Infosys to pay $34 million in U.S. visa case

BANGALORE/WASHINGTON Thu Oct 31, 2013 12:05am IST

An employees walks past a signage board in the Infosys campus at the Electronics City IT district in Bangalore, February 28, 2012. REUTERS/Vivek Prakash/Files

An employees walks past a signage board in the Infosys campus at the Electronics City IT district in Bangalore, February 28, 2012.

Credit: Reuters/Vivek Prakash/Files

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BANGALORE/WASHINGTON (Reuters) - Tech services giant Infosys Ltd (INFY.NS) agreed on Wednesday to pay $34 million to end a U.S. investigation related to the widespread practice by Indian firms of flying workers to client sites in the United States on temporary visas.

The settlement, which the U.S. Justice Department said was the largest in a case of alleged civil fraud over visas, was filed in U.S. District Court for the Eastern District of Texas.

Infosys, India's second-largest IT services exporter, agreed in the settlement that it committed civil violations of U.S. employment law, but it was not required to admit and did not admit widespread further wrongdoing.

"Infosys denies and disputes any claims of systemic visa fraud, misuse of visas for competitive advantage or immigration abuse. Those claims are untrue and are assertions that remain unproven," Infosys said in a statement.

The company emphasized that the allegations were not criminal, and that there would be no limitations on its eligibility for U.S. federal contracts or access to U.S. visa programs as a result of the settlement.

The Justice Department had alleged in court papers that Infosys knowingly and unlawfully sent people to work without proper visas, that there were widespread failures in the company's record-keeping and that the company tried to deceive U.S. consular officials with false "invitation letters", which tell the government the purpose of travel.

One invitation letter from May 2010 for someone identified in court papers as "AR" said the person "would be involved in meetings and business discussions," but the real purpose of the trip was for computer coding and programming, the Justice Department said.

One reason the Justice Department decided to settle its allegations rather than try to prove them at trial was that Infosys took steps to fix irregularities and agree to outside monitoring, said U.S. Attorney John Bales of the Eastern District of Texas.

Bales said the Justice Department had anecdotal evidence that problems with I-9 forms - used to verify employment eligibility - and visa forms were common in the tech services industry. While he would not confirm that there are other open cases, he said others should pay attention to the Infosys settlement.

"They do acknowledge that there are problems with their I-9 process, and that however it happened - unintentional or not - their visa practice had some irregularities," Bales told Reuters in a phone interview. "They have pledged to be more accurate."

"We've learned a lot in the case, and we're going to use that knowledge," he said.

U.S. lawmakers are considering legislation that would make it more difficult and costly for Indian IT firms to send workers to the United States on temporary, restricted visas.

Infosys employs roughly 15,000 people in the United States. As of March 31, about 10,800 of those were on H-1B visas, which allow an employee to stay and work in the United States up to six years, and 1,600 were on temporary L-1 visas, a company filing said.

The U.S. investigation focused on the use of B-1 business visas and I-9 forms, Infosys has said. A person on a B-1 visa in the United States can participate in meetings but is not allowed to work.

"It is likely to add more fuel to the ongoing debate around visa reforms," Chirajeet Sengupta, practice director in Mumbai at Everest Group, which advises clients on technology vendors, said on Tuesday after reports that a settlement was imminent.

"These reforms, if executed, have the potential to impact Indian service providers' landed resource model that is largely driven by access to H-1B visas in large numbers," he said.

In its statement, Infosys said only .02 percent of the days that Infosys staff worked on U.S. projects last year were performed by people on B-1 visas.

"The Company's use of B-1 visas was for legitimate business purposes and not in any way intended to circumvent the requirements of the H-1B program," the Bangalore-based company said.

Infosys has secured roughly one B-1 visa for every 10 H-1B visas, according to a person with direct knowledge of the matter who declined to be identified.

U.S. authorities had been looking into Infosys' use of visas since 2011. This month, Infosys set aside a reserve of $35 million, including legal fees, as it worked towards a resolution of the U.S. investigation.

The case is "an important event in the annals of Indian IT industry," Sundararaman Viswanathan, a consultant in Bangalore with Zinnov, which advises U.S. corporations on sending outsourcing work to India, said ahead of the settlement.

"This is a common issue amongst all the Indian service providers - just that Infosys had to deal with it," he said.

"Though the Indian service providers do not intend to flout the visa regulations, there was definitely a lack of regard for certain norms and procedures. This will be fixed. There will be an increase in onsite hiring," he said. (Writing by Tony Munroe; Editing by Sonya Hepinstall)

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Comments (3)
SkTp wrote:
Kudos to Jack B. Palmer! For upholding the law and being upright and busting these shameless thieves in coats who call themselves one of India’s greatest IT companies, shame on Infosys for smothering India’s name all around the professional world and making Indians look like fraudsters.

Highly unfortunate for both Americans and Indians that the US justice department has decided not to pursue the case and not file criminal charges. They should have filed charges and extracted the fullest penalty, debarred them and jailed the senior Infosys management for misusing the US visa system AND exploiting Indians and benefiting from the desperation and very low wages Indians get for the same work which is performed at a much higher wage by Americans.Indians are paid ~$4-7/hr for what Infosys charges its clients ~$70-$80/hr.

Despite what Infosys says about ‘fully complying’ with US laws. They continue to rampantly misuse/abuse the US visa system.The US govt should enact a law similar to that in Germany/Switzerland where irrespective of the nationality of the person employed and the organisation involved, every organisation that brings outsiders is forced to pay similar wages to all (Germans or Indians) employed at equivalent designations in the Industry.

The american public must file a class action lawsuit against Infosys for causing them to lose out jobs in the US and the govt should pursue other IT companies and severely fine them and jail the guys running such scams.

Ultimately the losers are not Infosys(paltry fine $35mil for the cash reserve $4bil they have accumulated from this monumental scam) or the US justice department(they may just settle for the amount to keep good relations with India). The losers are those Americans(not those in Silicon valley but ordinary Americans with the skills for the jobs Infosys poached) who lost out on a job opportunity created in the US AND those Indians who got low Indian wages for working in the US. Infosys should be fined for the low wages they paid their countrymen and the same must be divided to those who came to the US on the B1 visa.

Utter shame on Infosys for tarnishing India’s name! Who’s next TCS, Wipro, HCL, Accenture or Cognizant??? (Wish all of them get booted!). America needs people like Jack !!!(take a long holiday, you earned it($5mil??? right :-) and quit Infosys and try else where). It is not a place for upright guys like you!

Oct 30, 2013 10:00pm IST  --  Report as abuse
Applebees wrote:
I agree this has been a systemic abuse by all oursourcing vendors (including IBM, Accenture). Infosys was unfortunately the only one who was thanks to Jack Palmer. He deserves kudos for standing up.

I want to point out 2 items (1) You have no clue on hourly wages of Indian workers in IT industry. (2) Jack Palmer is also a gold digger of sort. He lost the case in cort but continues to draw salary for last 3 – 4 years from Infosys, the same unethical company against which he claims to have led the crusade.

Oct 30, 2013 10:48pm IST  --  Report as abuse
Kulmohan wrote:
As an employee of Indian IT consultancy, I have seen many innocent Indian IT employees working overtime and spending their health and long hours on the job even so on the day of Diwali festival (akin to Christmas in the western world). To say the least, US decision to levy a fine of 34 million dollars on Indian IT company Infosys has only deprived the creators of this wealth i.e. the ordinary Indian employees of their rightful share.

Oct 30, 2013 12:12am IST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

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