India-based outsourcing giant Infosys is under investigation by the US Securities and Exchange Commission after an internal whistleblower report revealed accounting tricks and “disturbing unethical practices” that helped make the company appear more profitable than it really is.
The complaints were made last week by a group of internal employees, who have extensive documentation and some audio recordings that back up their claims. Wall Street evidently took the charges seriously, as the company’s share price cratered by at least 15% during the course of last week and three separate investor class-action law suits were filed against the company.
Costs associated with Visa workers in the US not fully reported
One of the major allegations in the complaint is that Infosys management cooked the books in their quarterly financial filings, by failing to report expenses – including those related Visa workers (see paragraph 3 of this story).
Note: While hourly costs associated with Indian workers are less than their American counterparts, the fees associated with Visa applications and the legal representation they require are not insignificant. In fact, these fees can be as high as tens of thousands per employee.
Infosys – and other India-based outsourding firms – rely heavily on Visas to staff their US operations. In their 20F filing with the SEC, the company said the majority of their workers in the United States held either H-1B visas (14,859 persons), which allow the employee to remain in the United States for up to six years … or L-1 visas (1,549 persons), which allow the employee to stay in the United States only temporarily.
In a recent conference call, Nilanjan Roy, the company’s CFO, denied Visa costs had any real impact on the company’s bottom line, saying the company had fewer Visas compared to last year and that more work was getting sent back to India.
Are they creating jobs in the US or are they moving jobs to India?
The CFOs comments were a startling admission, since the company recently claimed they were going to hire more US workers in their American operations and would reverse their earlier business model of moving data operations from the US to India.
The fact that Infosys is using doublespeak and subterfuge on Visas comes as no surprise to Kevin Lynn, the founder of US Techworkers (a national orgainzation that advocates for the rights of US IT workers). He said the recent news sheds new light on an issue that has dire consequences for the American worker – and the nation’s economy as a whole.
“With the majority of their workers (14,859) in the United States being expatriates here on Visas, we can begin to get our heads around just how many Americans each year are being displaced, forced out of good paying jobs. Add to this that the expatriate here on a Visa is just a stepping stone to the offshoring of the job altogether, we can see the long-term harm that is being done to the economy – the kind of harm that may be irreversible, Lynn said.
“Infosys is just one of many outsourcing firms being used by companies to reduce payroll cost and increase profits,” Lynn continued. “This displacement has become systemic and pervasive and must end. Infosys cooking the books regarding the costs associated with its many workers in the US on visas is just another example of the underhanded and nefarious ways they conduct their body shop business.”
Infosys has abused Visa laws in the past
The company was fined $34 million by US Immigration and Customs Enforcement for systemic abuse of US Visa laws. This came to light only after a courageous whistleblower, Jay Palmer of Alabama, stepped forward and told authorities that the company was using Indian citizens in the US on B-1 Visas to replace American workers.
Also, in June of 2017, Infosys paid NY state a $1 million fine for “failing to follow US visa requirements for foreign workers and placing them in New York jobs without paying prevailing wages and taxes owned on them.”
Also in 2017, they were accused by US authorities of gaming the US Visa lottery for their own benefit.
The list goes on and on …
No comment from Governor Lamont
There’s been no comment from Governor Lamont, who was one of the architects of the $14 million deal to bring Infosys to Hartford. During his campaign for governor, he touted the deal as proof of his business acumen and his ability to bring companies and jobs to the state. Despite the state having nearly $100 Billion in unfunded pension liabilities, state leaders asked the state bonding commission to borrow another $14M to entice Infosys to set up an office in Hartford in exchange for creating 1,000 jobs. Note: Neither the Governor nor Infosys has stated that Americans should be hired as part of this deal.
The recent news comes as no surprise to Craig Diangelo, , an IT worker who was displaced when Infosys took over IT operations at Northeast Utilities (now Eversource) in 2014. Ever since Lamont announced the deal, he knew that Americans weren’t going to be hired in Hartford – and that the deal with actually result in a net loss of jobs.
“Moving jobs from the US to India … that’s what Infosys does. That’s their business model! How could he have not known that? How could he have not known that this would lead to a loss of jobs”
Diangelo was part of a group of Northeast Utilities workers who were forced to train their Indian replacements (Infosys employees) as a condition of them receiving a severance. On their last day at work, Diangelo and others put American flags on their cubes before being escorted from the building. His story was chronicled, along with other displaced US IT workers, in a 2017 60 minutes story.
The news of this week raises serious questions of the state’s deal with Infosys. Should the state be financing a company that routinely violates US immigration and financial reporting laws? Will the deal with Infosys really result in a net gain of jobs in the state? Is the widespread use of foreign labor in the US good for the state, the country or even Infosys themselves?
“They are driving wages so low in the business (IT servies) that its not profitable any more,” said Hillarie Gamm, a CT resident and author of Billions Lost. “This reveals the truth behind pushing American labor out of IT. No company can remain profitable with margins so slim.”
“US employers need to be hiring, training or re-training American workers for tech jobs, rather than going outside the country for their labor. US tech wages remain stagnant for over 20 years (with the exception of the top 1% of tech workers) due to the constant stream of cheap foreign labor.”
Gamm helped orgainze a group of techworkers that rallied in Hartford to protest against the state’s deal with Infosys.
Rumors are circulating that the group has secured their own legal representation and is preparing to file legal briefs requesting the makeup of the company’s Hartford workforce.
Calls seeking comment on the news were not returned by Infosys.