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UPDATE 1-India's Infosys to pay $34 million in U.S. visa case

Harichandan Arakali
Wednesday, 30 Oct 2013 | 11:19 AM ET

* Company had reserved $35 million for settlement

* Infosys says no limit on eligibility for U.S. federal contracts

BANGALORE, Oct 30 (Reuters) - Infosys Ltd said on Wednesday it has reached a $34 million settlement with U.S. authorities in a case involving the widespread practice by Indian firms of flying workers to client sites in the United States on temporary visas.

The fine, which the U.S. Department of Justice said is the largest in a case of its kind, comes as U.S. lawmakers consider legislation that would make it more difficult and costly for Indian IT firms to send workers to the United States on temporary, restricted visas.

"Infosys denies and disputes any claims of systemic visa fraud, misuse of visas for competitive advantage or immigration abuse. Those claims are untrue and are assertions that remain unproven," Infosys said in a statement.

"There were no criminal charges or court rulings against the company. Furthermore, there are no limitations on the company's eligibility for federal contracts or access to U.S. visa programs as a result of the settlement," it said.

Infosys, India's second-largest IT services exporter, employs roughly 15,000 people in the United States. As of March 31, about 10,800 of those were on H-1B visas, which allow an employee to stay and work in the United States up to six years, and 1,600 were on temporary L-1 visas, a company filing said.

The U.S. investigation focused on the use of B-1 business visas and I-9 forms, Infosys has said. I-9 forms verify the identity of employees and their authorisation to work in the United States. A person on a B-1 visa in the United States can participate in meetings but is not allowed to work.

"It is likely to add more fuel to the ongoing debate around visa reforms," Chirajeet Sengupta, practice director in Mumbai at Everest Group, which advises clients on technology vendors, said on Tuesday after reports that a settlement was imminent.

"These reforms, if executed, have the potential to impact Indian service providers' landed resource model that is largely driven by access to H-1B visas in large numbers," he said.

In its statement, Infosys said only .02 percent of the days that Infosys staff worked on U.S. projects last year were performed by people on B-1 visas.

"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 Bangalore-based company said.

Infosys has secured roughly one B-1 visa for every 10 H-1B visas, according to a person with direct knowledge of the matter who declined to be identified.

U.S. authorities have been looking into Infosys' use of visas since 2011. Earlier this month, Infosys set aside a reserve of $35 million, including legal fees, as it worked towards a resolution of the U.S. investigation.

The case is "an important event in the annals of Indian IT industry," Sundararaman Viswanathan, a consultant in Bangalore with Zinnov, which advises U.S. corporations on sending outsourcing work to India, said ahead of the settlement.

"This is a common issue amongst all the Indian service providers - just that Infosys had to deal with it," he said.

"Though the Indian service providers do not intend to flout the visa regulations, there was definitely a lack of regard for certain norms and procedures. This will be fixed. There will be an increase in onsite hiring," he said.

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