DOJ’s Civil Rights Fraud Initiative Claims Another DEI-Related FCA Settlement

On Tuesday, August 25, 2026, the U.S. Department of Justice (DOJ) announced that Deloitte LLP and several of its subsidiaries agreed to pay, collectively, $21.5 million to resolve allegations that Deloitte violated the False Claims Act (FCA) by failing to comply with new anti-discrimination requirements incorporated into its federal contracts, by discriminating against employees and applicants on the basis of race and sex, and by allocating and seeking reimbursement for costs related to those practices under its federal government contracts. This resolution is the second of its kind under DOJ’s recently launched Civil Rights Fraud Initiative, following a similar settlement by IBM in April 2026.

The Deloitte Settlement

The settlement resolves allegations that, from 2017 to the present, Deloitte falsely certified compliance with equal opportunity and anti-discrimination requirements while engaging in discriminatory race- and sex-based employment practices. The government alleged that Deloitte allocated costs relating to these discriminatory practices to its federal government contracts and sought payment and reimbursement from the government for such costs. Specifically, the government alleged FCA violations based on four categories of conduct:

• Taking race or sex into account when making hiring, promotion, and staffing decisions. Business units were allegedly assigned non-public race- and sex-based workforce composition goals, sometimes with attached financial incentives, which were described internally as “aggressive” and intended to “drive behavior change.”
• Identifying promotion candidates by race and sex. DOJ claimed that Deloitte circulated spreadsheets that encouraged staff to “continue taking intentional action” to increase the number of Black, multiracial, and Hispanic/Latinx professionals promoted to the partner, principal, or managing director level.
• Setting demographic goals for employees staffed to federal contracts. Deloitte allegedly provided a “Priority Staffing Report” that identified employees available for project staffing by race and sex to staffing managers as a “lever” to help Deloitte achieve parity between the percentages of underrepresented minorities and non-underrepresented Minorities, respectively, who were understaffed.
• Offering training, mentoring, and leadership development programs with eligibility limited on the basis of race or sex. DOJ asserted that Deloitte’s “Springboard” and “Compass” programs were designed to boost participants’ career prospects through sponsorship and networking. Only employees who met certain race or sex criteria were eligible to participate.

As part of the settlement, the qui tam relator, the American Alliance for Equal Rights (the Alliance) will receive $4,300,000 of the total recovery amount and will confidentially disclose to Deloitte the identity of the former employee who provided information regarding Deloitte’s practices.

Notably, the Alliance also alleged state-level claims in Florida and Indiana, which were resolved via additional coordinated settlements for $1.2 million each, illustrating that these cases can create risk at both the state and federal levels.

Lessons Regarding DEI Investigations and Enforcement Landscape

• DEI is a real and ongoing enforcement priority: The IBM and Deloitte settlements exemplify the significant exposure federal contractors may face if the administration deems their DEI practices to be unlawful. As has been publicly reported, multiple companies and institutions and their DEI programs are under investigation by DOJ pursuant to the Civil Rights Fraud Initiative. And in the press release announcing this settlement, Attorney General Todd Blanche emphasized “[t]he Justice Department will aggressively pursue government contractors that have used taxpayer dollars to fund unlawful discrimination.” The value and time period of both the IBM and Deloitte settlements, each extending years prior to the launch of the Civil Rights Fraud Initiative, speak to DOJ’s aggressive approach in this new FCA frontier.
• A new breed of whistleblowers may drive FCA cases involving DEI allegations: This is the first resolution of a DEI-related FCA suit based on a whistleblower claim and is likely just a preview of what’s to come as individuals and organizations focused on opposing DEI measures find a new way to pursue their goals. The Alliance, the relator in this case, describes itself as “a nationwide membership organization that is dedicated to ending racial classifications and racial preferences in America,” and has filed dozens of other civil suits based on similar theories of discrimination. The qui tam suit was filed just a few months into the second Trump term and, notably, before the administration formally encouraged whistleblowers to come forward regarding alleged civil rights violations like those at issue in the Deloitte settlement. With significant potential financial recovery possible for relators to pursue civil rights objectives by leveraging the FCA — as shown by the Alliance’s $4.3 million share of the settlement amount — there is serious incentive for qui tam activity regarding allegedly unlawful DEI practices.
• EO 14398 is creating tangible risk: Executive Order 14398 (EO 14398), “Addressing DEI Discrimination by Federal Contractors,” created a new mandatory contract clause requiring federal contractors, among other things, to refrain from engaging in “racially discriminatory DEI activities” and acknowledge that such compliance is material to the government’s payment decisions for purposes of FCA compliance. While some commentators have questioned whether EO 14398 could create real FCA liability by simply declaring that a violation of that clause was material to the government’s payment decisions, the Deloitte settlement demonstrates that even if the enforceability of such clauses has not been tested in a public case, they are a tool that the government and qui tam relators will seek to leverage. But risk isn't limited to EO 14398.
• Risk of FCA allegations extends beyond EO 14398: Shortly after the execution of EO 14398, contracting officers were instructed to replace the Equal Opportunity contract clause (FAR 52.222-26) with a new clause (FAR 52.222-90) to “address DEI discrimination by federal contractors.” However, just as with the IBM settlement, the Deloitte settlement agreement expressly resolves contentions that Deloitte’s practices violated Title VII of the Civil Rights Act of 1964 via FAR clause 52.222-26. Settlements like IBM’s and Deloitte’s shed light on how key clauses like this are being interpreted through a new lens in the current administration — and how that lens continues to evolve over time.
• Cooperation and remediation credit remains available: Both Deloitte and IBM reportedly received credit under DOJ guidelines for disclosure, cooperation, and remediation as set forth in § 4-4.112 of the Justice Manual. This underscores the importance of proactive engagement with counsel where DEI program issues are identified. At the same time, these two settlements signal that DOJ is seeking large monetary damages in this space, particularly where it sees a connection between the alleged conduct and the receipt of government funds.

Crowell & Moring has been advising clients on the legality of their DEI programs considering these developments over the past 19 months and is available to counsel clients on compliance and responding to government investigations to mitigate risk of FCA liability.