Oct. 29 (Bloomberg) -- Infosys Ltd. is preparing to pay about $35 million to avoid restrictions on its use of U.S. work visas under a potential resolution of the company’s use of entry permits, said a person with direct knowledge of the talks.
The company reached a settlement with the U.S. Attorney’s Office for the Eastern District of Texas that will be announced Oct. 30, two other people familiar with the matter said yesterday.
Infosys, India’s second-largest software exporter, received a federal grand jury subpoena seeking records related to its sponsorships for B-1 business visas and its use of them, according to an Oct. 11 regulatory filing. The company and “certain” employees are targets of the investigation, according to the filing. Infosys said it was cooperating with the probe.
Bangalore-based Infosys said it had reserved $35 million for a settlement tied to the probe and that it was engaged in talks to resolve the matter.
“The resolution has not been finalized,” according to today’s e-mailed statement.
The company resolved two whistle-blower cases in Alabama and California in the past 14 months after employees alleged it misused B-1 visas, which are temporary business permits, to avoid limits on H-1B employment visas. Proposed changes to immigration laws in Congress, which would limit the ability of large Indian companies to access H-1B visas, may damage Infosys’s business model of relying on North America for more than 60 percent of its revenue.
“This investigation has been on since 2011, so any damage to the company’s reputation is already done,” said Ankur Rudra, a Mumbai-based analyst with Ambit Capital Pvt. “Now they get on with business, which may be a little more expensive going forward in terms of finding talent, but the result could have been worse.”
The information-technology industry is spending about 25 percent to 30 percent more for on-site workers as H-1B visas become more difficult to attain, Rudra said. Companies, including Infosys, are losing about 1 percent of their annual revenue by sub-contracting employees instead of sending cheaper labor from India to work face-to-face with their clients in lieu of visas, he said.
The shortage led to a Justice Department probe of International Business Machines Corp., which was investigated for violating anti-discrimination charges by stating visa-status preferences in job ads. IBM agreed to pay $44,400 and will remain subject to reporting requirements for two years, according to a Sept. 27 statement.
The Infosys settlement with the U.S. was reported earlier by the Wall Street Journal.
To contact the reporters on this story: Kartikay Mehrotra in New Delhi at firstname.lastname@example.org; David McLaughlin in New York at email@example.com; Sarah Frier in New York at firstname.lastname@example.org