The January 8, 2010 USCIS memo concerning H1B “third party site placement” memo has provoked a great deal of concern and controversy. In reality, there is little new in this memo. That is, the USCIS has been applying these same standards for at least the past one year. The new memo simply articulates in one document what we have been seeing in requests for evidence since January, 2009. For this reason, you should not expect to see radical changes in USCIS adjudications immediately following the publication of the memo.

The memo brings to a head a controversy that has been simmering for more than a year. To understand what the CIS is attempting to do, it is necessary to first go back and look at a bit of history. Only when the memo is placed into its proper context can you fully appreciate what has happened and what is likely to happen.

In September, 2008 the Department of Homeland Security’s Document Fraud and National Security (DFNS) unit produced a report titled H-1B Benefit Fraud & Compliance Assessment. This report was based on an examination of just 246 cases out of a total case population of 96,827, or a sample size of just 0.25% of the whole. Within this tiny sample, they found 51 cases (20.73%) that had violations of some sort, ranging from minor technical violations to actual fraud. Out of this group, they found 33 cases that involved actual fraud and 18 cases that involved technical violations.

More specifically, they found that 28 of cases involved work at a site other than the site listed in the H1B petition. In another 14 cases, they found that the H1B beneficiary was not being paid the prevailing wage or had been “benched” without pay. Ten of the cases involved fraudulent education/experience documents. Seven of the cases involved situations where the address given for the job site did not exist. Six of the cases involved job duties that were different from those described in the H1B petition. Three cases involved situations where the beneficiary began work before the employer had filed the H petition. Finally, in two of the cases, investigators found that the H1B beneficiary had paid the ACWIA fee, which is prohibited by the regulations.

Within this sample of 0.25% of existing H1B cases, DFNS found that the most common occupations associated with fraud were accounting, human resources, business analysts, sales, and advertising occupations. Again, within this tiny and statistically insignificant sample, the

“violation rate” for computer professionals was found to be 27%. DFNS further reported that “46% (114 cases) of the beneficiaries were born in India. Among this sample, 25% (29 cases) were associated with some type of fraud or technical violation(s).”

Further findings included observations that companies in business less than ten years were four times more likely to have violations. Similarly, companies with 25 or fewer employees were five times more likely to have violations. Companies with gross income less than $10 Million are six times more likely to have violations than companies that earn more than that amount. Finally, the report concluded that:

“Companies engaged in professional, scientific, and technical services (NAICS 54) make up 52% (128 cases) of the sample. Among this sample, 27% (35 cases) were associated with some type of fraud or technical violation(s). This category includes companies whose work involves computer software engineering/development contracting.”

Following the issuance of the report, the USCIS began issuing requests for evidence (RFE) in all cases involving information technology workers. They did not distinguish between those who worked in-house from those who worked for consulting companies and were placed with third parties. The new onslaught of H1B RFEs began in late December, 2009 and has continued through the present. The standards set forth in the January 8, 2010 memo simply incorporate the standards set forth in the RFEs that have been issued since December, 2008. It is very clear that the USCIS had decided to inquire into every IT H1B petition filed.

The DFNS memo concludes with the statement:

“Results from this BFCA have established a 21% baseline fraud and technical violation(s) rate for H-1B petitions. Given the significant vulnerability, USCIS is making procedural changes, which will be described in a forthcoming document.”

The January 8, 2010 memo is presumably that “forthcoming document.”

In the next section of this article, we will discuss each of the specific aspects of the new memo and what each means in practice. The third section of the article will deal with the clear illegality of the standards set forth in the article and the correct legal standard. The fourth and final section will deal with recommendations for dealing with these requirements that have been imposed by the CIS over the past year.