February 19th, 2014 by DanielLundy
In an unprecedented move, U.S. Senator Tom A. Coburn (Oklahoma), the Ranking Member of the Senate Committee on Homeland Security and Governmental Affairs, has issued letters to a number of approved regional centers seeking information about each one’s participation in the EB-5 program. The letter indicates that a similar letter will be sent to all USCIS approved regional centers. Our regional center clients have begun receiving this letter in the last few days. The letter is requesting the following information:
- Any approval from USCIS to participate in the EB-5 program regarding the regional center and its business plan, including any subsequent recertification;
- The total annual amount of investment and the number of individuals by country of origin making investments through the regional center since it has been in operation;
- The name, address, and a description of each business in which the regional center has made an investment of funds and the number of jobs created by each investment;
- Any fees charged to EB-5 applicants or received by the regional center, including amount and description;
- A list of any current or former corporate officers of the regional center, including title, position, and dates of employment, and
- The name and address of any individual or entity- either foreign or domestic- that the regional center has an agreement with to provide legal, accounting, recruiting or consulting services, as well as a description of the service provided.
The letters request a response via email by March 7, 2014.
While some of the questions asked in the letter reflect the information required in the Form I-924A required to be filed each year by every regional center, some of the questions far exceed the scope of the normal reporting requirements. It is unclear at this point why Senator Coburn is seeking this information. While we would like to think that this is an opportunity to show the positive impacts of the program by revealing the large number of projects that have been successfully completed with EB-5 funding, recent Congressional interest in the EB-5 program has appeared to be both negative and politically motivated. In light of this, we advise our regional center clients to contact us upon receipt of the letter to formulate an appropriate response.
February 18th, 2014 by H. Ronald Klasko
In the last blog, I prepared a set of FAQs to try to make the anticipated EB-5 quota retrogression understandable. In this follow-up blog, I will explain some of the changes in USCIS policy and interpretations and investor and developer strategies that will be necessitated by the first ever EB-5 quota retrogression.
One of the most obvious impacts of EB-5 quota retrogression for China is the impact on children who may be “aging out”. Since the child’s age is “frozen” while the I-526 petition is pending and is “unfrozen” when the I-526 petition is approved and there is a quota backlog, the investor is well advised to file the EB-5 petition years in advance of the child turning 21 rather than immediately before the child turns 21. Once the petition is filed, it is to the investor’s advantage if the USCIS processing time is elongated in the event of quota retrogression, since the child’s age is frozen longer if processing times are longer.
Quota retrogression may increase the onset of the 21-24 month conditional residence period by 2 years or more. This is problematic for the majority of investors who invest in regional center “loan model” projects. Most of these loans are 5 or 6 years in term since it is expected that all of the investors will have removed their conditions by the end of the 5 or 6 years, after which the investors can receive a return of their investments. But what happens if quota retrogression results in investors not being able to remove conditions for 7 years or more given the delayed onset of conditional residence status? USCIS has so far refused to opine on the impact of loan repayment to the new commercial enterprise before the investors have removed the conditions on residence.
This raises a number of issues for the I-829 condition removal petition. Has the investment been sustained? Since the investment must be sustained in the new commercial enterprise and not the job-creating enterprise, presumably the answer is yes. If the money just sits in the NCE for a period of time until all of the investors remove conditions, does the money remain “at risk”? Arguably it does, especially since it has already been used in creating the requisite number of jobs; and the NCE can use its own discretion on what to do with the money in the interim. In addition, it is not clear that the money must remain “at risk” during the entire conditional residence period as long as the investment is sustained and the jobs created. In any event, this issue must be clarified by USCIS.
Given this issue, we will be counseling regional centers and developers to consider increasing the length of the loan term to prevent money going back to the investors before their conditions on residence are removed. This is not beneficial to the exit strategy of an investor, but it may provide the developer with EB-5 financing dollars over a protracted period of time while protecting investors at the I-829 stage.
USCIS has created a so-called “2½ year” rule, requiring that all jobs be created within 2½ years of the approval of the EB-5 petition. In an earlier blog, I articulated in detail why this “rule” is wrong as a matter of both law and policy. In the event of EB-5 quota retrogression, it is not only wrong but its foundations crumble and it makes no sense. The premise of the 2½ year rule is that an investor will become a conditional resident within 6 months after approval of the EB-5 petition and then have 2 years to create the necessary jobs during the conditional residence period. The quota retrogression could result in 2 or 3 years from EB-5 petition approval until onset of conditional residence. In that event, the investor will be required to create all jobs before even becoming a conditional resident. This is not at all what Congress had in mind or what makes sense for the success of the program. We are advocating for USCIS to change this policy.
From the project developer’s point of view, quota retrogression may result in projects being able to get credit for more indirect and induced jobs. With most construction projects, if the construction period is, say, 18 months, and stabilized occupancy (and the job creation that goes with it) does not occur for another 24 months, the job creation resulting from stabilized occupancy would occur after the 30 month period. In the event of quota retrogression, since the time period for job creation should be extended to cover the full conditional residence period, the project may well be able to count jobs both from construction and operations where previously only construction jobs could be counted.
Also, developers will have longer periods of time to meet the required inputs in the economist’s job projection report, such as longer periods of time to spend the money, produce the necessary revenues, employ the necessary direct employees, achieve the necessary occupancy rate, complete construction, etc.
Direct EB-5 investors will confront additional challenges in the event of quota retrogression. If it will be an indeterminate amount of years before a direct EB-5 investor will be able to come to the U.S. to manage his investment, it will be more difficult – if not impossible – to prepare a business plan with realistic timeframes for the development of the business and the hiring of the employees.
Finally, foundations for the “troubled business” rule could crumble in the event of quota retrogression. The investor must demonstrate maintenance of the existing number of employees for a period of 2 years. If the investor, who may well be the key manager of his business, will not be able to immigrate for more than 2 years, such a showing may not be possible.
In summary, Chinese EB-5 quota retrogression will require a rethinking of conventional wisdom on many EB-5 issues. It will be incumbent for EB-5 counsel to prepare new EB-5 projects with these issues in mind and to advise EB-5 investors of these issues in potential investments.
In addition, and significantly, USCIS will need to reevaluate some of its policies and interpretations to accommodate the new reality. Hopefully, USCIS will be open to suggestions from stakeholders on how to do this. The AILA EB-5 Committee, which I chair, will be taking a leading role in this advocacy.
January 20th, 2014 by H. Ronald Klasko
From my dealings with my clients – both investors, developers and regional centers – there seems to be a misunderstanding of what the EB-5 quota backlog is and what it means. For this reason, I have decided to write this blog in the form of Frequently Asked Questions. I hope this helps to eliminate any confusion:
Q. What is the EB-5 quota?
A. Congress has allocated approximately 10,000 visa numbers for EB-5 investors and family members. This quota was established in 1990 and has never been changed. Until recently, because of a lack of demand in the EB-5 category, this 10,000 allocation has been sufficient to meet demand. With the increased demand in recent years – accompanied by increased investment dollars and increased jobs – that number is no longer sufficient.
Q. How many EB-5 investors can obtain conditional permanent residence in any year?
A. A majority of the EB-5 quota is used up by investors’ family members. The actual number of EB-5 investors who can immigrate in any year depends on the number of family members, but is generally in a range between 3,500 and 4,000.
Q. When are EB-5 visa numbers allocated?
A. Upon approval of conditional permanent residence – either issuance of a conditional immigrant visa at a U.S. Consulate or adjustment of status to conditional permanent residence in the U.S.
Q. There were over 6,500 I-526 petitions filed in the fiscal year ending September 30, 2013 with over 3,600 approvals. Why was the quota not reached?
A. From the time of approval of the I-526 petition until the time of issuance of conditional immigrant visa or approval of conditional permanent residence status, there is often a delay of about one year. The impact of the FY2013 filings and approvals will be realized in subsequent fiscal years’ quota allocations.
Q. The Department of State had predicted that the EB-5 quota might be reached for China in the last fiscal year. Why was it not?
A. The main reason is the very slow pace of I-526 approvals by USCIS. Processing times for I-526 petitions have increased from six months to, in many cases, more than eighteen months. If I-526 petitions do not get approved, investors do not get conditional permanent residence; and numbers are not used. In a curious way, the unprecedentedly slow processing times have delayed the onset of quota retrogression.
Q. Is the EB-5 quota likely to be reached in the fiscal year ending September 30, 2014?
A. If USCIS continues to process I-526 petitions at the present extremely slow pace, there is a possibility the quota will not be reached in this fiscal year. More likely, quota retrogression may begin in the last quarter of this fiscal year (July, August, September).
Q. If the quota is reached, will it affect all countries?
A. No, it will only affect China. 81% of the world’s EB-5 petitions are filed by Chinese nationals. Because there are per country limits that set in before the quota is backlogged for the entire world, the Department of State would create a waiting list for Chinese investors to make certain that EB-5 visas remain available for the rest of the world.
Q. What does it mean if there is a quota backlog for China?
A. Chinese investors will still be able to invest. Chinese investors will still be able to file I-526 petitions. Chinese investors will still be able to have their I-526 petitions approved. However, the final step of the process – issuance of the conditional immigrant visa or adjustment of status to conditional permanent residence – will not occur until there is a quota number available for the investor.
Q. If Chinese quota retrogression occurs, how long will be the wait?
A. No one knows the answer to this question. However, since there are a very large number of cases pending at the National Visa Center with I-526 filing dates (“priority dates”) in 2012, it is likely that some date in 2012 will be the cutoff date.
Q. What does it mean if there is a 2012 cutoff date?
A. Let’s just postulate that there is a China EB-5 quota cutoff date of November 1, 2012. This means that all investors whose I-526 petitions were filed before November 1, 2012 will be able to continue processing for their conditional permanent residence. However, all investors who filed I-526 petitions on or after November 1, 2012 will not be able to do so. This date is updated each month in the Department of State Visa Bulletin. (www.travel.state.gov)
Q. If there is a quota backlog, will there be a difference between regional center and direct EB-5s?
Q. If there is a backlog in the last quarter of this fiscal year, will it likely continue indefinitely?
A. There is a possibility that, at the beginning of the new fiscal year on October 1, 2014, the quota could again become current given the infusion of a new year’s visa numbers. However, it is even more likely that there will be a quota backlog at some time during the next fiscal year than there is for this fiscal year.
Q. Is there any chance that USCIS will increase the quota?
A. No, USCIS does not have the power to do so. Only Congress can do so.
Q. Is there any chance that Congress will increase the quota?
A. The comprehensive immigration bill that passed the U.S. Senate several months ago would have resulted in avoiding a quota backlog, probably for a number of years. This was done not through increasing the numbers but through removing family members from the EB-5 quota. So far, the House of Representatives has failed to take up this bill. Advocacy efforts are being undertaken by many individuals and groups, including IIUSA and AILA, to address the impending EB-5 quota backlog issue. The prospects for success at this time are speculative.
Q. Why should the EB-5 quota be increased?
A. Retrogression in the Chinese EB-5 quota could discourage investment. Since EB-5 investment contributes more than $2 billion of foreign direct investment to the U.S. and creates more than 40,000 jobs per year, this would be a result that is contrary to the national interest.
I hope that this FAQ is helpful in clarifying quota retrogression issues. My next blog will focus on actions to be taken in anticipation of a possible quota backlog and USCIS policies that need to be changed in the event of retrogression.
January 9th, 2014 by H. Ronald Klasko
Immediately prior to resigning under a cloud of suspicion and investigation, the Deputy Inspector General of DHS issued his long-delayed report on the EB-5 regional center program. This blog will not focus on that report, which has a number of inaccuracies that others have pointed out, most especially because it is at best of historical interest only. All of the findings and recommendations pre-date the May 30, 2013 Policy Memorandum, the establishment of the D.C. Investor Unit and the other significant reforms shepherded through by Director Mayorkas that render moot a substantial number of the major findings in the OIG report.
Rather, this blog will discuss new information that we have learned not from the Report itself, but rather from Director Mayorkas’ response to the Report dated November 4, 2013.
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January 8th, 2014 by Suzanne Seltzer
On October 2, 2013, I presented on the immigration and visa process in a program sponsored by the Science Alliance at the New York Academy of Sciences. Over 80 foreign scientists attended the event, most residing in the U.S. on a student or work visa. The presentation provided information regarding the best routes to becoming a permanent resident for early-career researchers. NYAS has now been kind enough to make streaming audio and PowerPoint of the presentation available at this link: Navigating Immigration and Visa Issues: A Primer for Postdocs and Young Scientists. The presentation also discussed the challenges faced by post-doctoral fellows and other young scientists when it comes to U.S. immigration law. Not only are employer sponsored petitions often difficult to come by, but the visa backlog means even those with an employer sponsored petition may find themselves waiting for many years. The presentation addressed the specific issues faced by post-docs and young scientists in the immigration context, and discussed both the non-immigrant and green card options available under current law.
December 13th, 2013 by Matthew Galati
Even though we have filed hundreds of family-based petitions, yesterday was a first for KRSS.
As we discussed back in July, the Supreme Court struck provisions of Defense of Marriage Act (“DOMA”) in United States v. Windsor which opened the doors to the awarding of immigration benefits on the basis of same-sex marriages. Soon thereafter, USCIS provided guidance on the filing of these types of cases. This guidance instructs that so long as the laws of the place of the marriage celebration hold the union as lawful, then immigration-related benefits may attach to the same-sex spouse.
As an extremely general estimate, marriage-based adjustment of status cases take between 4-8 months to fully adjudicate from the time of filing to the issuance of the Green Card. Given that the Windsor decision was issued in late June, the first same-sex couples filing post-DOMA are now having their adjustment of status interviews and obtaining Green Cards for the beneficiaries, even though they might have been married for many years.
But following the excitement of the Windsor decision, many open questions remain: How would adjudicators treat these cases? Will there be any bias or prejudice against these unions given the immigration laws’ historically hostile treatment of homosexual individuals? Will proving that same-sex marriages are bona fide be more difficult given their controversial nature, their fundamental differences in family structure compared to heterosexual marriages, and that most jurisdictions have only permitted the unions relatively recently?
Given that the first same-sex I-130 approval in history occurred on June 28, 2013, virtually no immigration attorneys had experience in dealing with the government adjudicating same-sex I-130 filings. Happily, that is now changing.
Yesterday, I had the pleasure of accompanying a same-sex couple to USCIS’s Philadelphia office for a marriage-based interview. I am happy to report that the experience was not at all different than it would have been had the couple been in an opposite-sex marital union. The officer at the interview treated both with dignity and respect, and his questions regarding the relationship were similar to those heard countless numbers of times. We were quite pleased with how the situation was handled. Nothing stood out as unique about the process compared to our hundreds of other family-based cases.
Congratulations to this couple, who were informed last night that the petition and beneficiary’s Green Card application were approved!
Hopefully, as more and more same sex-couples apply for benefits following DOMA’s downfall, adjudicating same-sex cases will indeed be as routine as the millions of cases filed by opposite-sex spouses. If our experience yesterday is a sign of what is to come, then USCIS appears to be well-prepared to handle these types of filings, now that millions of individuals who were shut out of the U.S. immigration system are finally eligible for immigration benefits.
December 5th, 2013 by H. Ronald Klasko
In my last blog, I mentioned that I recently successfully represented a regional center developer before the new Decision Board in connection with a regional center application and exemplar I-526 for which the key issue was job creation based on tenant occupancy methodology. Although no decision is precedential and each case is dependent upon the facts and presentation, I can share three insights that may be instructive.
First, the main lesson is that tenant occupancy as a job creation methodology is not dead. It may be on life support, but not dead. Second, the Decision Board process is a very worthwhile one for developing a dialogue and for focusing on the key information that is required for a successful resolution of a petition. Finally, the facts and the evidence must be extremely strong for tenant occupancy jobs to be counted.
I believe that the key facts that led to the approval of our petition were the following:
We identified, with evidentiary support for our conclusions, the mix of tenants that would eventually lease the premises. We did not do so by name, but by type of tenant – restaurant, medical office, etc. We proved the likely mix of tenants by a preponderance of the evidence.
We proved by a preponderance of the evidence that the tenants in the new mixed-use project will produce “net new jobs” and not just be relocated tenants that would leave empty space elsewhere. We were able to do so by proving that tenants are at “full occupancy” in the area, which is defined as vacancy rates at or below 3%. We were also able to prove that vacated space is filled with a new tenant within one to two months.
We proved a combination of excess demand for the type of space in question together with proof that the extra supply of space would not create any excess capacity.
We showed that the extra space would “correct market imperfections”, including abnormally high rents and abnormally high unemployment, and specifically that the increased supply of space was essential to growth in employment and reduction in rents.
We presented an expert economic opinion setting forth a “reasonable economic methodology” for projecting tenant occupancy jobs. The expert opinion concluded that the applicant’s job projection is consistent with the proposed “reasonable economic methodology.”
Finally, we provided an analysis explaining how the documentation was fully compliant with the USCIS Guidance Memorandum on Tenant Occupancy dated December 20, 2012. A key element of the presentation was emphasizing that the Guidance Memorandum requires a showing of either “constraint on the supply of appropriate commercial space” or “excess demand for such space.” Although in our case we presented documentation to establish both constraint on supply and excess demand, we emphasized that approving either one or the other by a preponderance of the evidence was sufficient to meet the standards of the Guidance Memorandum.
In summary, my advice to clients remains as it was before this approval. Reliance on tenant occupancy jobs, other than for increasing a job cushion, is highly risky business. However, given the right facts and a cogent evidentiary and legal presentation, for a project where tenant occupancy jobs are critical, it may be possible to achieve a successful result.
November 19th, 2013 by Matthew Galati
On June 27, 2013, after months of hard-fought negotiations on both sides of the aisle and political spectrum, 68 senators voted to pass S. 744, the “Border Security, Economic Opportunity, and Immigration Modernization Act.” Without a doubt, this Bill was truly bipartisan. Forged during marathon negotiations between the so-called “Gang of Eight” as well as the Chamber of Commerce and AFL-CIO, there are elements in S. 744 to please and annoy just about everybody. This attempt at modernizing our immigration system gave us the prospects of liberalizing the computation of the annual immigrant visa quotas, increased border security, additional numbers and procedural restrictions on H-1B visas, making the EB-5 Regional Center program permanent, and eliminating the Diversity Visa and family-based immigrant category for siblings of US citizens. And, of course, the vote on S. 744 signaled a bipartisan approval of a pathway to citizenship for DREAMers, the undocumented, and those out of status, which is perhaps the most controversial element of all.
But after June 27, not much else happened.
Following Independence Day, House Speaker John Boehner indicated that the House would not take up the Senate Bill. The idea, instead, was to approach fixing the immigration system in a more piecemeal process through a series of bills. During the August recess, members of our local AILA chapter met with eastern Pennsylvanian Republican House members from arguably “swing” districts, but each toed the party line. Once Congress went back into session after Labor Day, the attention shifted to the deadline on the continuing resolution to fund the government with a looming shutdown and debt ceiling default. Despite a national effort of the political Left to bring the issue back to the forefront of the media narrative, pundits were already calling the effort dead. The day after the shutdown started, a group of Democrats introduced H.R. 15, largely similar to S. 744, which even attracted limited Republican support. Once the government reopened its doors following the shutdown, the President urged the House to pass immigration reform by the end of the year.
But again, not much else happened.
It’s now approaching Thanksgiving. Congress in session until this Thursday and then closed for the rest of the calendar year except for December 2-13. Speaker Boehner has ruled out the prospects for voting on anything comprehensive this year. As far as 2013 goes, it is safe to pronounce immigration reform as dead. The House’s third-ranking Republican has confirmed as much.
As we approach 2014, the prognosis for passing immigration reform is not nearly as strong as it was heading into this year, but there exists a few windows of opportunity for the House to pass a comprehensive bill.
Congress will go back into session on January 7. However, we must consider the figurative “elephant in the room” or perhaps better said as those elephants waiting in the wings. Next year will be the midterm elections where every House member’s candidacy will be decided at the polls on November 4. But the real battles happen months in advance. Next Spring, a majority of the states will be holding their primary elections. Considering how the primary elections tend to bring out the base of both sides of the aisle, it is difficult to imagine a scenario where House Republican primary hopefuls will run on a pro-comprehensive reform platform given the leadership’s (and much of the base’s) opposition to comprehensive legislation to date.
The period in between the primary elections and the general election may, however, provide some opportunity. As we saw in 2012, Latinos (a group associated by the political media as being staunchly pro-comprehensive reform), skewed heavily towards President Obama and the Democrats. Although this year provided less of a litmus test given the relatively few off-year races, immigration-related issues did provide somewhat of a wedge in this month’s Virginia Gubernatorial election where anecdotal evidence supports the notion that Latino support helped carry the Democratic candidate to victory in a very close race.
Will there then be pressure for House Republicans to push for a vote on a comprehensive bill in 2014? It’s certainly possible. However, one must consider that many analysts only consider a relative handful of House seats to be competitive given the nature of the majority of Congressional districts. With this as the status quo, it is difficult to imagine a scenario with the Speaker reversing course with the support of his party. On the other hand, there is always the possibility of a headline-grabbing event occurring that will galvanize support, the efforts of coordinated grassroots campaigns coming to fruition, or a shift in the political winds that opens up more venues for electoral competition. In other words, one can never count out the effects of a political “game changer.”
Finally, one must also consider the possibility of immigration reform occurring in the so-called “lame duck” session between the general election and the swearing in of the 114th Congress. The 2010 post-midterm lame duck session garnered a margin just short of defeating a filibuster on the DREAM Act. Perhaps late 2014 will be different.
But the biggest challenge to immigration reform in 2014 could be time. The House Majority Leader has released the legislative calendar for next year and there are relatively few working days in D.C. This calendar grants members at least one week off every month, in addition to the entire months of August and all but two days in October. Given that another debt ceiling and budget battle looms, and that the citizenry will face another polarizing election cycle, it’s easy to imagine nothing getting done in D.C. in this short period of time.
But until the last day of the 113th’s Second Session, many supporters will continue to hold out hope that the work already done towards Comprehensive Reform comes off life support and begins to breathe on its own again.
November 14th, 2013 by H. Ronald Klasko
I recently represented clients in two proceedings before the new USCIS Decision Board. One involved an ultimately successful exemplar I-526 petition and regional center designation based upon tenant occupancy jobs. I will report on that in my next blog.
The other involved the sale of a regional center. Based upon that case, I can state somewhat more confidently than before what I believe the USCIS position to be in this murky subject matter area.
The USCIS position appears to be that the acquisition of a regional center can be accomplished by the purchase of stock, but not by the purchase of assets. USCIS has not stated a legal basis for this conclusion, nor has it suggested the ramifications of a completed asset purchase.
Assuming the stock of a regional center is purchased, is there a necessity to file a regional center amendment application? The USCIS position appears to be that such an amendment application is optional. That position is consistent both with the instructions to Form I-924 and with the May 30, 2013 comprehensive policy memorandum. Both reference the possibility – but not the requirement – of filing an amendment application to notify USCIS of a change in the “organization or administration” of the regional center. A change in stock ownership is not a change in organization or administration. However, if there are new owners of the regional center, there probably is a change in the organization or administration.
Should the optional amendment application be filed? The answer may not be the same in every context. Counsel should be consulted on this decision.
If there is a change in the organization or administration and the regional center opts to file an amendment application, does the pendency of the amendment application prevent the regional center from doing business as usual, including marketing for investors and having investors file I-526 petitions? The USCIS position appears to be that the regional center can do business as usual while such an amendment application is pending.
I want to emphasize two points. First, what I purport to be the USCIS position is extrapolated from statements made by USCIS during the course of RFEs, NOIDs and ultimately a decision from the Decision Board. None of these is precedential, nor were these positions ever clearly stated. Rather, the USCIS position appears to be evolving.
Second, different regional center designation approval notices have different language regarding changes in ownership. A regional center seeking to be sold, and individuals or companies seeking to acquire a regional center, should review the language in the regional center approval notice and consult with counsel prior to making a decision on the appropriate course of action.
November 13th, 2013 by William Stock
In the largest fine ever in an immigration case, on October 31, 2013, the U.S. Department of Justice settled for $34 million from Infosys Limited. The complaint alleged that Infosys had engaged in “systemic visa fraud and abuse of immigration processes” – that it had abused the B-1 business visitor visa program by bringing foreign national employees into the United States to perform work that was not authorized under the classification and had violated regulations regarding the employment of work-authorized H1-B visa holders. The settlement, however, dealt with Infosys’ failure to maintain accurate employment verification records for its US citizen and foreign national employees in the United States. What explains the discrepancy?
In the settlement, Infosys conceded that it committed civil violations of 8 U.S.C. § 1324a, which prohibits employers from hiring any individual (citizen or non-citizen) for employment in the United States without verifying that individual’s identity and employment authorization status using Form I-9, Employment Eligibility Verification. According to the Justice Department, more than 80% of the company’s I-9 forms for all of its US employees from 2010 and 2011 contained “substantive violations” – paperwork errors that were not fixable by reference to the employees’ documents, such as failure to complete the form within three days of hire, or failure to update and re-verify the employment authorization status of those employees present in the United States on visas authorizing temporary employment.
While the civil “paperwork” violations were settled, however, the criminal charges were dropped. The complaint filed with the settlement agreement alleged that Infosys brought foreign national employees into the United States as B-1 business visitors in order to perform functions that are not authorized under that classification and for which an H1-B visa is otherwise required. The Justice Department’s allegations are, at first blush, reasonable: noting that B-1 visas are much cheaper for the company to obtain than H-1Bs, the government alleged that Infosys told employees to describe the scope of their activities in the US in such a way that they would be eligible for B-1 visas, and provided letters confirming that scope, while writing contracts with government contractors that billed the employee’s activities as having been performed “off shore.” The allegation is that Infosys thereby engaged in criminal violations, specifically 18 U.S.C. §§ 371 (conspiracy), 1001 (false representations to government officials), and 1546 (passport and visa fraud); as well as 31 U.S.C. § 3729 (false claims for payment to government contractors).
Once the scope of business activities allowed under – indeed, encouraged by – the B-1 category is considered, however, it becomes much less clear that Infosys’ conduct prior to 2010 violated any of the restrictions on the B-1 category – which may have been a large factor in the government’s decision not to insist that Infosys plead guilty to any criminal charge. In order to understand why Infosys’ conduct was quite likely legal, it is necessary to review the various restrictions on the scope of activity in which B-1 visitors can engage.
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