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Alerts and Updates

DOJ Announces First DEI-Related False Claims Act Settlement

April 17, 2026

DOJ Announces First DEI-Related False Claims Act Settlement

April 17, 2026

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In the DOJ’s announcement, Acting Attorney General Todd Blanche characterized the settlement as the first resolution under the Civil Rights Fraud Initiative, warning that contractors “cannot evade the law by repackaging [discrimination] as DEI.”

On April 10, 2026, the U.S. Department of Justice (DOJ) announced its first False Claims Act (FCA) settlement arising from allegations that an organization’s diversity, equity and inclusion (DEI) programs constituted illegal discrimination. The $17 million settlement, announced by DOJ's Civil Division, resolved allegations of unlawful DEI practices in connection with federal funding. All recipients of federal funds should take note of this shift from policy pronouncements to tangible, concrete enforcement action.

The Settlement

Notably, the settlement did not arise from a whistleblower-filed qui tam action. Rather, the matter was a government-initiated investigation, underscoring that the government itself is actively identifying and pursuing potential violations. The settlement resolved FCA claims arising from the following alleged practices:

  • Modifications or adjustments to pay, bonus or other compensation that caused employees to take race, color, national origin or sex into account when making employment decisions, including a “diversity modifier” that tied bonus compensation to achieving demographic targets;
  • Taking race, color, national origin or sex into account as part of decisions to hire, transfer or promote through the use of “diverse interview slates,” “diverse sourcing,” and other related employment practices, including by altering interview eligibility criteria based on such factors;
  • Developing race and sex demographic goals for business units, and taking race, color, national origin or sex into account when making employment decisions to achieve those goals; and
  • Offering certain training, partnerships, mentoring, leadership development programs, educational opportunities or resources only to certain employees, with eligibility, participation, access or admission limited on the basis of race, color, national origin or sex.

The government alleged that costs associated with these practices were allocated to unspecified government contracts. The United States acknowledged that it credited cooperation with the investigation, including through early disclosures of relevant facts and voluntary remedial measures such as the termination and modification of various programs at issue. In the DOJ’s announcement, Acting Attorney General Todd Blanche characterized the settlement as the first resolution under the Civil Rights Fraud Initiative, warning that contractors “cannot evade the law by repackaging [discrimination] as DEI.”

Background: Executive and Agency Actions Targeting DEI and the FCA

The first DEI-related FCA settlement does not come as a surprise. Since taking office, the current administration has taken a series of actions making clear its view that certain DEI programs are unlawful, that the FCA is an appropriate enforcement mechanism, and that the government is prioritizing investigation and enforcement of its interpretation of discrimination laws:

Together, these actions laid the groundwork for exactly the type of enforcement reflected in this first settlement.

DOJ Officials Signal Continued and Expanding Enforcement

This settlement confirms what senior DOJ officials have been signaling. At the Federal Bar Association's Qui Tam Conference on February 19, 2026, Deputy Assistant Attorney General Brenna Jenny, who leads nationwide FCA enforcement out of the Commercial Litigation Branch, reportedly described DEI as a priority receiving "expedited" treatment, and confirmed that the DOJ is actively conducting investigations involving both government-initiated matters and qui tam filings. She identified recurring fact patterns under investigation, including demographic hiring goals tied to compensation, training or mentoring programs limited by protected characteristics, and “diverse slate” policies. Jenny cautioned that, while promoting diversity is not necessarily unlawful, it is “not a protective talisman,” and that some companies had engaged in what the administration viewed as unlawful discrimination. Jenny’s remarks reinforced that the Civil Division views DEI-related FCA enforcement as a sustained and intensifying priority.

Key Takeaways for Recipients of Federal Funds

The settlement (representing what is expected to be the first of many) highlights enforcement risks for all recipients of federal funds across a broad range of industries, and from a range of sources.

Although much of the attention about the administration’s DEI-related policy pronouncements has focused on higher education – and the healthcare industry perennially drives FCA recovery – the settlement reflects a broader effort. In a December 2025 article, the Wall Street Journal reported that DOJ had launched FCA investigations into companies' DEI practices across technology, telecommunications, automotive, pharmaceuticals, defense and utilities, with companies in these sectors receiving demands for documents about their DEI programs. A settlement with a funding recipient serves to confirm that those investigations are producing enforcement outcomes, and recipients of federal funds in virtually any industry should consider themselves potentially within the scope of government scrutiny.

Recipients of federal funds should also recognize that FCA exposure in this area can arise through multiple channels: a qui tam action filed by a whistleblower such as a current or former employee, or — as with this bellwether settlement — a government-initiated investigation without any relator involvement. The settlement should remind federal funding recipients that the absence of a whistleblower does not mean a company is free from the risk of scrutiny.

To reiterate, Jenny revealed at the February 2026 FBA Qui Tam Conference that the government has an inventory of expedited, DEI-related FCA investigations initiated by both the government and relators. For federal funding recipients, the potential cost risk of an investigation (regardless of outcome) can be significant. The government has broad investigative authority under the FCA, and responding to civil investigative demands imposes significant financial and operational costs. Organizations should consult with counsel to carefully evaluate their existing DEI-related policies, programs and certifications – and their compliance documentation – to evaluate potential exposure for current practices, and to mitigate the costs of investigation.

For More Information

If you have any questions about this Alert, please contact Daniel R. Walworth, any of the attorneys in our White-Collar Criminal Defense, Corporate Investigations and Regulatory Compliance Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.