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High Rate of H-1B Visa Fraud

A study finds that 13% of the visa petitions for U.S. employers to bring in skilled foreign workers are fraudulent

A report released Oct. 8 by the U.S. Citizenship & Immigration Services (USCIS) reveals that 13% of petitions filed for H-1B visas on behalf of employers are fraudulent. Another 7% contain some sort of technical violations.

The study, released to members of the U.S. Senate Judiciary Committee, marks the first time the agency, part of the Homeland Security Dept., has documented systematic problems with the controversial program. Technology companies, in particular, have come to rely on the H-1B visa program to bring in skilled foreign workers to fill jobs that employers claim can't be filled with U.S. candidates. Tech companies like Oracle (ORCL), Microsoft (MSFT), and Google (GOOG) have pushed to get more visas, claiming that a shortage of skilled workers is hampering U.S. competitiveness. Microsoft Chairman and co-founder Bill Gates has twice testified in front of Congress on the issue.

Critics say H-1Bs help U.S. companies replace American workers with less costly foreign workers. "The report makes it clear that the H-1B program is rife with abuse and misuse," says Ron Hira, assistant professor of public policy at the Rochester Institute of Technology. "It shows the desperate need for an auditing system." However, both Presidential candidates, Senator Barack Obama (D-Ill.) and Senator John McCain (R-Ariz.), have said they support expanding the program.

Program Abuses Alleged

A USCIS spokesperson was not immediately available for comment. The report's conclusion states: "Given the significant vulnerability, USCIS is making procedural changes, which will be described in a forthcoming document." A spokeswoman, Beth Pellett Levine, says Senator Chuck Grassley (R-Iowa), a longtime critic of the H-1B program, is drafting a letter to USCIS in response to the study.

The H-1B visa program has become increasingly controversial in recent years as groups such as the Programmers Guild and WashTech, which represent U.S. tech workers, allege it is being abused, resulting in mistreatment of foreign workers, wage depression, and the displacement of U.S. workers. The program was originally set up to allow companies in the U.S. to import the best and brightest in technology, engineering, and other fields when such workers are in short supply in America. But data released this year by the federal government show that offshore outsourcing firms, particularly from India, dominated the list of companies that were awarded H-1B visas to employ workers in the U.S. (BusinessWeek, 3/6/08) in 2007. Indian outsourcers such as Infosys (INFY), Wipro (WIT), and Tata (TCS.NS) accounted for nearly 80% of the visa petitions approved last year for the top 10 participants in the program.

There is also evidence that workers on H-1B visas are being mistreated. In a pending case (BusinessWeek, 1/31/08), H-1B workers employed by Patni Computer Systems (PTI) allege they were underpaid.

Critics say such instances of abuse represent the tip of an iceberg of deeper problems with the visa program. Academics and U.S. tech worker advocates point out the requirement that even employers who abide by the law—for example by paying the required "prevailing wage"—are able to underpay workers . "We shouldn't forget that the major problem with the H-1B program are caused by massive loopholes that allow firms to legally pay below-market wages and force US workers to train foreign replacements," says Hira. "Those wouldn't show up in this investigation because they are entirely legal." Hira says that a bill proposed by Grassley and Senator Dick Durbin's (D-Ill.) bill in 2007, S. 1035, would address both fraud and legal loopholes in the program.

Companies Not Named

The USCIS report, called H-1B Benefit Fraud & Compliance Assessment, is based on a sample of 246 H-1B petitions. It does not name companies involved in the study. The report says that 80% of the fraud or technical violations were uncovered during site visits.

Fraudulent cases include instances in which the visa worker was not working or had never worked at the specified location on the application. Technical violations involved situations in which the worker was paid at or below the prevailing wage, which companies are required by law to pay.

In other cases, the job duties were significantly different from the position listed on the visa petition. This could involve misrepresenting the skill set required or the location of the job. Accounting, human resources, business analyst, sales, and advertising occupations are more likely than other categories to involve fraud, according to the study. Other areas in which violations were found include computer-related occupations, and art and managerial jobs. "Until we make a conscious effort to close the loopholes, we're going to see continued abuse where people coming to this country on H-1B visas are working at Laundromats," said Grassley in a statement. He was referring to situations in which companies misrepresent what type of work the visa holder will do.

In the study, visa workers with only bachelor's degrees were subject to higher fraud or technical violation rates (31%) than those with graduate degrees (13%). Fraud and violations were more common for companies employing 25 or fewer employees and with annual gross income of less than $10 million.

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