IBM agreed to pay $17 million to the US government to resolve the Trump administration’s claim that the firm’s diversity, equity, and inclusion (DEI) policies discriminated against employees and job-seekers.
The Department of Justice (DOJ) touted the settlement on Friday, saying it’s the first one secured under the Civil Rights Fraud Initiative launched in May 2025. The Trump administration created the program to make DEI-related complaints against government contractors fall under the False Claims Act of 1863, which imposes triple damages and a civil penalty on contractors that defraud the government.
The Justice Department alleged that IBM violated the False Claims Act by failing to comply with anti-discrimination requirements in its federal contracts, which required IBM to certify that it would not discriminate against employees or applicants. The US claims that IBM certified compliance despite maintaining practices that “discriminated against employees during employment and applicants for employment because of race, color, national origin, or sex, and failed to treat employees during employment without regard to race, color, national origin, or sex.”
The US complained that “IBM took race, color, national origin, or sex into account when making employment decisions, including by using a diversity modifier that tied bonus compensation to achieving demographic targets.” It also said that “IBM altered interview criteria based on race or sex,” and “developed race and sex demographic goals for business units and took race and sex into account when making employment decisions to achieve progress towards those demographic goals.”
The US objected to IBM offering “training, partnerships, mentoring, leadership development programs and educational opportunities only to certain employees, with eligibility, participation, access or admission limited on the basis of race or sex.” It further claimed that “IBM allocated costs to its federal government contracts relating to these practices and sought payment and reimbursement under its federal government contracts for such costs.”
While companies often enter settlements without admitting to alleged misdeeds, this settlement says IBM ended conduct that it denies having ever engaged in. In one sentence, the settlement agreement says that “the cooperation IBM provided included… taking voluntary remedial measures, including the termination and/or modification of various programs, policies, or other activities described in the Covered Conduct.” Two sentences later, the settlement states that “IBM denies that it engaged in the Covered Conduct.”
Trump admin’s aggressive push against DEI
IBM agreed to pay $17,077,043 to the government within 14 days of the settlement being signed. The amount includes civil penalties and $8.2 million in restitution to the government.
“Racial discrimination is illegal, and government contractors cannot evade the law by repackaging it as DEI,” Acting Attorney General Todd Blanche said. “The department launched the Civil Rights Fraud Initiative to root out this misconduct, hold offenders accountable, and end this practice for good.”
The Trump administration has taken an aggressive stance against DEI programs that were implemented to help historically underrepresented groups. President Trump has issued several executive orders on DEI, including one last month that targets federal contractors.
In addition to ending DEI policies within the government, the Trump administration uses multiple legal and regulatory tools to pressure private companies. For example, the Federal Communications Commission chairman has refused to approve mergers unless the merging companies end DEI initiatives.
“IBM is pleased to have resolved this matter,” the company said in a statement provided to Ars. “Our workforce strategy is driven by a single principle: having the right people with the right skills that our clients depend on.”
The Justice Department credited IBM for cooperating in its investigation and for ending DEI programs. “IBM made early disclosures of facts relevant to the government’s investigation gathered during IBM’s independent investigation, including information to assist in the calculation of damages and penalties,” the department’s press release said. “The company also undertook voluntary remedial measures, including the termination and/or modification of various programs and practices at issue.”
