On Nov 26 2018 by William A. Stock

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 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. In light of this nonprosecution agreement, cap-exempt institutions should review their collaborative programs through which university employees are employed as H-1B workers but perform all or some of their duties with companies that would otherwise be cap-subject. Such practices are not all illegal or without precedent, but there are clear boundaries that must be considered when using the H-1B program in this way.

To illustrate, let’s consider a successful, above-board example of a cap-exempt institution using its status to launch and grow what might eventually become private, U.S.-based businesses.  In 2015, the New York City Economic Development Corporation and the City University of New York (CUNY) launched the International Innovators Initiative. Through this program, public CUNY institutions—and now the private New York University—employ entrepreneurs on a cap-exempt H-1B under the conditions that they base their business in the partnering school’s incubator and contribute to the academic research and educational goals of the school, providing internship and employment opportunities for CUNY students and New Yorkers in general.

New York City’s International Innovators Initiative solves a number of problems for a number of interested parties.  It cements these universities’ reputations as hubs for innovation and entrepreneurship. It allows foreign talent to avoid the uncertainty of the H-1B lottery process and forego the catch-22 of wanting to launch a U.S.-based business but needing U.S.-employer sponsorship to do so. Simultaneously, it allows universities to attract vital talent to bolster their academic and job-training programs, while for New York City at large it furthers the mission of establishing the city as a startup-friendly center for innovation. A program like this one ensures that the skills required to keep the United States competitive on the global marketplace are drawn and retained, with the end goal being a clear pathway to employment-based permanent residency and perhaps citizenship for individuals who hope to establish high-growth ventures that will create American jobs in the immediate future and for years to come.

The differences between schools participating in New York City’s International Innovators Initiative and the actions taken by Wright State University are a matter of being transparent to the government in the arrangements between the university and the private employer.. Individuals granted cap-exempt H-1Bs under the New York program are employees of their partner institution. They are paid by the university and conduct their work on location at the partner school’s campus in line with the employment requirements of the H-1B visa program. As noted, they are also required to contribute certain services to the school’s academic operations.

In its use of cap-exempt H-1B visas, the government alleged that Wright State University made a number misleading or deliberately fraudulent attestations, claiming on its applications that the H-1B workers would be developing a software program at the school’s Fairborn, Ohio, campus under the supervision of university employees when in fact they were acting as consultants for IT services companies on location in cities across the country. While the university did technically employ these H-1B workers, drafting employment offer letters and paying their salaries and benefits, a federal investigation revealed that Wright State University had entered into contracts with the outside companies to be reimbursed for these and other costs associated with the individuals in exchange for providing cap-exempt, H-1B labor to private, cap-subject entities.

According to the government, this arrangement amounted to Wright State University knowingly misrepresenting the nature of the work that their employees would be engaging in while on their cap-exempt, nonimmigrant visas, acting as a conduit for circumventing numerical limitations on H-1B workers on behalf of private companies. Especially egregious is the revelation that at least one of the outside entities was involved in the selection of the individuals eventually hired by Wright State University. The school removed employees with ties to the fraudulent applications and a new oversight system has been put into place, according to reports, but the $1 million fine to be paid by the university is the largest ever levied as a result of a U.S. Immigrations and Customs Enforcement Homeland Security Investigations probe in Ohio.

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. 

 

The material contained in this article does not constitute direct legal advice and is for informational purposes only.  An attorney-client relationship is not presumed or intended by receipt or review of this presentation.  The information provided should never replace informed counsel when specific immigration-related guidance is needed.

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