Every Victory Counts in H-1B Fraud Battle

Don Tennant

When you're an unemployed IT worker whose job prospects have been hampered by everything from hiring freezes to age discrimination to H-1B visa abuse, it's a good day whenever you can find at least one thing to cheer about. Today is a good day.


Computerworld's Patrick Thibodeau reported today that the Department of Labor finally caught up with Peri Software Solutions, a software services company in New Jersey that has made a mockery of the H-1B visa program for years. According to the DOL, Peri has cheated 163 H-1B visa holders out of $1.45 million in wages. If that's the case, Peri has cheated the U.S. IT workforce out of the same sum by underpaying the H-1B workers, thereby driving down IT wages.


My only complaint is that the DOL isn't demanding an adequately stiff penalty. It's seeking a civil fine of $439,000, and a two-year debarment from the H-1B visa program. That's nonsense.


Let's start with the fine. Less than half a million bucks is a paltry sum given the egregiousness of the offense and Peri's horrific reputation in providing decent employment conditions (Google the company and read some of the message boards with posts from current and former employees). A fair civil fine would be twice the sum of the underpayment to its employees-in this case, $2.9 million. And that sum shouldn't be lost in the bowels of the federal budget. It should be earmarked for job training programs for U.S workers.


And then there's the debarment. Forget two years. Any company that's found guilty of willingly abusing the H-1B program should be debarred for the life of the program. Period.


The H-1B Debarred/Disqualified List of Employers maintained by the DOL, current as of November 2009, includes 21 companies. Each has been debarred for only two years, which helps to explain why there are 21 companies on the list rather than two or three, and why H-1B visa abuse is so rampant. There needs to be a much more substantive disincentive, and the prospect of losing the privilege of access to this program forever might just do the trick.


All of that said, it's important that we not lose sight of the fact that battles against H-1B visa abuse, however small, are increasingly being won. We should take heart in that, and let it serve to encourage the fight for more stringent enforcement and penalization.

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Feb 24, 2010 12:46 PM Steve Smith Steve Smith  says:

Then notice the predicament the DoL is now in. If the DoL puts Peri out of business (as should have happened long ago), all the H-1B workers get no back pay. If DoL allows them to stay in operation the H-1B workers might get their back pay BUT we have another abuser still operating. What a system!

Feb 24, 2010 2:29 PM B B  says:

Employers can legally discriminate against qualified Americans by firing them without cause and recruiting only H-1B guest-workers to replace them.  The U.S. Department of Labor (DOL) has said:  'H-1B workers may be hired even when a qualified U.S. worker wants the job, and a U.S. worker can be displaced from the job in favor of a foreign worker.'  Some companies that discriminate against American workers are so brazen that their job advertisements say 'H-1B visa holders only.'  And some companies in the United States have workforces that consist almost entirely of H-1B guest-workers.    

Feb 24, 2010 5:01 PM Donnie Gets Religion Donnie Gets Religion  says:

Hey Don, finally waking up are? I've got news for you. Nearly EVERY H-1B shop like this has been abusing the system for OVER A DECADE. IT workers tried to warn you media types about this back in 2000 when India, Inc. started taking over the IT market, but none of you would listen. Millions of lost white collar jobs and a crashed economy later, you're finally starting to listen. This kind ofbehavior is RAMPANT in these job shops. RAMPANT. We're talking about MILLIONS of violations nationwide. When they are caught ALL the people - the owners and employees should be DEPORTED and barred from every coming back into the country AND ALL their assets should be seized and turned over to the U.S. IT workers whom they have kept out of jobs for years. We don't need no stinking training programs - just seize the money and turn it over to U.S. citizen IT workers who have been DEFRAUDED. Put the fakers on a plane, and send them home. End of problem.

Feb 24, 2010 5:37 PM anonymous anonymous  says:

I am Indian and came on H-1B visa. From my experience and interaction with hundreds of H-1B holders I can say that almost 90% consulting companies (body shops) deserve to be debarred. Few of the things they do:

1.  Job description is not shown to candidate at the time of filing papaer. Visa is files for very less salary so that whatever is paid appears to be more then the amount written on application. 

2. Compensation is paid only after money is received and check is cashed.

3. They promise that a part of billing will be paid (80%) but they change it to whatever they like.

4.  They get too many legaal papers signed by the candidate once he is USA at their mercy.

5. No benifit or relocation etc are paid.

6. At times end client also exploit. I was verbally misbehaved (abused).

7. On asking for salary (after non payment), I was threatened. My green card was NOT filed in last slow down. It was filed at last moment because otherwise my visa could not have been extended and the body shopper whould have lost huge sum he made by fees and cheating.

8. Almost every H-1B holder has to go through such exploitation.

9. My body shopper did not send pay stub to most of the consultants.

10.  Body shopper always pay after payment is received and block 10K- 20K dollars. This has lot of advantage. The consultant does not leave them.

11.  The green card has many steps. H-1B holder is exploited on every step. Net effect is that smartest Indian with lot of expeerience has lost interest. Most H-1B holders who come are below average.

12. The "best and brightest" image propogated is completely misleading and untrue.

Feb 24, 2010 6:11 PM Indian_H1B Indian_H1B  says: in response to anonymous

And a few comments from an Indian H-1B who hasn't come within a barge-pole of a bodyshop, but has found it hard to miss the stench. Firstly, Peri's punishment sounds like sentencing the murderer to 2 hours detention for bad behavior. They are being fined LESS than the amount they have underpaid? How the heck does that make any bloody sense?

What does satisfy me is that 2 years of debarment ought to be enough to kill their business model. Without the free supply of slaves who'll allow Peri to drive all over their hapless corpses, they may as well dissolve.

These bodyshops aren't being run by guys who have much intelligence. They just happen to be cockroaches -- they'll do all to survive, but quashing them ought to be quite doable.

First Apex and then these guys...pretty strong signal to the bastards. I commend the USCIS.

Feb 25, 2010 10:04 AM n6532l n6532l  says:

Enforcement of the H-1B rules is a peripheral issue.  Perfect enforcement of the H-1B rules will not move one single American from unemployment to a job.   The problem is the H-1B not the abuse of it.

In the Peri Software case sited after the company is fined and pays the back wages not a single American will get a job.  All 163 Peri H-1B holders will still be employed and no American will get a job.  If Peri had not been there another firm would have gotten the H-1B slots and the jobs would still be 'Americans need not apply.'

Most likely Peri hired out their H-1Bs at or near market rates underpaid their workers and pocketed the difference.  Going forward they will be less profitable but still a profit making organization with 163 contractors bringing in income.  If the net markup after increased wages is only $5 an hour (and I suspect it is more) they will have a gross profit of over $600,000 a year. Even if the two year prohibition is actually enforced they will weather the storm quite well.

More likely they will just form another corporation and do it all over again.

Feb 25, 2010 10:30 AM Indian_H1B Indian_H1B  says: in response to n6532l

Looks like the populists got to you. It's all too convenient to blame each H-1B job as a one-for-one replacement for an unemployed American job.

Feb 25, 2010 10:37 AM Blue Blue  says:

I completely agree with you here Don.  These penalties are very weak considering the scope of fraud involved.

Feb 25, 2010 12:37 PM Drunken Economist Drunken Economist  says: in response to Indian_H1B

Nah, don't you worry your pretty little curry.head(); Indian_H1B. Mumbai Don getting religion would make too many heads on both sides explode and we can't be having any of THAT.

NASSCOM just missed giving Donnie his little suitcase of rupees this week and this is his ham-handed attempt at a 'warning' to them that the paper betta keep coming.

Business as usual for a backeast collaborator.

Feb 25, 2010 1:06 PM In the same boat In the same boat  says: in response to Indian_H1B

Indian_H1B, I have long maintained that the H1b€™s themselves are not the problem. They are as much victims of unscrupulous management and this corrupt system as everyone else. In some cases they are even bigger victims then the rest of us. Your post seems to indicate that you agree?

We both suffer from lower then honest market salaries, high stress from bad management, and a general lack of management respect. The artificial labor shortages that the industry maintains as an excuse for pitting the two labor groups against each other are part of a divide and conquer strategy. That strategy can only work if we stay divided.

I€™ve seen with my own eyes how badly H1b€™s are treated. They treat us with disrespect and they treat you even worse, all in the name of short term profits. In a capitalist society respect is expressed with money. Yet we don€™t even get paid enough to justify financing our own educational costs; continuing and otherwise. If there are in deed shortages of qualified labor then why have wages stagnated for the last ten years while corporate officer€™s salaries have steadily climbed?

I have long held the belief that good programmers and analysts with current skills should be making over 250k a year. That is not going to happen if we keep pointing fingers at each other. I wish some of my comrades would see that.

As you may have noticed populist sentiment is rising. If the November election goes the way I think it will, the remaining politicians are going to be forced to take some action. Now would be a good time for you and your countrymen to start speaking out for better work conditions and respect $$$. You can bet your @ss we are going to be pushing for it.

Feb 25, 2010 4:53 PM R. Lawson R. Lawson  says:

Good post.

Feb 26, 2010 1:38 PM In the same boat In the same boat  says: in response to Indian_H1B

You ask many very good questions. I'll try and answer as best I can. If you need clarification on any point let me know.

Where is all the money that was made? Start with the mis-definition of the term money. When the market went up all that changed was the perception of the value. The only why the actual value could be captured is if the property was actually sold. On close of escrow the seller walks away with the money literally. This is a zero sum game where nothing is created. It is simply an exchange of value. 

All the value that remained in the market was perception (air if you like). That is the Ponzzi nature of a market price. It appears to evaporate because it never really existed. The price is held up by the perception of the people at the base of the pyramid. If you continue to add to the base of the pyramid the perception pushes and holds the price up. When support is removed (ie a boom bubble starts to retire) the price declines and perceptions are affected causing a collapse of the pyramid.  

Not a borrower nor a lender be. Lending on perception doesn€™t ever make sense. Whether we are discussing derivatives or mortgages, lending on perceptions is the definition of insanity. Yet we don€™t learn from letting gamblers make mistakes.

Wall Street and some academic propaganda try to justify this foolishness. They take the intellectually dishonest approach of using the investment model where interest is a function of risk and they apply it to a speculative model where risk us used to justify gambling with other peoples money. Investing creates wealth. Risk can destroy wealth. All speculation does is transfer wealth. Derivatives use leverage to transfer vast amounts of wealth all at once.

Lending to build is an investment as it is not a zero sum game. A mortgage on an existing home, transfer€™s wealth to a privileged class called banker and causes the need for them to provide price supports to protect their portfolios. Mortgages are a negative sum game which should be classified as indentured servitude. In a low interest environment mortgages monopolize this wealth extraction tool making the transfer very one sided. Almost absolute. One percent interest on a CD or saving account, please. You might as well make a law that people store their wealth in stock market for extraction. 

Feb 26, 2010 1:43 PM In the same boat In the same boat  says: in response to Indian_H1B

I don't disagree with most of what you are saying. If done right there would have been a net gain to society from free and fair trade. The problem was in the implementation.

World trade began BC. It started when the first merchant put his wares on a donkey and headed off to the next village. It has continued ever since. The point I'm making is that there is a time component that apparently got ignored during this failed attempt to implement the new world order.

Our captains of industry lost their moral compasses. Their greed and pursuit of instant gratification in the form of short term profits blurred their judgment. To perpetuate their addiction to easy money they purposely framed the trade debate as all or nothing as you just did.

Most of the people that get labeled as anti-trade would have preferred a gradual implementation OVER TIME. Now we have to deal with the repercussions of the all or nothing thinking that exported our manufacturing base overseas as fast as possible. The US labor market has been decimated by the rash actions of our so called leaders. In spite of propaganda to the contrary the housing market is going to continue deflating probably for a decade or more. The chronically unemployed and working poor simply will not be able to afford today's prices and foreclosures will continue for quite some time.

If WTO leaders continue to frame this as an all or nothing proposition in an attempt to stop any attempts to slow down the degradation they will eventually be facing full on protectionism. Our leaders are a spineless lot. It won't take to much more for them to choose nothing (the worse case scenario). It would be in everyone's best interest if some TEMPORARY barriers were put in place to slow the pace. The worthless pigs in congress need a way to save face so they don't join the ranks of the unemployed themselves

Feb 26, 2010 3:49 PM Indian_H1B Indian_H1B  says: in response to In the same boat

The greater problem is the tendency to group disparate people, concepts and idelogies. I don't control how the collective H-1B thinktank thinks and at some level I don't care given the fact that it's likely a pot-pourri of perspectives.

I can only speak for myself when I say that H-1Bs appear to come in several shapes and sizes. 20% of all H-1Bs are actually fraudent, so there's a section of this set that considerably scrapes the bottom (this pertains to the issue Don has discussed). All the H-1B friends I have make 6 digits, have a couple of graduate degrees and are increasingly ready to move on if this populist crap catches on. Into my 10th year in the US, I do feel quite at home here, but not as much as I did before the double-whammy of fraud and shameless misuse in the H-1B program along with irrational, racist populism started permeating the lanscape.

The US has a simple fact to reconcile with. It's 5% of the world's market (in terms of people). If it chooses to be populist, it's essentially guaranteeing enough backlash to not be able to partake in 95% of the world's markets. For 10,000 units of some daily good an American consumes today, it's quite likely that an Indian or a Chinese national consumes only 1,000 units. The real business promise arises from the fact that in 5 years this number could well be 2,000 units. Given that India and China are 40% of the world's market, the multiplicative effects of this first derivative are ginormous.

The future evolution of markets is more in information and services than physical goods. If the US decides to go down the road of a closed economy, it will forgo a large part if not all of this action.

Feb 26, 2010 5:00 PM Indian_H1B Indian_H1B  says: in response to In the same boat

Though trained to tend toward classical economics, I am quite Keynesian. I completely get the meaning of temporary measures meant to stimulate the economy and job markets.

But 85,000 H-1Bs cannot be upsetting the apple cart (even if 17,000 are fraudulent). Hell, the US gives out 50,000 greencards to arbitrary people in a lottery each year. It's amazing how little press that gets. These 50,000 people are from countries that are not oversubscribed (India, China, etc. don't get dibs). They don't have to prove their economic worth to the US. They don't need to be educated. They literally just won the lottery! And living in the US costs money. You don't think these people are joining the labor force? 5 years later, they are entitled to citizenship. When they retire, they get social security benefits like other American born citizens.

I am willing to bet the average income of these 50,000 lottery winners is much lower than that of the 85,000 H-1B awardees. More importantly, their skills likely plonk them bang in the middle of exactly those people that are hurting the most in these times (middle class blue collar) and represent the bulk of America.

How can 50,000 be few enough to invite nary a sigh while 85,000 has everyone's blood boiling?


Feb 27, 2010 1:57 PM Bob Bob  says: in response to Indian_H1B

Indian H-1b,

The 85,000 figure you cite is only an annual figure, and thus distorts the gravity of the situation. Since h-1b visas are good for 3 to 6 years, at any one time there's hundreds of thousands of workers in the US on h-1b visas. The fact that the US government advances other suicidal immigration practices, such as the visa lottery, is irrelevant. All these policies that throw American workers in the garbage heap are equally appalling.

Feb 28, 2010 8:05 PM Common Sense Common Sense  says: in response to Indian_H1B

>> But 85,000 H-1Bs cannot be upsetting the apple cart (even if 17,000 are fraudulent). <<

Nope.  There are millions in the U.S. on H-1B if you consider the numbers cumulatively.  It is dishonest to claim 85K as the number when you know full well that there are millions.

>> Hell, the US gives out 50,000 greencards to arbitrary people in a lottery each year. <<

By arbitrary, I assume you mean those green cards aren't going to people that have a stated interests in taking some Americans' jobs.  The H-1B is a business subsidy with the stated purpose of it to fill a job. 

Mar 2, 2010 7:08 PM PERI_H1B PERI_H1B  says:

I would be very happy if this verdict is implemented. I am one of the consulant who worked with PERI and suffered. I have waited for this for a long time and finally it seems come true. I firmly believe that these kind of body shoppers should be banned not only for 2 years but at least for 10 years. Putting 2 yearsof ban will not have any impact on them and they will start doing business after the ban,if not with name PERI then with some other name. Though money compensation will help a little to those who have gone through this pain but can not heal entirely until PERI or alike companies are punished severly.


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