U.S. Accuses Infosys of ‘Fraud and Abuse’ in Visa Case

Infosys is one of the largest outsourcing providers to U.S. companies. European Pressphoto Agency

As it prepared its workers to take on jobs at major U.S. companies, Indian outsourcing giant Infosys Ltd. provided them with written instructions on how to deceive U.S. authorities about the type of work they would do, and furnished them with inappropriate visas to lower its cost of doing business, federal prosecutors allege.

The technology company also entered numerous errors on forms meant to confirm its workers’ employment eligibility in this country, part of a pattern one prosecutor called “systematic fraud and abuse.”

While denying that it committed visa fraud, Infosys has agreed to pay the largest penalty ever for alleged immigration violations—$34 million—to close the investigation and conclude the civil case, according to a settlement and complaint unveiled Wednesday by the U.S. attorney’s office in the Eastern district of Texas. The company acknowledged mistakes in filing the federal employment-verification records, known as I-9 forms.

The government originally pursued criminal charges against the company, which it says would have barred Infosys from obtaining U.S. visas and operating here. But immigration law is ambiguous regarding technology work, according to the lead prosecutor on the case, which gave Infosys attorneys leverage during six months of negotiating over a penalty.

Still, the high-profile case could prompt more stringent requirements for work visas as Congress drafts new immigration laws. It may also spur many corporations to examine their own potential liability in this area. It is already boosting government scrutiny of Infosys’ competitors and other companies applying to bring foreigners to the U.S. to perform specialized work, said a State Department official.

Here is how Infosys’ practices unfolded, according to federal prosecutors and investigators on the case:

From 2008 to 2011, Infosys “as a matter of practice” wrote “invitation letters”—documents submitted to and reviewed by U.S. consular officials and other immigration officials—that misrepresented the purpose of employees’ travel, according to the government complaint.

For example, a letter submitted on or about July 3, 2008, for an individual referred to as MG in the complaint, stated his travel was for “customer discussions and related business development activities.” In fact, “as known by Infosys,” the complaint said, the individual would actually do coding and programming, work not authorized under short-term business visitor visas, known as B-1s.

The individual should have received an H-1 B visa, a long-term work visa that is more expensive and takes longer to acquire, said agents involved in the investigation, which stretched more than two years.

An H-1B visa typically takes months to be processed in the U.S. and costs about $5,000 per worker; each B-1 costs $160 and can be obtained in a matter of days at a U.S. consular office abroad.

“To circumvent the requirements, limitations and governmental oversight of the H-1B visa program, Infosys committed visa fraud by knowingly and unlawfully using B-1 visa holders to perform skilled labor in order to fill positions for employment that would otherwise be performed by United States citizens or require legitimate H-1B visa holders,” according to the complaint.

In a review of 6,500 B-1 visas used by Infosys employees, investigators found hundreds of instances of the documents being used improperly, according to Shamoil Shipchandler, the lead prosecutor in the case.

The federal investigation was conducted jointly by the Department of State’s Diplomatic Security Service and Immigration and Custom Enforcement’s Homeland Security Investigations. The immigration agents found an 84% error rate in the company’s I-9s, work-authorization forms that employers complete for each employee, according to an official close to the investigation.

Infosys distributed a “Do’s and Don’ts” memorandum to foreign nationals to help them appear that they qualified for a B-1 visa, according to the complaint. For example, they were instructed to “not mention activities like implementation design and testing consulting etc., which sound like work.” They were told to avoid using terms like “work” and to “not mention anything about contract rates.”

Infosys directed employees to inform customs and border protection officers at airports that their destinations were those listed on a “labor condition application” to avoid additional paperwork and scrutiny, according to the complaint. For example, on or about Oct. 28, 2009, Infosys allegedly directed an individual cited as VG to tell U.S. authorities that he was destined for Seattle when his destination was in fact Bentonville, Ark.

In the settlement, the company said its use of B-1 visas was for “legitimate business purposes” and “not in any way to circumvent the requirements of the H-1B program.”

“There’s absolutely no evidence that these B-1 visas were used for competitive advantage or to save money or for some illegal scheme—those allegations are not true,” said Stephen Jonas, Infosys’ lead attorney on the case.

Mr. Jonas acknowledged that the company distributed a memo on how to proceed through immigration. But he says many large organizations that operate internationally, including some U.S. agencies, give employees similar guidance. And while employees were encouraged to use certain terminology when speaking to officials, they weren’t instructed to lie, Mr. Jonas said, adding that the memo has since been taken down. “The government hasn’t indicated in all these years a single incident when a consular officer was actually deceived,” he said.

While the settlement allows Infosys to continue to operate without restrictions on its use of U.S. visa programs, the investigation and fine cast a pall over one of the world’s largest outsourcing companies. Bangalore-based Infosys, which made $1.73 billion in net profits for the fiscal year that ended last March, employs 157,000 people and operates in 30 countries. Its U.S. clients have included big-name Wall Street banks, Silicon Valley companies, retail chains and manufacturers, according to investigators. Dow Jones, the company that publishes The Wall Street Journal, is a client of Infosys.

“Their checks and balances and due diligence were totally lacking,” the person said. Although the fine is a record for an immigration case, prosecutors had weighed tougher penalties, Mr. Shipchandler said. But immigration law isn’t always clear regarding work in the technology field, he said, which strengthened Infosys’ position during negotiations, he said.

In recent years, Homeland Security agents have stepped up scrutiny of I-9 forms from meatpacking plants, fast-food chains and other industries as part of a crackdown on the hiring of undocumented foreign workers. In Infosys’ case, omissions and mistakes enabled employees to remain in the U.S. after their visas had expired, according to the complaint.

The company denies this was the case. In a statement, Infosys said, “There is no evidence that the I-9 paperwork violations allowed any Infosys employee to work beyond their visa authorization.”

“It’s not 100% clear what someone who holds a B-1 visa can actually do,” he said.

For example, placing someone within a company for six months to do in-house tech support is an improper use of a B-1 visa. But if a consultant helps refine software during a meeting with a client, as part of a larger project, that could be seen as an appropriate use of a visitor visa, Mr. Shipchandler said. “It’s a murky area, but for our purposes they misled consular officials.”

The investigation was ignited by a February 2011 lawsuit by Jack “Jay” Palmer, an American employee who accused the company of harassment and breach of contract after he raised concerns about possible visa violations. A federal judge in Alabama, where Mr. Palmer worked, dismissed that case. Mr. Palmer cooperated with federal agents investigating the company.

Ken Behrendt, chief executive of Eagle Creek Software Services, a large IT service provider who formerly worked for an offshore company, said he saw “countless examples of companies manipulating or simply breaking the law in regards to visa policy.”

The Infosys case could trigger Congress to pass laws that “make it more difficult for legitimate players to jump through immigration hoops to bring workers to the United States,” said Susan Cohen, chair of Mintz, Levin immigration law practice in Boston.

Greater scrutiny already is reverberating across the outsourcing industry.

Consular officers are giving applicants from India’s IT industry more scrutiny, a State Department security official says. Meanwhile, companies are paying closer attention to the “fine print” of the visa rules, says industry analyst Phil Fersht.

“The Infosys settlement sets the benchmark,” said Ian MacDonald, an attorney at Greenberg Traurig in Atlanta who specializes in immigration compliance and has done risk-assessment work. “Any CEO who isn’t ordering an immediate assessment of risk and financial exposure…is sitting on a time bomb that can not only result in tax, employment law and immigration liability, but also will likely cause negative publicity and possibly adversely affect stock pricing.”