DOJ’s novel False Claims Act theory targets DEI at federal contractors
Deloitte has agreed to pay nearly $21.5 million to settle Justice Department allegations that the accounting and consulting firm defrauded the federal government by considering diversity in its employment decisions, the Wall Street Journal reported Tuesday.
The Justice Department alleged that Deloitte tracked diversity in its business units and set demographic goals based on race and sex that affected hiring and promotion decisions.
In a statement Tuesday, Associate Attorney General Stanley Woodward called the deal another example of how the department was “eliminating woke, unconstitutional practices from American workplaces.” “Merit drives opportunity and promotion. Not someone’s sex or race,” he said.
In its own statement, Deloitte said it was pleased to have resolved the matter “to avoid the cost and distraction of protracted litigation.”
The settlement is the latest to emerge from civil probes the Trump administration launched last year in what the Journal described as a broad effort to root out diversity initiatives at major U.S. companies that contract with the federal government.
Many of those investigations have been proceeding under a novel application of the False Claims Act — a federal law most often used in healthcare to pursue Medicare and Medicaid fraud. The statute punishes businesses that cheat the government by inflating the cost of services or billing for work that was never performed; last year, it generated more than $6.8 billion in settlements and judgments, a single-year record for the Justice Department.
Under the new theory, federal contractors that consider diversity, equity and inclusion in their employment practices are also committing fraud, the Justice Department maintains. Contractors must certify, as a condition of their federal contracts, that they will not discriminate against current or prospective employees based on race, color, national origin or sex, the department argues.
IBM was the first private-sector company to settle allegations that it violated the False Claims Act under this theory. The technology company agreed in April to pay $17 million to resolve claims that it failed to comply with antidiscrimination requirements when hiring, helping employees advance their careers and distributing bonuses.
Several other companies have faced similar investigations. Alphabet’s Google and Verizon Communications have received Justice Department demands for documents and information about their workplace programs, the Journal previously reported.
The probes follow a January 2025 executive order from President Trump that directed agencies to effectively end what he called “dangerous, demeaning, and immoral race- and sex-based preferences” in federal contracting.
In a related but distinct enforcement action, PayPal agreed in May to forgo $30 million in transaction fees to end a separate Justice Department investigation into its lending practices. The financial services company was accused of creating a discriminatory investment program that favored Black and minority-owned businesses. In that case, the department alleged PayPal had violated the Equal Credit Opportunity Act, which requires lenders to judge borrowers based only on their ability to repay a loan.