In a move that demonstrates the determination of federal authorities in Texas to prosecute H-1B visa fraud, six top officials working for Dibon Solutions, an IT consulting company near Dallas, were arrested last week on a charge of conspiracy to commit visa fraud and 10 related wire fraud charges.
According to an indictment that was filed under seal in the U.S. District Court for the Northern District of Texas on Feb. 20, the six defendants conspired to engage in the fraudulent activity from Feb. 2008 to Feb. 2011. The following excerpt from the indictment, which was unsealed on March 1, details the scheme:
As part of their scheme, the conspirators recruited foreign workers with computer expertise who wanted to work in the United States. The conspirators sponsored the workers’ H-1B visas with the stated purpose of working at Dibon headquarters in Carrollton, Texas, but, in fact, required the workers to provide consulting services to third-party companies located elsewhere. Contrary to the representations made by the conspirators to the workers (and the government), the conspirators paid the workers only when the conspirators placed the workers at a third-party company and only if the third-party company actually paid Dibon first for the workers’ services. Additionally, in Dibon’s visa paperwork, the conspirators falsely represented that the foreign workers had full-time positions and were paid an annual salary, as required by regulation to secure the visas.
This scheme provided the conspirators with a labor pool of inexpensive, skilled foreign workers who could be used on an “as needed” basis. The scheme was profitable because it required minimal overhead and Dibon could charge significant hourly rates for a computer consultant’s services. Accordingly, the conspirators earned a substantial profit margin when a consultant was assigned to a project and incurred few costs when a worker was without billable work.
This scheme is known as “benching.” Benching is defined by U.S. Department of Labor (DOL) as “workers who are in nonproductive status due to a decision by the employer, such as lack of work.” Dibon actively recruited H-1B workers and “benched” them.
Dibon’s “benching” scheme was facilitated by the conspirators’ use of the company as a staffing company. Dibon employed H-1B workers to perform services with third-party companies. The design of the H-1B system intended for the H-1B worker to perform services for the petitioning company, i.e. Dibon. In fact, regulations required that a petitioning company inform the government in the LCAs and H-1B petitions if the workers were assigned to a different location than the petitioning company’s address—which Dibon did not do. Moreover, as an intermediary company, Dibon claimed that jobs existed with third-party companies when, in fact, Dibon had not yet secured contracts with these companies; thus, Dibon filed false Labor Condition Applications (LCAs) with the DOL requesting H-1B workers for positions that did not exist.
According to the indictment, the defendants include Atul and Jiten “Jay” Nanda, two brothers who co-founded Dibon; Siva Sugavanam, Dibon’s chief recruiter of foreign workers for H-1B visas, who was responsible for training other recruiters; Vivek Sharma, the office manager for Dibon, who coordinated placement of benched workers with third-party contracts and kept track of benched employees; Rohit Mehra, another recruiter who recruited employees for the bench and transported benched employees to and from Dibon headquarters; and Mohammad Khan, who handled the bookkeeping for Dibon and issued payroll checks to employees.
Court documents available at this writing detail the status of all of the defendants with the exception of Sharma. Those documents show that the defendants were arraigned on Feb. 27, and that they pled not guilty. They were released on personal recognizance after surrendering their Indian passports. Conditions of their release included avoiding all contact with the co-defendants and former Dibon employees; and agreeing that Dibon’s records would be subject to inspection by the U.S. Attorney’s Office upon request, from now through trial.
The indictment of the Dibon officials comes at a particularly sensitive time for Infosys, whose immigration management operations are in nearby Plano, Texas. As I’ve previously reported, the grand jury subpoena that was issued against Infosys in May of 2011 was issued by the U.S. District Court for the Eastern District of Texas. That subpoena sought documents related to the U.S. government’s investigation of alleged violations by Infosys of U.S. immigration and tax laws, principally related to the company’s use of B-1 visas. The results of that investigation are looming.
I spoke on Monday with Kenny Mendelsohn, the attorney who represented Jay Palmer, whose whistleblower report of alleged visa fraud at Infosys triggered the government’s investigation. Mendelsohn said the Eastern District, and the Northern District where the Dibon indictment was filed, are “next-door neighbors without a fence.” I asked Mendelsohn what the Dibon indictment told him about the likelihood of a similar indictment being brought against Infosys. His response:
I can’t comment with respect to Infosys, but I think what it truly shows is the Department of Justice, and particularly the U.S. Attorneys in Texas, are serious about enforcing visa laws, especially as they relate to H-1 violations. That’s what this one’s about, but I think it’s going to be the same with B-1 violations. It’s pretty serious, to me.