Bangalore: Infosys Ltd, India’s second largest software services firm, is set to be hit with a record $35 million fine on Wednesday by the US government on allegations of visa misuse, The Wall Street Journal reported, citing people who it didn’t name, even as the company said it was working with the US government to resolve the issue.

The violations pertain to using employees on business visas (or so-called B1 visas) to do work typically done by engineers on long-term work visas (also called H-1B visas).

Business visas cost less than H-1B visas, are easier to get, and there is no limit on them. Normal work or visit visas cost about $200 and H-1B visas could cost as much as $2,000.

“In response to reports attributed to justice department officials, Infosys is in the process of completing a civil resolution with the government regarding its investigation of visa issues and I-9 documentation errors. The resolution has not been finalized," Infosys said in a statement.

“Infosys denies any claims of systemic visa fraud, misuse of visas for competitive advantage, or immigration abuse. Those claims are untrue and only unproven assertions. The company’s use of B-1 visas was for legitimate business purposes and not in any way intended to circumvent the requirements of the H-1B program," the statement said. “No criminal charges have been filed against the company and no court rulings have been issued."

While announcing its financial results for the quarter ended 30 September, Infosys said it had set aside $35 million towards “visa-related expenses" (the provision hurt its net profit for the quarter).

In a regulatory filing on 11 October, Infosys said it received a federal subpoena that sought details of the company’s B1 visa sponsorships. Infosys, which along with some of its employees are targets of the probe, said it is cooperating with the investigation.

The immigration fine comes at a time when Indian information technology (IT) firms are tracking the progress of the US Immigration Bill. If passed into law in its current form next year, the Bill will increase the cost of doing business for Indian IT companies and force them to hire more local workers at higher costs, thus disrupting their business models.

Some of the provisions of the Bill were pushed by lawmakers to force firms to hire more local people in the US and are backed by top technology firms in the US, such as Microsoft Corp. and Facebook Inc., that believe Indian offshore firms were misusing the visa regime to gain a competitive advantage.

“Enforcement and restrictions will be most effective if they are focused on the users whose workforces are most dependent on H-1B visas or who show a disregard for the rules," Brad Smith, general counsel and executive vice-president (legal affairs) at Microsoft, said in his testimony in April before the Senate.

The provisions of the Bill, if passed, will increase the cost of doing business for top Indian IT firms and force them to remove professionals from client sites working on short-term outsourcing projects. During the first few months of an outsourcing project, the presence of engineers at client sites is crucial in determining the success or failure of such projects.

According to data provided by technology researcher Gartner Inc., the Bill could force firms to file for fewer visas effective October 2014, as the cost per petition would increase by about $5,000.

Prime Minister Manmohan Singh raised the issue last month in a meeting with US president Barack Obama, who promised to address India’s concerns. Wipro Ltd’s chairman Azim Premji has met US vice-president Joe Biden to raise his concerns.

Last month, trade lobby US-India Business Council (USIBC) and five former US ambassadors to India wrote to senators urging them to soften their stance on the Bill.

“Infosys is engaged in discussions with the US attorney’s office and other government departments regarding a civil resolution of the government’s investigation into the company’s compliance with Form I-9 requirements and past use of B1 visas. Based on the status of those discussions, Infosys has set aside a reserve of $35 million, including legal costs," the company said in its regulatory filing on 11 October.

Bloomberg said late Monday that Infosys had reached a settlement resolving the US government’s investigation into the company’s use of visas, citing two unnamed people familiar with the matter.

The WSJ report said Infosys would be fined $35 million, the largest immigration fine ever, by the US government on claims that the Bangalore-based outsourcing firm illegally placed employees on visitor visas, and not work visas as companies are supposed to.

The investigation, conducted by the department of homeland security and the US state department, found that the company used visitor B1 visas instead of the mandated H-1B visas for longer business visits, to bring an unknown number of its employees for long-term visits, the report said.

This is not the first time Infosys has been investigated for visa misuse. In August, a US-based IT professional, Brenda Koehler, filed a lawsuit against the company, alleging that it discriminated against job applicants in the US by preferring to hire workers from South Asia to fill positions in the US.

Last year, Infosys received a lawsuit from a former employee alleging visa fraud. In December, a US court dismissed the lawsuit filed by Satya Dev Tripuraneni. Prior to that, a US employee, Jack Palmer, filed a lawsuit alleging Infosys had harassed him after he reported instances of business visa fraud.

Shares of Infosys closed 0.2% higher to 3,330.30 on BSE on a day the benchmark Sensex rose 1.74% to 20,929.01.

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