On August 25, 2026, the U.S. Department of Justice (DOJ or the Department) announced a $21.5 million settlement with Deloitte LLP and four affiliated entities (collectively, Deloitte), marking the second False Claims Act (FCA) settlement under the Department’s Civil Rights Fraud Initiative launched in May 2025. The settlement resolves allegations that Deloitte violated the FCA by falsely certifying compliance with anti-discrimination requirements in its federal contracts while engaging in challenged race- and sex-based employment practices and charging costs relating to these practices to federal government contracts. This case follows the $17 million IBM settlement announced in April 2026 and confirms that DOJ’s enforcement in this area remains active.

The resolution with Deloitte is notable for both its similarities to the IBM settlement and key differences, summarized below.

Comparison to IBM Settlement

Monetary Terms – While the settlement amount with Deloitte is greater than that with IBM ($21.5 million compared to approximately $17 million), the payment is described in similar terms as “inclusive of civil penalties.” Neither agreement specifies the amount of the settlement attributable to penalties versus damages.

Scope of Allegations – The settlement with Deloitte spans a broader time, going back nearly 10 years to January 2017, compared to 2019 in the IBM settlement. Nonetheless, the government asserts the same two bases of alleged liability, namely that Deloitte falsely certified compliance with anti-discrimination requirements in its federal contracts and improperly allocated costs to its federal contracts relating to these practices.

Covered Conduct – In a striking departure from the IBM settlement, the agreement with Deloitte describes the alleged covered conduct in far greater detail. While the IBM allegations spanned less than two pages, the Deloitte allegations span more than four pages, including quoting internal company communications and documents. This level of detail is not typical of FCA settlements, though it provides greater insight into what specific practices the Department is focused on in its investigations.

Despite this additional detail in the Deloitte agreement, however, the discriminatory practices alleged are generally consistent with those alleged in the IBM agreement:

• “Taking race or sex into account when making hiring, promotion, and staffing decisions to achieve progress towards non-public race and sex-based workforce composition goals for business units.”
• Evaluating senior personnel “in part, based on their contributions to helping Deloitte achieve its workforce composition goals,” including a “two-year period” during which certain senior employees’ compensation could be impacted based on whether demographic goals were met.
• “Offering certain training, mentoring and leadership development programs, educational opportunities or resources … on the basis of race or sex.”

Nexus to Federal Contracts – While the IBM agreement contains a general allegation that the company had improperly allocated costs of its diversity, equity and inclusion (DEI) practices to federal contracts and sought reimbursement for such costs under the contracts, that agreement contains no further detail linking the alleged discriminatory conduct and federal contracts. In this respect, the Deloitte agreement goes further, alleging that “Deloitte set goals pertaining to the demographics of employees staffed to federal contracts,” with additional allegations regarding the manner in which the company used sex- and race-based goals to make staffing decisions on its federal contracts.

Reserved Claims – Unlike the IBM agreement, the Deloitte agreement expressly reserves the Equal Employment Opportunity Commission’s independent right to investigate and litigate claims against Deloitte, including “charges which may allege the same covered conduct” described in the FCA settlement.

Cooperation Credit – Finally, while the agreement states that Deloitte has been credited for its cooperation, it includes no detail regarding the nature of the cooperation or remediation. The IBM settlement agreement described the company’s cooperation and remediation efforts, including that it had ended the conduct in question.

The Qui Tam Action

Perhaps the most significant difference with the Deloitte matter is that it arose from a qui tam action. Qui tam suits permit private parties, known as relators, to file suits for false claims on the federal government and share up to 15-30% of any federal recovery. They also allow these private parties to carry the litigation forward on the government’s behalf if the government declines to proceed with the action after completing its investigation. The qui tam complaint against Deloitte, captioned United States ex rel. American Alliance for Equal Rights v. Deloitte LLP, et al., No. 4:25-cv-00458-O, was filed in the Northern District of Texas on April 25, 2025. The case remained under seal for approximately 16 months while the government conducted its investigation and settlement terms were finalized. The states of Florida and Indiana, on whose behalf the relator also brought claims under state false claims act equivalents, separately reached settlement agreements with Deloitte. Based on statements issued by the Florida and Indiana Offices of Attorney General, it appears that Deloitte will pay each state an additional $1.2 million. The federal settlement agreement provides the relator with a $4.3 million (twenty percent) share of the federal recovery, a comparatively high share for a matter settled before any litigation.

The qui tam action against Deloitte was filed by The American Alliance for Equal Rights, a Texas nonprofit founded in 2021 that describes itself as a nationwide organization with more than 280 members “dedicated to ending racial classifications and racial preferences in America.” The Second Amended Complaint (now unsealed) alleges that one of the Alliance’s members—“Member A”—is a “former senior employee at Deloitte” with personal knowledge of the alleged conduct at issue.

Key Takeaways

• The DOJ Civil Rights Fraud Initiative remains active and poses FCA risk for companies, from both government-initiated investigations and qui tam actions.
• Organizations that receive government funds—whether directly or indirectly—should be attuned to federal and state contract and grant requirements around DEI, including whether and to what extent costs associated with DEI programs may be allocated to contracts.
• Organizations should evaluate their current and historic DEI practices against the detailed allegations contained in the Deloitte settlement, as a guide to practices the government may pursue as problematic.
• Recipients of government funds should continue to document their good faith decision-making around diversity and inclusion practices, consult with counsel concerning the many FCA defenses available, and prepare to defend policies and practices that are important to them given the likelihood of continued DOJ investigations.
• Organizations contemplating settlement should consult with experienced FCA counsel to secure the best possible result in DOJ negotiations.