A QUESTION OF FRAUD: Silicon Valley pushes for more foreign workers despite federal probes

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A QUESTION OF FRAUD Silicon Valley pushes for more foreign workers despite federal probes David Lazarus, Chronicle Staff Writer Thursday, September 21, 2000 )2000 San Francisco Chronicle

URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2000/09/21/MN4322.DTL

Federal authorities have started nationwide investigations into the hiring of foreign high-tech workers, including charges of visa fraud and allegations that the practice is riddled with abuse, The Chronicle has learned.

The investigations by the Immigration and Naturalization Service and the Department of Labor are being conducted as Silicon Valley, facing a severe shortage of workers, pushes Congress to expand the controversial H-1B visa system.

The immigration service is looking into assertions that H-1B applicants are falsifying academic and work credentials, and that U.S. employers -- in many cases acting as nothing more than agencies for temporary employees -- are exploiting workers.

``We deny tens of thousands of (visa) cases every year,'' said Bill Yates, a senior immigration service official in Washington, D.C. ``But are we catching most of the fraud? The truthful answer is that we're not.''

He said immigration agents began re-examining H-1B cases throughout the country in July as part of a sweeping attempt to gauge the scope of ``misrepresentations'' by visa applicants and employers, which include some of the biggest names in the U.S. tech industry.

Labor Department officials, meanwhile, said a separate investigation of possible H-1B violations is now under way in the Bay Area. They refused to elaborate.

``All I can say is that we have cases open in Silicon Valley,'' said a department spokesman.

H-1B visas have emerged as a hot political issue, with both Vice President Al Gore and Texas Gov. George W. Bush embracing Silicon Valley's calls for raising the number of foreign tech workers allowed into the country each year.

Congress is considering whether to increase the current annual limit of 115,000 H-1B visas to 200,000. Demand for the visas is so fierce, this year's allotment ran out in March.

``It's a major problem,'' said Thom Stohler, director of workforce policy for the American Electronics Association, an industry group representing more than 3,000 high-tech heavyweights. ``When you talk to the HR people in Silicon Valley, they say it's very hard finding skilled people.''

But critics of H-1B visas, including many U.S. programmers and engineers, say tech companies are overstating the scope of worker shortages to maintain a steady supply of foreign-born employees willing to work longer hours for lower wages.

``H-1B is indentured servitude,'' said Rob Sanchez, a programmer from Phoenix who maintains that he lost his job last year to an H-1B visa holder. ``That's the whole idea behind this program.''

Actually, Sanchez and other critics concede that many if not most H-1B visa holders are meeting a legitimate demand for skilled workers and play a key role in the continued expansion of the U.S. tech industry.

STEPPING STONE TO GREEN CARD

But, as the current fraud investigations illustrate, the system is not foolproof. By any reckoning, the H-1B program in place today has substantially changed from its legislative roots.

When the program first began in the early 1950s, its intent was to allow qualified foreign workers to hold temporary positions with American companies.

Today, the H-1B visa is seen by applicants as a stepping stone to obtaining permanent U.S. residency -- the coveted ``green card.'' And a tier of entrepreneurs has emerged to both expedite and profit by from the immigration process.

Known as ``body shops,'' some of these middlemen are at the heart of many of the charges of visa fraud and abuse.

They recruit workers overseas and arrange for their visas. They then farm out the workers to U.S. companies, often cutting themselves in for as much as half of the employee's salary.

Body shops are especially prevalent among Indian workers, who make up by far the largest segment of H-1B visa holders. According to a report released this month by the U.S. General Accounting Office, Indians accounted for about half of all H-1B visas handed out in the last fiscal year.

`CONSULTANCY' PROCESS

As for how legitimate body shops operate, it would be hard to find a better or more efficient example than that of Manka Ahluwalia, who runs her small ``consultancy,'' TIC Resources, out of her husband's law office on the fringe of San Francisco's Financial District.

Manka's spouse, Raja, is himself an immigration lawyer, allowing TIC to make a persuasive case for the breadth of its services when recruiting workers back in India.

``Others have to find an attorney and do all the work,'' Manka said. ``I just give the whole thing to my husband.''

The chain begins in Delhi, where Manka's brother-in-law, Preet, serves as TIC's recruiter. He advertises in local newspapers and on the Internet for workers with specific tech skills -- proficiency in the Java programming language, for example.

Manka said Preet will sift through submitted resumes and check academic and vocational references. Then, when a suitable candidate is found, TIC will begin the application process for an H-1B visa.

The applicant, now technically a TIC employee, signs a contract before leaving home agreeing to a fixed salary, usually about $60,000 a year, or roughly $30 an hour for a 40-hour workweek.

Manka said she shells out about $3,000 per employee for airfare to the Bay Area, moving costs and a week or two of initial rental payments. The idea is to quickly place the worker as an independent contractor with a local tech firm.

``We usually start marketing him a week before he comes here,'' Manka said.

Once a job is found, she said she often charges the hiring company about $60 an hour for the services of TIC's ``consultant.'' Half this amount goes to the worker, per the conditions of the previously signed contract, and the rest is profit for TIC.

``I don't have to work any more,'' Manka observed. ``Now I do this full time.''

Her husband, Raja, was quick to note that nothing TIC does is illegal. ``I believe in the entrepreneurial system,'' he said. ``I believe in the American dream.''

STICKING WITH EXPEDITERS

While admitting that some might see the body-shop system as a form of exploitation, Raja stressed that no one forces workers to employ the services of go-betweens and that body shops play a valuable role in expediting the visa process.

``If they have a preference, people would rather work directly for a company than a body shopper,'' he said. ``But they stick with the body shopper because a body shopper can process a green card.''

There's the rub. The procedure for obtaining a green card requires that the applicant remain on the payroll of a single employer. If the applicant switches jobs, he or she falls to the bottom of the queue.

In the case of TIC, the incentive not to leave the body shop is even greater. With Manka's husband handling the green-card application process, departing workers face the distinct possibility of losing favor with their own attorney.

Raja freely admitted that other body shops may not be as scrupulous as his wife's in upholding the law. ``Of course, there is fraud,'' he said. ``Everybody knows it.''

FAKE CREDENTIALS

One of the most common forms of H-1B fraud involves falsification of academic and work credentials. A bachelor's degree (or its vocational equivalent) is required for H-1B status, as well as proof of specific work skills.

Some Indians have reported that overseas recruiters will charge workers as much as $6,000 to improve their visa chances. In return, relatively unskilled workers will receive a month or two of computer training along with paperwork attesting to far more extensive work experience.

Diplomas from existing or even nonexistent universities also can be arranged.

``It's a well-known fact that people in India will take two or three classes in Java programming, then the body shop will create a resume for them,'' said Inder Singh, a former H-1B visa holder now working as a programmer on the East Coast.

``You will find that a lot of them don't have the work experience they claim to have,'' he said. ``The body shop does it for them. They are very good at glossing over resumes.''

DETECTING FRAUD TOUGH

Catching all such instances of fraud is virtually impossible for U.S. consulates abroad. Meanwhile, immigration officials are themselves overwhelmed by the number of visa applications submitted and seldom have opportunities to check on specific petitions.

In a scathing report on shortcomings in the H-1B visa system, the General Accounting Office pointed out that immigration agents are judged by the number of visa applications they process, not the number of lies spotted in accompanying documents.

``As a result,'' it said, ``there is not sufficient assurance that INS reviews are adequate for detecting program noncompliance or abuse.''

The immigration service's Yates said his agency disagreed with much of the GAO's findings. He said the immigration service is doing a perfectly adequate job with the resources available.

``We simply don't have the resources to check on every visa petition,'' Yates said.

Last year, he testified before a congressional subcommittee that the U.S. Consulate in Chennai (formerly Madras) issued 20,000 visas in the previous fiscal year, more than any other diplomatic post in India.

Yates told legislators that a subsequent immigration service investigation revealed that 21 percent of vocational resumes submitted by visa applicants were fictitious and 29 percent more ``were either probably or possibly fraudulent.''

DOING THEIR BEST

Christopher Lamora, a spokesman for the State Department's bureau of consular affairs, told The Chronicle that diplomatic officials are doing their best to keep visa fraud at bay.

``We know that visa fraud exists,'' he said. ``If we find out about it, we do our best to crack down.'' Lamora declined to discuss current investigations.

Yates of the immigration service said that in the year since he appeared before Congress, advances in computer technology have significantly improved his agency's ability to spot bogus credentials. Nevertheless, he said, about 20 percent of resumes submitted still contain fraudulent information.

``There's no denying that applications can slip through,'' Yates said. ``If it is the intention of the employee or the employer to defraud the government, you may not be able to ferret it out.''

Once a worker is in the country, it is largely the responsibility of the Department of Labor to ensure that conditions of the H-1B visa are not being abused.

WORKERS FEAR COMPLAINING

But there's a big catch: Labor officials can investigate potential fraud or abuse only after a complaint has been lodged by an H-1B worker. Few workers dare jeopardize their employment status or green-card prospects by filing such complaints.

``The notion that this program can be enforced on a complaint- only basis is naive, if not misguided,'' said John Fraser, deputy administrator of the Labor Department's wage and hour division.

The numbers suggest as much. Out of more than 600,000 H-1B tech workers who have arrived in the United States since 1990, fewer than 400 have ever complained to the Labor Department of mistreatment.

``Others have taken that data and argued that compliance is not an issue,'' Fraser said. ``We know it's an issue.''

An aspect of H-1B visas that especially rankles Labor officials is the practice of ``benching.'' This is when a body shop cannot find immediate work for a ``consultant'' and leaves the worker essentially to fend for himself, with reduced or no pay in violation of his contract.

Workers who complain about being benched are frequently threatened with being shipped back to India.

``This is illegal,'' Fraser said. ``Unfortunately, it's quite common.''

Raja Ahluwalia, the immigration lawyer, said that while benching is against the law, it has become a routine part of the body-shop trade.

``In business, you do what is best for your business,'' he explained. ``Where there is a possibility for profit, an entrepreneur, by definition, should exploit it.''

INDIAN CONSULTANTS PROFIT

Another development that has authorities scratching their heads is the way major Indian consulting firms -- among the leading petitioners for H-1B visas -- are manipulating the system for their own benefit.

In such cases, the consultancy learns from clients about a coming tech project and agrees to provide H-1B workers to help meet the project's deadlines. In so doing, the consultancy may parcel out some or all of the work to other employees back in India.

This is how Tata Consultancy Services operates. A subsidiary of India's largest conglomerate, Tata boasts of a client list that includes such Bay Area powerhouses as Oracle Corp., Intel Corp. and Cisco Systems.

Subramanian Sambamurthy, regional manager at Tata's San Francisco office, said his company's service allows clients to maintain production schedules on a virtually round-the-clock basis, with work performed simultaneously in the United States and in India.

``Shortening the time to market is what we are doing,'' he said. ``We are not seeking to create employment opportunities for Indians in the U.S. We are seeking to help our customers.''

However, each consultant the company brings over from India to learn the particulars of a client's project requires the issuance of an H-1B visa, even though the visa will not be used, as originally intended, to fill a local need among U.S. firms.

Rather, this is an example of H- 1Bs being used at least in part to drum up business for foreign companies and their workers overseas.

Tata received 320 H-1B visas between October 1999 and February of this year, according to immigration service records. Other major Indian ``outsourcing'' consultancies include Mastech Corp. (389 visas), Syntel Inc. (337) and Wipro Corp. (327).

Yates of the immigration service said he had not heard about such use of the visas but said he found it troubling. ``If it takes work away from American workers, that's a problem,'' he said.

DEFENDING VISA LAW

Lenni Benson, an associate professor at New York Law School specializing in immigration law, said that despite such blatant manipulation of H-1B statutes, she would not encourage Congress to tamper significantly with the law.

The system, she said, is clearly benefiting U.S. industry by supplying access to thousands of skilled workers.

``If you're a startup in Silicon Valley,'' Benson observed, ``you can go directly to a body shop and have them take care of everything.''

To better protect workers, though, she said the law at least should be amended to allow H-1B holders to switch employers without jeopardizing their employment status or green-card prospects.

``Give them free agency,'' Benson said. ``Give them the same powers as any other worker in the United States.''

In fact, legislators are pondering measures along these lines, although it remains unclear what, if anything, they will do in conjunction with a proposed increase in the annual visa quota.

Manka Ahluwalia, for one, would not be displeased to see a greater number of H-1B visas available. Her body shop is always on the lookout for new talent.

``There are so many projects going on,'' she noted. ``There will always be room for more consultants.''

``Business is thriving for everyone,'' her husband said.

--------------------------------------------------------------------------------

E-mail David Lazarus at dlazarus@sfchronicle.com.

VISA BREAKDOWN

Most H-1B visas go to Indian workers in the high-tech industry.

BC:

CHART:

-- Industry

Systems Analysis and Programming 54%

Other IT-Related Occupations 5%

Electrical/ Electronics Engineering 5%

Remaining Occupations 36%

.

-- Country of Origin

India 48%

China 9%

Philippines 3%

Canada 3%

United Kingdom 3%

Remaining 34%

.

Source: Immigration and Naturalization Service

--------------------------------------------

CHART 2:

EMPLOYERS OF MOST H-1B WORKERS

For period October 1999 to February 2000

Company Number of H-1Bs(x) Type of business

Motorola 618 High tech

Oracle 455 High tech

Cisco Systems 398 High tech

Mastech 389 IT Consulting

Intel 367 High tech

Microsoft 362 High tech

Rapidigm 357 IT Consulting

Syntel 337 IT Consulting

Wipro 327 IT Consulting

Tata Consultancy

Service 320 IT Consulting

.

(x) - Includes all the company's successful applications for H-1B visas;

in some cases the company may not have actually hired the H-1B worker.

.

Source: Immigration and Naturalization Service

CHRONICLE GRAPHIC

--------------------------------

CHART 3:

HOW H-1B WORKERS COME TO THE U.S. THROUGH `BODY SHOPS'

(1) ``Body shop'' recruiter searches overseas for skilled technical

workers who want to come to the United States.

(WHAT CAN GO WRONG: Recruiters may accept bribes

from unqualified workers. College degrees or documents verifying

skills may be counterfeit.)

.

(2) Body shop, which functions as an agency for temporary employees,

hires worker, applies for H-1B visa for new employee and brings

worker to United States.

(WHAT CAN GO WRONG: Workers may languish without a job in the United

States, unpaid by body shop.)

.

(3) Body shop turns to U.S. tech company and offers worker's services.

(WHAT CAN GO WRONG: The body shop may hire the worker for $30 an hour,

then charge the tech company $60 an hour for the worker's services.

Critics call this a form of exploitation and against the spirit of the

H-1B law.)

.

(4) Body shop, having hired worker and expedited H-1B paperwork, promises

to get worker a green card.

(WHAT CAN GO WRONG: Workers cannot switch jobs while green card application

is in the works. They are tied to the body shops in what some say is a form

of indentured servitude.)

John Blanchard / The Chronicle



-- K (infosurf@yahoo.com), September 21, 2000

Answers

Correction to article

San Francisco Chronicle Letters to the Editor 9/21/2000 Thursday, September 21, 2000 3:23 PM

David Lazarus, in his article "A Question of Fraud" twisted what I said and took it totally out of context. His claim that I "concede that many if not most H-1B visa holders are meeting a legitimate demand for skilled workers and play a key role in the continued expansion of the U.S. tech industry" is ridiculous. Anybody that goes to my website at www.ZaZona.com/ShameH1B, and Lazarus said he has, would know that I would never say such a thing. Let me reiterate what I said and I will leave it up to the reader to decide if Lazarus quoted me correctly.

I told Lazarus that many employers consider using H-1Bs as good business. They can hire these high-tech braceros cheaper than American workers and they are considered to be more "loyal" because they are indentured to the employer that hired them. Companies that don't hire H- 1Bs may consider themselves to be at a competitive disadvantage with firms that hire H-1Bs to lower expenses.

This IT Cartel of companies will claim that they need H- 1Bs or they won't be able to compete. They threaten our government that they risk going out of business or moving overseas. The same argument was made by southern plantation owners when they were asked if they needed slaves to pick cotton. After the civil war, the south still grew plenty of cotton, and if H-1B is abolished, we will still retain our high-tech companies.

H-1Bs are meeting a legitimate demand. The IT Cartel demands cheap indentured servants and our corrupt government is giving them the H-1B law to import them. Lazarus did a good job of pointing out the fraud that routinely happens with this program, and for that he should be thanked.

Rob Sanchez H-1B Hall of Shame www.ZaZona.com/ShameH1B

-- K (infosurf@yahoo.com), September 22, 2000.


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