Infosys Settles with Government for Record $34M

, The Litigation Daily

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Federal prosecutors in Texas announced Wednesday that Infosys Corporation will pay $34 million to settle civil claims that the Indian technology outsourcing company committed "systemic visa fraud and abuse of immigration processes." The settlement is the largest ever in an immigration case.

Yet under the the settlement agreement, Infosys denied the most serious charges, including claims of systemic visa fraud, misuse of visas for competitive advantage, and immigration abuse. Instead, it only admitted that it failed to maintain accurate employment records for many of its foreign nationals in the United States in 2010 and 2011.

Infosys was represented by Stephen Jonas, the chair of Wilmer Cutler Pickering Hale and Dorr's investigations and criminal litigation practice group. We contacted him but did not hear back.

Prosecutors detailed the charges in a civil complaint filed Wednesday in U.S. district court in Sherman, Texas. They alleged that Infosys used employees holding B-1 visas, which allow entrance into the United States for only limited business purposes, to perform skilled labor. These employees took work that would otherwise have gone to U.S. citizens or foreign workers holding H-1B visas, the type required to temporarily fill specialty occupations, the government contended.

On top of the $34 million payment, the company agreed to hire an independent auditor to review its record-keeping compliance and file reports to prosecutors. The settlement proceeds will be split among three agencies, with Homeland Security Investigations receiving $5 million, the U.S. Department of State receiving $5 million and the U.S. Attorney's Office for the Eastern District of Texas receiving $24 million.

The government's investigation was spurred by a whistle-blower lawsuit filed by Infosys employee Jack Palmer Jr. in Alabama in 2011. Palmer accused the company of retaliating against him after he reported the alleged visa problems internally.

U.S. District Judge Myron Thompson in Montgomery dismissed Palmer's lawsuit in August 2012, finding that Palmer did not have a viable claim under Alabama state law. But the judge wrote that he found it "deeply troubling" that Palmer claimed to have received anonymous threats in notes, emails and phone calls at work and at home. "Indeed, an argument could be made that such threats against whistle-blowers, in particular, should be illegal," Thompson wrote. Infosys was represented in the Alabama lawsuit by Littler Mendelson.

Palmer's lawyer Kenneth Mendelsohn told us Wednesday that many of the reporting changes adopted by the company under the settlement mirror suggestions Palmer made when he first reported the problems. As a whistle-blower, Palmer is entitled to as much as 25 percent of the government's settlement, but Mendelson declined to comment on how much his client, who remained an employee at Infosys throughout the investigation, would receive.

Wednesday's settlement doesn't spell the end of Infosys' legal headaches in the U.S. A purported class against brought by Infosys employees in the Eastern District of Wisconsin accuses the company of "systematic,company-wide discrimination" against employees who are not of South Asian descent. Infosys is represented by Morgan Lewis & Bockius in that case.

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