IBM settles DOJ case

IBM agreed on April 10 to pay the United States $17,077,043 to settle Justice Department allegations that its employment practices violated anti-discrimination rules in federal contracts. (justice.gov) The Justice Department said the case was the first False Claims Act resolution under its Civil Rights Fraud Initiative, which the department announced on May 19, 2025. The initiative uses a fraud law usually tied to government payment disputes to pursue recipients of federal funds that knowingly violate federal civil-rights laws. (justice.gov 1) (justice.gov 2) Federal contractors certify that they will not discriminate against employees or applicants because of race, color, national origin, or sex. The Justice Department said IBM failed to comply with those promises while working under federal contracts. (justice.gov) The government said IBM considered race, color, national origin, or sex in employment decisions, including through a “diversity modifier” that tied bonus compensation to demographic targets. Reuters reported the settlement also described allegations involving other demographic goals and hiring-related practices. (justice.gov) (finance.yahoo.com) IBM did not admit liability in the deal. Reuters reported that the agreement said it was “neither an admission of liability by IBM nor a concession by the United States that its claims are not well-founded,” and IBM told Engadget it was “pleased to have resolved this matter.” (finance.yahoo.com) (engadget.com) The Justice Department said IBM received credit for cooperation during the investigation. The department said the company made early disclosures from its own internal review and terminated or modified programs and practices at issue. (justice.gov) The case lands in a broader federal push against diversity, equity, and inclusion programs under President Donald Trump’s second term. Reuters reported that Trump signed executive orders directing federal contractors and subcontractors to eliminate diversity, equity, and inclusion programs, and that many companies then scaled back or changed their policies. (finance.yahoo.com) Civil-rights advocates have argued that diversity, equity, and inclusion programs are meant to address longstanding barriers for women and racial minorities. The Justice Department’s May 2025 announcement, by contrast, said recipients of federal money that use “divisive” diversity, equity, and inclusion policies could face False Claims Act scrutiny and potentially treble damages and penalties. (finance.yahoo.com) (justice.gov) For federal contractors, the IBM settlement put a price on that legal fight: $17.1 million, a public Justice Department press release, and the first test case for an initiative the department says it plans to keep using. (justice.gov)