In my last couple of posts, I've written about how Infosys watchers, especially those in India, are seemingly oblivious to the magnitude of the problem that Infosys is facing in this country. That problem stems from the company's failure to man up when Infosys employee and whistleblower Jay Palmer brought the company's rampant visa and tax fraud to the attention of the people in the company who were supposed to do the right thing. No problem. There are going to be a lot of people, many of whom had never even heard of Infosys before, who will see the significance of Palmer's case with crystal clarity, and will take action accordingly.
There will be longstanding clients who will dump Infosys, as Axis Capital and Union Bank of California have done (see my post, "Contract Cancellations Add to Infosys' U.S. Problems"). There will be corporations that might have considered doing millions of dollars worth of business with Infosys, but that will now see the company as toxic. That will be partially due to law firms citing the Palmer case, as Nixon Peabody has done, and warning companies not to fall into the trap that Infosys' clients did.
Boston-based Nixon Peabody LLP, one of the largest international law firms in the world, on Dec. 19 issued an Immigration Law Alert titled, "Business Visitor Warning: Why You Should Not Work' in B-1 Status (and What Is Work')." Here's an excerpt:
If you are a U.S. company that wants to bring business visitors to the U.S., be aware of the fallout caused by an Alabama whistleblower lawsuit. This recent case has created havoc for many companies and has resulted in B-1 visa denials for numerous potential visitors.
The whistleblower alleged that Infosys, an international IT consulting company, committed fraud by employing foreign nationals in B-1 business visitor status rather than properly obtaining H-1B work visas for them (Palmer v. Infosys Technologies Ltd., Inc., Case No. 45-CV-2011-900009.00, Circuit Court of Lowndes County, Alabama Feb. 23, 2011). In addition to this civil suit, a federal court in Texas has begun a grand jury investigation into the immigration practices at Infosys. The U.S. government is currently re-examining its B-1 business visitor program, resulting in more scrutiny and increased denials in B-1 business visitor cases, increased worksite enforcement efforts, and wage and hour, immigration, and tax audits.
That it took 10 months for Nixon Peabody, a company with a giant immigration law practice, to issue the alert is unfortunate, but at least it ultimately got its act together. Other law firms will no doubt take notice, and there will be more warnings issued to companies to be prepared for what Nixon Peabody calls the "fallout" from the Infosys case. That fallout, Nixon Peabody says, is a U.S. government crackdown on the abuses that have come to light, thanks to Palmer's case. This is how Nixon Peabody wrapped up its alert:
[Department of Labor] Wage and Hour auditors looking at B-1 wages have the discretion to broaden their audits to other wage and hour areas, increasing the potential exposure and liability to businesses. In addition, B-1 workers who should properly be in H-1B status most likely have not had employment or income taxes withheld from their wages, leading to IRS audits, investigations, and penalties.
International companies must weigh the risk of keeping workers on the foreign payroll while they are in the United States, and should examine the tax implications of doing so more carefully. In this age of increased inter-agency and inter-governmental cooperation, employers should be aware that an audit by one agency can lead to another audit by a different agency, and could keep you on the radar of each agency for repeat audits, and possible repeat or willful violator sanctions.
And all because a guy in Alabama had the guts to blow the whistle. If you haven't already recognized this case as a game-changer, trust me. You will.