Wednesday, October 30, 2013

Infosys to pay $35 million, settle visa ‘fraud’ case in US

WASHINGTON: IT services major Infosys is expected to cough up nearly $35 million (Rs 215 crore) in penalties — said to be the biggest fine of its kind in American history — to settle visa fraud allegations with the US justice department. The settlement, reached with the East Texas Attorney\'s office, is to be announced on Wednesday, though the market has long had an inkling of the deal from Infosys\' regulatory filing.

Infosys acknowledged receiving a federal grand jury subpoena seeking records related to its sponsorships for B-1 business visas and its use of them, according to an October 11 filing, which said it had reserved $35 million for a settlement tied to the probe. It is accused of using B-1 visas instead of harder-to-get H-1B work visas to bring an unknown number of staff for long-term stays.

An American manager formerly employed by Infosys blew the whistle on this scheme, resulting in investigations involving the Justice Department, Homeland Security, and State Department, amid a toxic debate about how India was stealing American jobs.

Here\'s how Infosys is alleged to have circumvented the growing protectionist visa road blocks which some sections in India view as trade barrier: The US typically issued just 65,000 H-1B visas a year for skilled long-term guest workers visiting for up to three years. The cost of these visas has gone up steadily over the years to nearly $5000 per visa, including filing and legal fees, as domestic lobbies have sought to stop cheaper foreign workers from taking over jobs in America although the US labor department has tried to bring about wage parity.

Typically, H1-B workers have to be paid locally in the US and their employers withhold federal and state income taxes, and social security payments. If the employees return to India in less than ten years (or 40 quarters), they lose the money they have paid into the social security net. But often the employees prolong their stay with visa extensions and by defecting to a local US employer and applying for permanent residency.

To get around these problems, Infosys is said to have sent workers to the US with a B-1 visa on which there is no cap, which can obtained easily, and which costs only $160. B-1 visa holders are also paid from their home country - in rupees - and don\'t have to pay taxes or social security contributions in the US. But US rules mandate that the B-1 visas are intended only for foreign nationals who come to the US for purposes such as attending business conventions and consulting with business associates.
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