On Nov 26 2018 by William A. Stock

CLIENT ALERT: Lessons for Universities and Companies from Wright State University’s Nonprosecution Agreement

By William A. Stock and Steven R. Miller

On November 16, 2018, the U.S. Attorney’s Office for the Southern District of Ohio announced that the Board of Trustees at Wright State University had agreed to pay the federal government a $1 million fine after accepting responsibility on the school’s behalf for visa fraud offenses relating to the practice of using its cap-exempt status to funnel H-1B workers to external, private IT companies subject to the visa cap. This incidence of H-1B exploitation raises a number of issues of concern to our university clients.

The federal probe by U.S. Immigrations and Customs Enforcement Homeland Security Investigations revealed that Wright State University had hired H-1B workers under the auspices of employing them to develop a software program at the university’s Fairborn, Ohio, campus, when in fact these individuals were working as consultants for private IT services companies on-site in cities across the country. The university would then be reimbursed by these entities for all costs associated with employing the H-1B worker, including salary and benefits, thus allowing the companies to benefit from H-1B labor to which they would not have otherwise had access.

While the idea of cap-exempt institutions establishing collaborative programs with companies that would otherwise be cap-subject is not at its foundation illegal or without precedent, there are clear boundaries that must be considered when using the H-1B program in this way. For example, a collaborative initiative between New York City and a selection of its public and private research colleges has used legitimate, cap-exempt H-1B employment to attract and grow business ventures through in-house university incubators, creating a mutually beneficial situation for the schools, the international entrepreneurs, and the city at large.

For our university clients, there are many lessons to be learned from the Wright State University incident, the foremost of which should be abundantly clear—be forthright in your dealings with the U.S. immigration system. Everyone stands to benefit from fostering innovation through the H-1B program. Universities, with their coveted cap-exempt status, are in a unique position to enable individuals with specialized talents to pursue their work here in the United States. But with each instance of abuse, public and governmental trust in the system erodes. The legitimate avenues available for sponsoring cap-exempt, in-house business development under the H-1B program give universities a strong card to play. They just have to play it by the rules.  

To read our full blog post on this story, click here.