Infosys ran 'unlawful' visa scheme, U.S. alleges in settlement

Infosys to pay $34M in settlement, but disputes all claims

The U.S. alleges that offshore outsourcing giant Infosys violated visa laws to increase its profits, reduce visa expenses and avoid tax liabilities, in a settlement announced today.

But the allegations, and the evidence the government says it has to back them up, will remain just that, allegations. Instead of pursuing a court case, the U.S. will accept a $34 million settlement payment from Infosys.

That's how the government typically handles visa violation claims, but in this instance, the government said it is the largest settlement ever reached.

Infosys denies any wrongdoing in the agreement, which is signed by both parties.

This settlement is a fraction of Infosys' 2012 revenues of $6.99 billion.

The government action involves the Bangalore, India-based company's use of the B-1, or business visitor visas, for work that allegedly required H-1B visas.

Generally, a B-1 visa is intended for short-term visits, such as attending a convention or negotiating a contract. It is relatively easy to get and isn't subject to any of the caps, fees, or wage requirements that govern H-1B visa use.

Infosys, which applies for thousands of H-1B visas every year, "unlawfully" supplemented its workforce with B-1 visa workers, according to the U.S. complaint. Infosys wrote letters to U.S. officials with "false representations regarding the true purpose" of a B-1 worker's activities. It would tell officials that a worker was coming in for discussions, when the real reason was to do work that required an H-1B visa, such as programming. Visa applicants were also told what to say to avoid suspicion, the government alleged.

"We will not tolerate actions that mislead the United States and circumvent lawful immigration processes, whether undertaken by a single individual or one of the largest corporations in the world," said U.S. Attorney John Bales for the Eastern District of Texas, which conducted the investigation. "The H-1B and B-1 visa programs are designed and intended to protect the American worker; and we will vigorously enforce the requirements of those programs," he said, in a statement.

In the settlement, Infosys denies any wrongdoing and says its B-1 visa "was for legitimate business purposes and not in any way to circumvent the requirements of the H-1B program."

The company reiterated that position in a statement Wednesday, and said it "disputes any claims of systemic visa fraud" and other claims and said they are "untrue and are assertions that remain unproven."

Infosys says that "only .02% of the days Infosys employees worked on U.S. projects in 2012 were performed by B-1 visa holders." But this date, 2012, was after the government probe began in 2011. Infosys has not disclosed the size of its U.S. workforce, or the percentage of its workforce on visas.

The person who triggered the investigation was Jay Palmer, an Infosys employee and Alabama resident who filed a lawsuit against the outsourcing company that drew attention to its use of the B-1 visa.

Palmer said that after he refused to participate in a plan to use B-1 visa workers for jobs requiring H-1B workers, he was threatened and harassed. Palmer's case in federal court didn't make it to trial, because of provisions in Alabama's "at-will" employment law. In dismissing the case, U.S. District Court Judge Myron Thompson, nonetheless made it clear that the alleged threats against Palmer were "deeply troubling," but the judge said he couldn't rewrite state laws. The case didn't touch on visa law, which is what a Texas grand jury was looking into.

Palmer's attorney, Kenneth Mendelsohn, said Palmer "was the guy who had the courage to stand up.

"There were many people in Infosys that knew this was going on and just turned the other cheek," said Mendelsohn, "and Jay, just morally could not do that, even at the risk of harassment and threats of that nature."

Palmer gives credit to the federal investigators. "Today is not about me, today is about Ed Koranda, and Tim Forte and the U.S. government and their findings and enforcement of the law," said Palmer, in an interview, referring to the two special agents who investigated the case.

Palmer also said that he "harbors no hard feelings" toward Infosys executive Chairman Narayana Murthy. "I only wish he would have reached out to me over the last 2.5 years," he said.

"What people don't understand is I tried to fix the problem before I got an attorney, before I turned them in," Palmer said.

The settlement doesn't affect Infosys' future ability to obtain visas. But it's unclear whether this agreement is the end of problems for Infosys.

The government's settlement said that Infosys circumvented visa law "for the purposes of increasing profits, minimizing costs of securing visas, increasing flexibility of employee movement, obtaining an unfair advantage over competitors, and avoiding tax liabilities." These allegations could invite a closer look from the Internal Revenue Service or the U.S. Securities and Exchange Commission.

Infosys, as part of the settlement, also agreed to improve its visa compliance procedures.

Ron Hira, a public policy professor at the Rochester Institute of Technology and a researcher on tech immigration issues, points out that the $34 million settlement represents a "mere 2% of Infosys profits of $1.7 billion last year."

"Hopefully, policymakers and journalists don't draw the conclusion that the 'system works' because Infosys has settled," Hira said. "Instead, they should see this for what it is -- one small indication of the vast extent to which firms are exploiting loopholes in the visa programs to bring in cheaper foreign workers to displace and undercut American workers."

John Miano, the founder of the Programmers Guild, said "it is great to see the government finally doing something." He believes the use of the B-1 visa to import labor is widespread.

"Until the government starts seeking criminal actions against individuals, illegal actions like this will continue," Miano said.

This article, Infosys ran 'unlawful' visa scheme, alleges U.S. in settlement, was originally published at Computerworld.com.

Patrick Thibodeau covers cloud computing and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov or subscribe to Patrick's RSS feed. His e-mail address is pthibodeau@computerworld.com.

See more by Patrick Thibodeau on Computerworld.com.

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This story, "Infosys ran 'unlawful' visa scheme, U.S. alleges in settlement" was originally published by Computerworld.

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