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H-1B Visa Dreams Deferred

A federal lawsuit in Iowa alleges that two men orchestrated a scheme to underpay workers who came into the country on H-1B visas

By Moira Herbst

Urbandale is a thriving residential suburb of Iowa's capital city, Des Moines. Go to its Web site and you'll see a picture of a charming gazebo and the claim that Urbandale is "a growing city that has held onto its small-town charm."

Part of that growth includes the U.S. headquarters of Pacific West, an IT consulting firm that employs both U.S. and H-1B visa workers from overseas. It is there, in a nondescript six-story office building at 2600 Aurora Ave., that dozens of skilled workers, mostly from India, were supposed to be working in 2004 and 2005.

But according to a federal lawsuit filed on Dec. 16 in the U.S. District Court for the Southern District of Iowa, some of those who came to work for Pacific West didn't get to enjoy the town's charms, or the computer programing or engineering jobs they expected to fill. A federal grand jury charges that in fact many of the workers wound up on the East and West coasts, working for companies that had nothing to do with technology.

Coordinated Federal Investigation
Two Pacific West executives, Vishnu Reddy and Chockalingam Palaniappan—also referred to as "Chuck Pal" in court documents—are charged with filing false documents with the U.S. Citizenship and Immigration Services and U.S. Labor Dept. to take advantage of the lower wage requirements in Iowa.

Critics of the worker-visa system have long claimed it is gamed by companies to replace skilled U.S. workers with lower-paid foreigners. But the allegations against executives at Pacific West—as well as those at four other companies under investigation—reveal the mechanics of a specific scheme that allegedly allowed employers to fraudulently cheat H-1B visa workers of their proper wage rates. Lawsuits have been brought against individual companies for H-1B visa fraud in the past, but allegations against Pacific West and other Iowa-based companies point to what may have become a common scheme to underpay H-1B visa workers by misrepresenting their geographic work location.

Details of this alleged fraud emerged as the U.S. Attorney for the Southern District of Iowa announced the arrest of 13 people in six states connected with five IT services companies, and the indictment of one company, Vision Systems Group, following a coordinated federal investigation. Vision Systems Group was ordered to forfeit $7.4 million that it allegedly obtained through fraudulent means. Three other technology companies—Worldwide Software Services and Sana Systems, both based in Clinton, Iowa; and Venurisoft of Clive, Iowa—remain under investigation for document fraud, prosecutors said. Vision Systems Group, Worldwide Software Services, and Sana Systems did not return phone calls and e-mail messages seeking comment.

"No Conspiracy to Defraud"
In the case of Pacific West, Reddy and Pal are charged with one count of conspiracy to defraud the U.S. and 11 counts of mail fraud. The defendants appeared in court on Mar. 6 for an initial hearing. Soby Mathews, an attorney for Pacific West, says he's confident that Reddy, Pal, and the company will be cleared of any wrongdoing. "We have complied with the spirit of the law and paid employees appropriate wages," says Mathews. "There may have been some technical errors, but we believe there was no conspiracy to defraud the government."

The H-1B visa program was set up in 1990 to help companies bring highly skilled workers into the U.S. to fill jobs that they were having a hard time filling with American workers. Critics say the program, which allows 85,000 skilled workers from overseas to enter the U.S. each year, is fraught with examples of deceptive practices that result in visa workers getting paid less than what they should.

Others say that the program systematically lets companies bring in lower-cost foreign labor when qualified U.S. workers are available. The net effect is that tech wages in the U.S. are dampened, they say, and job opportunities reduced for Americans.