In the latest settlement in connection with the current Trump administration’s anti-DEI efforts, the audit and consulting firm Deloitte has agreed to pay $21.5 million to settle Department of Justice allegations that the firm violated the False Claims Act by allegedly continuing to consider diversity in hiring, promotion, and training decisions. This latest settlement has several interesting features and raises interesting questions, as discussed below.

The U.S. Department of Justice’s August 25, 2026, press release about the Deloitte settlement can be found here. The actual settlement agreement itself can be found here. An August 25, 2026, Wall Street Journal article about the settlement can be found here.

Background

From the very beginning, the current Trump administration has proclaimed its intent to target Diversity, Equity, and Inclusion (DEI) practices and policies in Corporate America. The administration also clearly signaled that it intended to use the False Claims Act as part of its anti-DEI campaign. As early as late 2025, news began to circulate that the DOJ had already launched DEI-related investigations of several major U.S. companies. In April 2026, as discussed here, the DOJ announced the settlement of an FCA investigation relating to DEI practices, in the form of a $17 million settlement with IBM.

The Deloitte Settlement

The DOJ’s recently announced settlement with Deloitte is the second FCA DEI-related settlement as part of the agency’s anti-DEI initiative. In pursuing its claims against Deloitte, the agency relied on federal contracting process provisions that require federal contractors to certify, as a condition of their federal contract, that the company won’t discriminate against current and prospective employees based on race, color, national origin, or sex. The settlement resolves the government’s allegations that Deloitte falsely certified its compliance with these conditions, while engaging in employment practices that the government alleged were discriminatory.

The government alleged that, contrary to its certifications, Deloitte engaged in practices that involved racial preferences in hiring, training and promotion decisions. The government alleged that the company actively tracked its progress on its own internal goals to achieve certain race and sex-based workforce composition objectives. Different units allegedly were ranked according to their success in achieving the objectives. Firm managers were evaluated, in part, based on their contributions toward helping the firm achieve its workforce composition objectives. These same objectives allegedly impacted the firm’s promotion and training decisions.

The DOJ press release about the settlement acknowledged that the claims that were settled represented “allegations only,” and “there has been no determination of liability.” According to the Journal article, Deloitte has said that it resolved the matter “to avoid the cost and distraction of protracted litigation.”

Discussion

As detailed above, the Deloitte settlement is not the first of these DOJ DEI False Claims Act matters to be settled. There are, however, a number of features of the Deloitte settlement that are worth noting.

For starters, it should be noted that Deloitte is not a public company; it is a private firm. If nothing else, the Deloitte settlement underscores the fact that there is nothing about the current Trump administration’s anti-DEI efforts that is restricted to public companies only. (Indeed, in highly publicized actions, the administration has also pursued anti-DEI actions against certain colleges and universities, as well).

Another thing worth noting about the settlement is that the settlement resolved not only the government’s False Claims Act claims, it also resolved the related qui tam action, in which a whistleblower (known as a “relator”) can initiate a False Claims Act claim, and potentially share in any recoveries. In this case, the relator – the American Alliance for Equal Rights – which had filed a qui tam action against Deloitte, is to receive $4.3 million.

The American Alliance for Equal Rights (AAER) was founded by Edward Blum, who is also the president of the organization Students for Fair Admissions, which pursued the U.S. Supreme Court case against Harvard about admissions discrimination. In a June 2023 profile, the Wall Street Journal called Blum “the man behind the push to end affirmative action.” The AAER’s objective is by its terms to challenge and eliminate public and private policies that make distinctions based on race or ethnicity. The likelihood is that the AAER, now funded with the proceeds from its portion of the Deloitte settlement, will continue to focus on finding firms to target through similar qui tam actions.

It is also worth noting that the government’s use of the False Claims Act to try to root out DEI is, as the Wall Street Journal article put it, “novel.” The law is designed to punish businesses that cheat the government by inflating the cost of services or materials or billing for services that were not performed. As the Journal article points out, the current Trump administration is “operating under a new theory that federal contractors that consider diversity, equity and inclusion in their employment practices are also committing fraud under the law.”

As the Journal noted in an earlier article about the administration’s anti-DEI efforts, “it is unusual to see the antifraud law used to pursue hot-button conservative policy objectives.” The same article quoted one lawyer as saying that she has “never seen the government use its false-claims authority to pursue concerns about compliance with the federal antidiscrimination laws.”

The Journal article about the Deloitte settlement also notes that there are other FCA DEI investigations in progress. The article specifically mentions Alphabet’s Google and Verizon Communications as companies that have received document requests about their workplace programs. Other companies facing the kinds of charges that Deloitte faced may, like Deloitte, find it expedient to settle the charges rather than incur continued expense. But it may also be that one or more companies faced with allegations like the ones Deloitte faced may seek to legally challenge the administration’s use of the FCA as an anti-DEI weapon.  

From a D&O insurance perspective, there are many concerns here. The first is, as noted previously on this site (most recently here), FCA claims are an awkward fit with the typical D&O insurance policy. There is in fact a long history of D&O insurance coverage disputes arising in connection with underlying FCA claims. (Refer, for example, here.) Notice timing issues are common. Coverage for FCA claims under public company D&O insurance may be limited because the FCA claims are typically entity only claims, but the public company D&O insurance policy provides coverage only for securities claims (which the FCA action is not). The D&O insurers often contend that FCA claims are essentially non-covered contract disputes, or stem from excluded professional services liability issues.

Notwithstanding all of this, there arguably is increasing authority that D&O insurers must cover FCA claims (as discussed, for example, here and here). A detailed recent memo from the Covington law firm discussing these policy coverage issues can be found here.

There is an added risk here, both for the defendant companies and for their insurers. And that is the possibility that a regulatory False Claims Act claim can lead to a follow-on securities or derivative lawsuit. As discussed here, last spring a False Claims Act defendant was the target of a plaintiff shareholder’s follow-on securities lawsuit. As I noted at the time in connection with the follow-on suit, “the new follow-on lawsuit suggests that D&O insurers will want to consider the implications of the administration’s active deployment of the FCA as an enforcement tool.” An FCA follow-on securities or derivative suit arguably would involve very different D&O insurance coverage implications than the underlying FCA claim itself.

Given the administration’s approach and the priority it has given to its anti-DEI initiative, the likelihood is that we will be hearing more about anti-DEI False Claims Act claims in the months ahead. It is equally likely that all of the issues discussed above will receive a vigorous airing.