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It's True: There's Fraud in the H1-B Visa Program


A new U.S. government report confirms that companies are using the visas to hire illegally. But reforms are on the way

For years critics have charged that the U.S. visa program for highly skilled workers is susceptible to abuse. Now the federal agency that issues the visas has confirmed some of those concerns.

The program for what are known as H-1B visas is designed to help U.S. companies bring workers with rare or specialized skills into the country. A Microsoft (MSFT) or IBM (IBM) can use the visas to hire someone from abroad if they can't find an American citizen with equivalent skills. But in a recent study, U.S. Citizenship & Immigration Services (USCIS) found that 13% of the requests for H-1B visas were fraudulent and 7% contained technical violations. In one case, when a company requested a visa for a "business development analyst," USCIS found the person would be working in a laundromat, doing laundry and maintaining washing machines.

The study marks the first time the agency has documented systematic problems in the program. It's based on a sample of 246 H-1B petitions and does not name the companies involved.

Critics say the report underscores the problems with H-1B visas. They charge that companies use the visas so they can hire cheap workers from abroad instead of hiring Americans, pushing down pay and benefits in the U.S. "The report makes it clear that the H-1B program is rife with abuse and misuse," says Ron Hira, assistant professor of public policy at the Rochester Institute of Technology.

Hundreds of U.S. companies use the program to bring overseas workers into the country, and participants such as Microsoft and Google (GOOG) have long argued that the current limit of 65,000 visas a year should be increased. But the USCIS study makes it more likely that critics, such as Senators Dick Durbin (D-Ill.) and Charles Grassley (R-Iowa), will be able to win tighter oversight of the program before it is expanded. Presidential candidates Barack Obama and John McCain have both voiced support for expanding the program, with reforms.

CLOSING LOOPHOLES

Bill Wright, a spokesman for USCIS, says the agency is already weighing adjustments based on the report's findings. It's developing a new risk-assessment program that, among other things, would closely examine requests from companies with 25 or fewer employees, since that category was found to have a higher rate of violations.

Technology companies also called for stepped-up oversight. "U.S. employers who play by the rules of the H-1B visa program are hurt when visas go to employers who don't," says Robert Hoffman, a vice-president at Oracle and co-chair of Compete America, a tech lobbying group.

The report identified a variety of violations by companies requesting work visas. Some H-1B workers didn't have the academic credentials or experience detailed on the applications. Others never worked at the location specified on their forms. Still other H-1B employees were paid less than the prevailing wage for their position and geographic location, another violation of the rules.

Durbin and Grassley say the USCIS report shows the visa program needs more oversight. Along with other reforms, they want the government to investigate program participants regularly, something it doesn't currently do. "Until we make a conscious effort to close the loopholes, we're going to see continued abuse where people coming to this country on H-1B visas are working at laundromats," Grassley said in a statement.

Herbst is a reporter for BusinessWeek in New York.

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