H-1B visa: Feds say they fixed loophole that opened way for massive fraud

Fraudsters exploiting a change in the application process for the controversial H-1B visa have been shut down by a new rule, federal authorities say.

After U.S. Citizenship and Immigration Services in 2020 imposed a new, two-stage application process for the visa intended for workers with specialized skills, unscrupulous businesspeople colluded to game the lottery-based allocation system, a spokesman for Citizenship and Immigration said.

The new process was meant to slash application costs by letting companies submit initial $10 “registrations” to get prospective foreign workers into the H-1B lottery, instead of paying thousands of dollars in fees and legal costs on a gamble with poor odds — only 85,000 new visas per year are issued, and applications typically number in the hundreds of thousands.

But a flaw in the process became apparent: There was no requirement for companies to submit information such as passport numbers that would identify individual would-be visa recipients. Soon after the new system began, a number of employers started creating new companies and working together to submit multiple registrations for the same workers to up their lottery odds, the agency spokesman said. Registrations skyrocketed from about 275,000 in the first year to nearly 800,000 last year, according to agency data.

“The kind of typical scheme would be a small number of employers forming dozens or more paper companies and registering hundreds if not thousands of workers repeatedly under those same paper companies to try to up the odds of any of those workers getting selected,” said the spokesman.

The perpetrators likely intended to use fraudulently obtained visas to outsource foreign workers to their client companies, the spokesman said.

Citizenship and Immigration launched aggressive investigations last year, and agency officials referred an undisclosed number of suspected perpetrators to law enforcement agencies for possible fraud prosecutions, the spokesman said. The number of final applications submitted to the agency indicated that its public messaging about the fraud crackdown appeared to push many of those who gamed the registration process to abandon their efforts even if they had succeeded in the lottery, he said.

For the registration process earlier this year, Citizenship and Immigration changed the rules to require individually identifying passport or travel-document numbers. The new process appears to have solved the fraud problem, the spokesman said. The number of registrations plunged to about 480,000, a number the agency believes represents largely legitimate applicants and strong demand for the visa.

“All the evidence points to this phenomenon of employers collaborating to beat the odds has basically gone away,” the spokesman said.

The most recent research, by the Bay Area Council, showed nearly 60,000 foreign citizens were approved to work for Bay Area companies under the H-1B in 2019. The businesses targeted for fraud prosecution were not identified by name, so it remains unclear whether any are in the Bay Area.

In Silicon Valley, skilled immigration powers world-leading innovation, said Peter Leroe-Muñoz, senior VP of technology and innovation at Silicon Valley Leadership Group, which lobbies to expand the annual H-1B cap and whose membership include’s the region’s technology giants. “Silicon Valley companies are competing globally to attract and retain talent,” Leroe-Muñoz said. “H-1B visas are essential for maintaining U.S. leadership in technologies like AI, quantum computing, autonomous vehicles and semiconductors. All of those technologies rely on that infusion of global talent.”

But data suggest that to some extent, the visa has been used to hire cheaper foreign labor. A 2020 report by the left-leaning Economic Policy Institute concluded that 60% of H-1B jobs certified by the U.S. Department of Labor were assigned wage levels well below local median pay for the occupation. However, a report a year earlier by the American Immigration Council, which has called the annual 85,000-visa cap “insufficient,” found that in 2019, 78% of employers hiring H-1B workers offered pay higher than the prevailing wage.

Allegations that American workers lose jobs and opportunities to foreign citizens on the H-1B have made the visa a flashpoint in the nation’s immigration debate.

Howard University professor Ron Hira, who studies the visa, called the government’s apparent success against application fraud “small potatoes” and said federal officials must do more because oversight is lax.

“Employers systematically steal H-1B workers’ wages, place them in poor working conditions, and widely use the program to replace U.S. workers and offshore their jobs,” Hira said, adding that several cases have come to light of U.S. workers training their H-1B replacements, including at the University of California.

Many IT staffing companies break the H-1B rules by obtaining the visa for workers despite not having ready clients for them, and keeping them waiting offshore, Hira alleged.

“This kind of fraud is much bigger and more damaging,” said Hira, a co-author of the Economic Policy Institute report.

Selecting visa recipients by lottery favors the outsourcing companies, and should be replaced by a system that awards visas based on highest salary, Hira argued.