation for alleged discrimination against white employees.

In the same month, Goldman Sachs Group (NYSE:GS) announced plans to remove diversity criteria from its board selection process, following a request from a conservative activist nonprofit.

Alphabet Inc. (NASDAQ:GOOGL), Meta Platforms (NASDAQ:META), Amazon (NASDAQ:AMZN), Target Corp. (NYSE:TGT) and McDonald’s Corp. (NYSE:MCD) also discontinued DEI programs following Trump’s executive orders

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