“Racial discrimination is illegal, and government contractors cannot evade the law by repackaging it as DEI,” Blanche said. “The Department launched the Civil Rights Fraud Initiative to root out this misconduct, hold offenders accountable, and end this practice for good.”
Under the agreement, IBM will pay $17,077,043, including civil penalties. The government alleged the company factored protected characteristics into hiring, promotions, and pay decisions, violating the False Claims Act.
Federal contractors have to certify that they do not discriminate and ensure equal treatment of employees and applicants. The DOJ said IBM knowingly maintained practices that violated those requirements.
In the settlement, the DOJ alleges that IBM made modifications to pay, bonuses, and other compensation that caused employees to consider race, color, national origin, or sex in employment decisions, including the use of a “diversity modifier” that tied bonus compensation to demographic targets.
Prosecutors also said IBM took those characteristics into account in hiring, transfers, and promotions through practices such as “diverse interview slates,” “diverse sourcing,” and by altering interview eligibility criteria based on race or sex.
The DOJ also said the company developed demographic goals for business units based on race and sex, and considered those characteristics in employment decisions.
It is alleged that IBM offered training, partnerships, mentoring, leadership development, educational opportunities, or similar programs only to certain employees, limiting eligibility, participation, access, or admission based on race, color, national origin, or sex.
Enacted in 1863, the law allows the government to recover up to three times its losses, along with financial penalties. The DOJ said it recovered more than $2.9 billion under the law in fiscal year 2024.
The memorandum cited the Students for Fair Admissions, Inc. v. President and Fellows of Harvard College decision, stating that “eliminating racial discrimination means eliminating all of it.”
The IBM settlement says that the company cooperated with the investigation and received credit for early disclosures and remedial steps, including changing or ending certain programs, the DOJ said. IBM denied the allegations in the settlement.
“Merit drives promotion and opportunity. Not someone’s sex or race,” said Associate Attorney General Stanley Woodward.
“The Nation’s anti-discrimination laws are clear and reflect our basic commitment that opportunity, compensation, and advancement should turn on merit and performance, and not immutable characteristics,” said Deputy Assistant Attorney General Brenna Jenny.