When the U.S. Department of Labor needed a new contractor to upgrade its aging computer systems, it turned to labor broker Saras America. The firm should have sounded familiar.
The year before, regulators in another part of the sprawling bureaucracy had threatened to block the company from importing foreign workers because it had shorted the pay of nearly 40 high-tech employees, among other labor violations.
In the end, Saras America Inc. fought off the ban, sliced the fines and back pay it owed workers to roughly $275,000 and secured the lucrative contract to improve the Department of Labor’s computer systems.
The outcome left Saras America $700,000 richer and a company executive musing online about how they’d pulled off the deal.
“Perhaps it was pure luck – perhaps it was just happenstance,” Stephen Scruggs, the company’s vice president of sales and marketing, wrote on a federal contracting forum.
He advised other firms to pursue federal contracts with similar zeal: “Get out there and make it happen.”
Saras is one of hundreds of niche companies that populate a hidden world of immigration by recruiting temporary tech workers in India, then contracting them out to U.S. companies. A yearlong probe by The Center for Investigative Reporting found that porous federal oversight allows these labor brokers to financially exploit workers with little fear of detection.
It turns out that those that are caught can continue to survive and thrive – including on the taxpayers’ dime.
The federal government has awarded contracts and other benefits worth nearly half a billion dollars since 2000 to technology labor brokers and tech firms cited for violating laws related to the temporary visa program known as H-1B.
No checks and balances are in place to prevent it.
Since 2000, nearly 20 percent of the brokers and firms cited for violating the visa program have nevertheless received federal contracts, payments or other government support for their businesses. The Department of Homeland Security and the Department of Defense are among major agencies that have looked past these violations or did not check the record.
Even brokerages facing the ultimate penalty for breaking labor laws – debarment from the temporary visa program – found ways back in.
While labor broker Triune Technologies Inc. was blacklisted by the Department of Labor for two years, its executives received approval to import H-1B workers under the name of a different company, WalkWater Technologies Inc., which shares the same San Jose, California, address.
Both companies outsource tech workers, said former Triune executive Conrad Rodricks, who also is listed as a director at WalkWater. Even so, “the purpose of WalkWater was not to supplement Triune,” he said in an interview.
If WalkWater’s online client list is accurate, Google Inc., Cisco Systems Inc., Visa Inc. and a variety of other top firms have used the company’s services.
For government watchdogs, the system of policing labor brokers is broken.
"It’s immoral to take money away from hardworking Americans and give it to companies violating labor laws." — Leslie Paige, Citizens Against Government Waste
“If taxpayers knew about this, they would be apoplectic,” said Leslie Paige, vice president of policy and communications for Citizens Against Government Waste, a nonprofit group in Washington. “It’s immoral to take money away from hardworking Americans and give it to companies violating labor laws. … Debarment should have some actual teeth.”
The government’s reliance on technology services firms, including labor brokers, surged in the 1990s as technology advanced and boomed. This fiscal year, the federal government expects to spend at least $79 billion on information technology, with many agencies relying heavily on private contractors.
President Barack Obama this summer signed an executive order requiring anyone seeking federal contracts of more than $500,000 to notify federal officials if they’ve violated labor laws in the previous three years.
“Our tax dollars shouldn’t go to companies that violate workplace laws. They shouldn’t go to companies that violate worker rights,” Obama said at a July 31 press conference, adding that the order would “crack down on the worst violators by giving agencies better tools to evaluate egregious or repeated offenses.”
But it won’t stop most labor brokers: Firms cited for labor violations involving H-1B visa holders and other temporary workers are exempt from the executive order.
Temporary immigrant worker programs were excluded because they make up a sliver of government contractors, said Ann Mangold, a Labor Department spokeswoman. The reporting requirement, she added, could unnecessarily burden those firms.
It’s unclear exactly how many immigrants currently hold temporary work visas. In 2012, it was 840,000 men and women. But no one tracks how many of these visa holders are working for federal contractors.
Skirting laws despite scrutiny
Saras America began tangling with federal officials over its labor practices after it set up shop in 1997. Investigators in the Detroit district office of the U.S. Department of Labor’s Wage and Hour Division launched a probe after a worker complained that the Michigan-based company had withheld pay and overtime.
Chuck Yerneni, the company’s president, agreed to give the worker $10,588 in back pay and promised “full future compliance” with the temporary visa program, investigators wrote in 2000.
Despite that pledge, Saras attracted renewed scrutiny from the federal government. Within two years, the company failed to pay workers when no work was available or while they were waiting for their next assignment to start, Labor Department records show.
The very nature of the H-1B program makes such so-called benching without pay illegal because the visas are contingent on an employer proving it has a job waiting and the workers will be paid. Labor brokers, however, typically prefer to have a cache of workers in reserve, ready to jump if a contract lands.
As part of its scheme, Saras required recent immigrants to officially “report to work,” but didn’t pay them – for up to five months – saying the workers needed time to adjust to “the cold and the English language,” investigators wrote.
They said Yerneni told them he paid the workers only “when he feels they are actually ready to report to the client locations.”
Benching dating back at least five years, along with other abuses, prompted the Labor Department to recommend in 2008 that Saras be disqualified from the temporary visa program and assessed $422,434 in penalties and back pay.
The company appealed the decision to an administrative law judge, part of an internal court system that handles civil enforcement cases for the Labor Department.
Ultimately, the company’s tenacity paid off. The Labor Department settled with Saras in early 2009, agreeing to reduce what the company owed in fines and back wages. It also abandoned its recommendation to block the company from recruiting H-1B workers. Agency officials declined to discuss these negotiations, citing confidentiality rules.
On Sept. 29, 2010, the Labor Department’s Occupational Safety and Health Administration hired Saras to help modernize its computer systems. The $700,000 agreement was Saras’ first federal contract.
“When that was awarded, things were moving really fast; it was the end of our (contracting) season,” said Barry Jordan, a contract specialist with the Department of Labor.
Contracting season is when most federal agencies must use or lose the funding appropriated by Congress. Asked why Saras got the job, Jordan said, “They were the lowest bidder.”
Nothing prevented the company from applying for the contract. First, Saras’ past labor violations were not part of its performance records, said Wanda Maddox, a contracting officer at the Labor Department. Second, she said, “If they’re not debarred, then they’re eligible for a contract award.”
In the end, the company “did a good job,” Jordan added.
Although Scruggs, Saras’ vice president of sales and marketing, crowed on the Internet about getting the contract, he did not respond to telephone messages and emails from CIR.
Today, the company’s website says it keeps a “deep bench” of workers “immediately available for temporary and permanent help.”
Workers pay for success
Even after lying to federal investigators, Saicon Consultants Inc., a technology consulting company based in Overland Park, Kansas, continued to wring profit from lower-cost workers – and taxpayers.
Ramesh Lokre, the company’s chief executive, “introduced the Wal-Mart way to Kansas City’s tech community,” according to a December 2006 article in the Kansas City Business Journal.
“By promising corporate clients 10 percent to 15 percent cost savings on information technology workers, Lokre’s Saicon Consultants Inc. has taken off like a category killer,” according to the article.
That same year, the company, led by Lokre and his wife, Saicon President Swati Yelmar, had made Inc. magazine’s list of the nation’s fastest-growing private companies.
Before long, Labor Department investigators discovered a possible explanation for the remarkable success: It had shorted pay for its workers by tens of thousands of dollars. Saicon was uncooperative, the agency’s records from 2008 indicate, refusing to turn over key records and trying to mislead regulators.
Labor officials recommended barring the company from the H-1B program, but Yelmar objected, arguing that “the violations were minor and that debarment was an excessive penalty,” Labor Department records show. The agency settled on ordering the company to pay five workers a combined $62,499 in back wages, plus a $15,000 fine.
It wasn’t the first time Saicon violated H-1B worker protection laws, either.
The company took illegal deductions from workers’ paychecks in the mid-2000s for visa fees, company advertising, recruiting in India and other expenses, Labor Department records show. The company paid $11,784 in back wages and penalties of $550.
Before that, labor officials found in 2000 that the company had failed to reimburse workers dispatched around the country for $58,000 in living expenses. Following negotiations, the company promised to repay them $17,945.
But that history did not hamper Saicon’s ability to win federal contracts.
Since 2007, the government has awarded the company $1.8 million for at least 16 contracts with the U.S. Environmental Protection Agency, the Pentagon, the Department of Homeland Security and the Agriculture Department, records show.
Lokre, Saicon’s CEO, did not respond to voicemail messages left at his office seeking comment.
Same business, new name
The death knell for labor brokers is debarment, disqualifying them from the temporary visa program for up to three years. But few of them meet that fate.
Currently, 17 firms are barred from the H-1B program – out of hundreds of tech labor brokers. And even some of the most flagrant violators are not monitored closely.
As is often the case with government agencies, the Labor Department pleads poverty.
“The agency does not check up on debarred companies to make sure they are not doing business,” said Michael Kravitz, a spokesman for department’s Wage and Hour Division. “There are only so many resources to go around.”
Harshal Vaidya, founder of Goolti.com, an Internet complaint board for Indian H-1B visa workers, says he has seen dozens of labor brokers that run afoul of wage and immigration laws vanish, then reappear in various ways. Vaidya launched his website in 2006 after finding a dearth of information on unscrupulous labor brokers during his own job search in the U.S.
“If they get infamous a lot,” Vaidya said in an interview at his home in India, “what they do is shut down shop and open it with a new name.”
"The agency does not check up on debarred companies to make sure they are not doing business. There are only so many resources to go around." — Michael Kravitz, spokesman for the U.S. Department of Labor's Wage and Hour Division
Infamy nearly caught up with Sanjiv Singh, president of Soft Labs, until he used another existing company to import temporary workers.
Beginning in 2002, Michigan-based Soft Labs Inc. racked up fines and unpaid back wages of more than $78,000 through three investigations before the Labor Department blacklisted the firm.
In one case, the company was ordered to pay back wages to nine H-1B visa workers. In another, the Labor Department fined Soft Labs for assigning tech workers to different firms without posting required notices detailing their wages or telling employees they were entitled to file complaints with the Labor Department.
Soft Labs was banned from the visa program for one year, through February 2008. Yet during that period, Singh received approvals for 12 temporary visa petitions through his other company, Solexo Vandanam LLC, according to figures provided by U.S. Citizenship and Immigration Services. Both companies were staffing agencies.
Singh could not be reached for comment despite calls to his relatives and a letter sent to his home.
One of his former employees, networking specialist Gurvinder Bindra, came to work for Solexo in February 2008 with his eyes wide open.
“These companies are body shops and everybody knows that,” said Bindra, 39, a native of Mumbai, India. “I knew I had to be careful. The market has a reputation for ripping off workers.”
Bindra nevertheless spent his first three months in the U.S. searching for work, with no pay, he said. Then, Cisco Systems hired him through another labor broker that contracted with Solexo. He briefly worked from Cisco’s offices in San Jose, then Cisco sent him to Virginia to review the design of a Visa data center.
Solexo netted about $75 an hour for his work but paid him about $53, Bindra recalled. Beyond that, he added, “I had to watch them like a hawk to make sure I was paid.”
CIR video producer Adithya Sambamurthy, intern Lucia Osborne-Crowley and Jennifer LaFleur, senior editor for data, contributed to this story. It was edited by Amy Pyle and copy edited by Sheela Kamath and Nikki Frick.