Thousands of H-1B Visas Are Going to Middlemen Gaming the System (2024)

New data reveal how companies that farm out IT workers exploit flaws in the visa lottery while other US businesses and talented immigrants lose out.

By Eric Fan Zachary Mider Denise Lu Marie Patino for The Big Take July 31, 2024

Each year in April, the US government conducts a lottery that shapes the lives of hundreds of thousands of people — and America’s future as an economic power. It’s a drawing for a limited number of skilled-worker visas known as H-1Bs. Tech giants, startups, banks and drugmakers all vie for slots, hoping to snap up international graduates of top US universities who must otherwise leave the country. Most don’t get picked.

The game, it turns out, is rigged. New federal data obtained by Bloomberg News reveal how thousands of companies got an unfair advantage by helping themselves to extra lottery tickets.

The outsize role of these firms has distorted the H-1B program, which Congress conceived as a way to help American businesses get access to the world’s top talent. Instead, outsourcing and staffing companies bring in applicants with less-remarkable resumes, paying them lower wages and heightening the risk of undercutting American labor. The result is a system that fails US workers, shortchanges the economy, stiff-arms talented immigrants and enriches a class of middlemen.

The nation’s skilled-worker visa system has long been overshadowed in Washington by fights over illegal immigration and border security. But the economic stakes are high. A 2023 study from University of Pennsylvania’s Wharton School found that for every 10 H-1Bs that top US multinational companies lose out on, nine jobs are moved abroad. An economist at the Federal Reserve Bank of Richmond estimated that a mere 10% reduction in high-skilled immigrant workers would shrink the US economy by about $86 billion.

Ever since the Immigration Act of 1990 first capped the number of H-1Bs and made them a main pathway for skilled immigrants to pursue a green card, Congress and successive presidential administrations have tinkered with the system to deter visa middlemen. Yet, the data show that these companies keep finding new ways to exploit flaws in the system.

Bloomberg obtained the records, which offer never-before-seen details about the companies using the program, after filing a lawsuit against the Department of Homeland Security under the Freedom of Information Act.

The data, which cover lotteries conducted from 2020 through 2023, also shed new light on a form of cheating that became rampant in recent years. Referred to as “multiple registration,” the tactic involved submitting more than one lottery entry for the same person to boost their chances, a maneuver that federal officials describe as “fraud.” Bloomberg estimates that roughly 15,500 visas — about one out of every six awarded last year — were obtained by gaming the lottery in this way. Over a four-year period, one staffing firm operator used a dozen companies to enter the same applicants as many as 15 times, securing hundreds of H-1Bs while others lost out.

The arm of the DHS responsible for H-1B approvals, the US Citizenship and Immigration Services, changed the rules for this year’s lottery to eliminate multiple registration schemes. Yet there have been few consequences so far for the companies the government has linked to cheating. Some went on to win new visas this year.

That’s because, although it can revoke individual visas, USCIS says it isn’t allowed to bar companies from the lottery. In a written statement, USCIS said it “has strengthened the integrity of the H-1B registration system – including by issuing a final rule amending the H-1B process earlier this year.”

The sort of manipulation found in the data “goes against the stated purpose of the program,” says Ronil Hira, an associate professor of public policy at Howard University and a longtime critic of the H-1B program. The staffing and outsourcing firms crowd out worthy applicants in favor of lower-salary workers with less expertise, he says. “Employers that have a thumb on the scale are the ones that are paying the lowest wages.”

Sandeep Maganti, a 26-year-old software engineer from India, is precisely the kind of skilled worker H-1Bs were designed to attract. Born in Eluru, a small city in southeast India, he became interested in technology at a young age and used his skills and command of English to attend Arizona State University. There, he founded a student association devoted to blockchain technology and became enamored with US entrepreneurialism. While earning his bachelor’s degree, he befriended a real estate broker and began hatching ideas for a startup.

After graduating in 2019, Maganti developed an algorithm that helps real-estate investors predict rent prices, and grew the business into a million-dollar company that employed six people, including three in the US.

But visa rules wouldn’t allow Maganti to sponsor himself, so he had to sell his stake and stop working at his own company. While still in the US on a student visa, he got a job at another software company and applied for an H-1B. He wasn’t picked that year. Or the next. Or the next. Now, he’s considering moving back to India and pursuing his dream from there.

“I always wanted to start my own company. That’s why I came to the US.” Maganti said. “The system is really harsh on the legal immigrants.”

Conceived at the dawn of the internet age, H-1Bs were designed to help US employers fill high-skill jobs in industries where domestic talent is in short supply, particularly tech. Labor groups worried that the visa program might displace American workers or depress wages, so Congress imposed salary floors and capped the number at 65,000 per year, awarded on a first-come, first-served basis. (It was later raised to 85,000.) Most of these workers have always come from India, with its large population of highly educated, English-speaking engineers and programmers.

By the mid-2000s, the information technology industry’s demand for workers had grown so quickly that the annual allotment of H-1Bs was snapped up within the first day or two. So the USCIS created an annual lottery to select which entries would be considered. Over time, the chances of winning dwindled.

The drawing’s design stacked the chips against any company seeking to hire a specific person with specialized skills. That sort of employer would lose the candidate to chance most of the time. Even when it was lucky enough to win the lottery, it might have to wait for more than a year before putting them to work.

But other business models were perfectly suited to the lottery. Among them are outsourcing companies that have hundreds of thousands of IT workers in India, helping US corporations save money on back-office computer tasks. The outsourcers need some employees to embed at client locations in the US. Often, they draw from the ranks of their Indian workforces.

The outsourcers’ dominant role in the visa system has been a longtime concern for policymakers in both parties. Not only do these companies shift US work to India, but some critics contend they prefer visa workers to American employees because H-1B holders accept lower wages and are more willing to relocate between client locations. Despite attempts by Congress and the USCIS to restrict the outsourcers’ access to H-1Bs, they perennially rank among the program’s biggest users.

The H-1B data, combined with a document made public in federal court last year, reveal how the outsourcers keep winning: They leverage their foreign workforces to request far more H-1B visas than they actually want. Outsourcers can submit excessive lottery entries because “it doesn’t matter who gets selected as long as somebody gets selected,” says Emily Neumann, managing partner at immigration law firm Reddy Neumann Brown PC. “The system is set up better for them.”

Take Cognizant Technology Solutions Corp., a Teaneck, New Jersey-based corporation whose 344,000-strong workforce is located mostly in India. As lottery entries surged and win rates plunged over the past three years, Cognizant sharply increased the number of visas it sought, according to the H-1B data. That allowed it to keep the number of visas it received roughly constant — even as the company’s overall US employment declined.

Cognizant’s outsourcing peers follow a similar pattern, the data show: compared with the size of their existing US workforces, many of them sought disproportionally high numbers of visas. Companies such as Amazon and Google submitted at far lower rates.

An internal planning document from 2016 shows the sort of calculation behind such massive numbers of entries. Preparing for the next lottery season, Cognizant executives anticipated they needed fewer than 4,000 new workers on H-1Bs. But they recommended applying for almost three times that number. “The increased filing projection is only to accommodate the lottery selection process, which we have considered at 30%,” they wrote. (The document was disclosed last year in a pending lawsuit brought by US workers alleging discrimination in favor of visa recipients, allegations that Cognizant denies. Hira, the H-1B critic at Howard University, is a paid expert witness for the plaintiffs.)

Under H-1B rules, companies must attest that they have a “legitimate job offer” for each visa they seek. In a written statement, Cognizant said it always does. It added that it’s “fully compliant with the US laws in regard to the visa process.” As for the 2016 document, Cognizant said it ended up seeking fewer than half the number of visas initially recommended.

“We are always seeking to hire more high-skilled American workers. Over the past several years, we have increased our US hiring and reduced our dependence on the H-1B visa program,” the company said. “Yet like most other technology companies, when we are unable to fill open positions within the US, we must seek out talented individuals from outside our borders. The H-1B visa program is an important tool.”

During former President Donald Trump’s term, his administration pledged to break the grip of the outsourcers. At a press briefing in 2017, a Trump White House official accused Cognizant and its peers of “putting extra tickets in the lottery raffle.” He promised a “total transformation of the H-1B program.”

Many of those policy changes were swiftly overturned by the courts. But one reform that survived had a profound effect on the H-1B system — it supercharged the opportunity for fraud, and empowered a different kind of visa middleman: the staffing firm.

Well before those changes, Kandi Srinivasa Reddy had created his own small company with a grand ambition to become “the Amazon of Staffing.” A self-described “common farmer’s child” from a cotton-growing region in India, Reddy had earned a master’s degree in the US and worked as a tech consultant, eventually settling near Dallas. In 2013, he started his own outfit called Cloud Big Data Technologies LLC.

Much of his firm’s strategy involved working the US immigration system. Cloud Big Data would look for tech workers who needed an H-1B to remain in or move to the US, offering recruiters up to $8,000 a head, according to online ads. After winning an H-1B, Reddy’s company would rent the workers on contract to corporations such as Meta Platforms Inc. and HSBC Holdings Plc., visa applications show. The company said in its online advertisem*nts that it collected 20% or 30% of the worker’s pay, an amount that could reach $15,000 or more each year for a typical worker.

Many staffing firms function more like visa brokers than employers, selling aspiring migrants tickets to the US. That’s one reason they are often derided as “body shops.” Current and former staffing firm workers told Bloomberg their employers routinely charge workers for visa application fees, submit false information to the government, withhold pay and violate other labor laws. They often get away with it because complaining would put the workers’ visas at risk. (For the same reason, the employees spoke on the condition of anonymity.) In the handful of cases in the past decade where employers have been charged criminally with H-1B fraud, most were staffing firms. (Reddy’s companies were not among them.)

The ITServe Alliance, a trade group that represents staffing firms, says its members play an essential role in the US economy. “The staffing companies are really just the necessary flex-power of the IT industry,” said Jonathan Wasden, the group’s general counsel. “Without them, you lose a lot of the dynamic nature of American business and the tech industry.”

There’s no reliable data on how widespread fraud and exploitation are in the staffing industry, Wasden added, but he said he suspects it’s not that common. “There’s going to be unscrupulous folks in any industry,” he said.

During the waning days of the Trump administration, the USCIS proposed to streamline the lottery process. Previously, to participate, employers had to prepare a full H-1B application, assembling hundreds of pages of documents and writing a check for several thousand dollars. Each April, these applications would arrive by the truckload at processing centers around the country. USCIS would randomly select a fraction to review and toss the rest.

So, the agency made what sounded like a sensible fix: Employers would go through the lottery first, and only the winners would submit full applications. Entering the lottery itself would be simple — just submit a short online form and pay a $10 fee. The idea promised to save needless work for employers as well as the agency.

But there was a flaw: If two or more companies entered the same employee in the H-1B lottery, that employee’s chances of selection soared. In public comments, Intel Corp., Microsoft Corp., the AFL-CIO and the US Chamber of Commerce all predicted the new rule would flood the registration system with dubious entries.

The agency passed the rule anyway, saying that it could quickly detect rulebreakers.

The impact was immediate. In the 2020 lottery, the first under the new rules, employers submitted thousands of workers’ names multiple times – sometimes getting four, five, or even more lottery tickets for the same worker. A report published by USCIS last year describes one such scheme, involving a group of 13 related companies that worked in concert to exploit the new rule. The report doesn’t name the companies, but by matching the report’s details to the visa data Bloomberg News was able to link them all to Reddy. Cloud Big Data, for instance, is identified in the report as “Company B.” (Neither USCIS nor Reddy’s representatives would confirm or deny the connections.)

In the 2020 lottery, Reddy’s Cloud Big Data submitted the names of some 288 employees. At the same time, a dozen other companies Reddy controlled — companies with similar-sounding names, similar-looking websites, and overlapping mailing addresses — submitted many of the same workers’ names, USCIS officials determined. In all, his companies entered the lottery more than 3,000 times.

The federal data show that companies that played by the rules in 2020 got fewer than half the H-1Bs they sought while Reddy’s candidates were virtually assured lottery wins. When it came time to submit a visa application, however, most of them didn’t follow through. Even so, his companies got a total of 54 visas, far more than any previous year. They’ve scored more than 300 since 2020.

In a brief phone interview, Reddy said he is merely a registered agent for the companies and has little involvement in them. That’s not what he’s said elsewhere. He’s told Texas authorities he’s the chief executive officer of Cloud Big Data, and an affidavit filed with election officials in India and business registry documents in the US show that he or his wife own or control all of them. In social media and promotional material supporting a run for public office in India last year, he identified himself as the founder and CEO of a group of staffing companies and took credit for employing hundreds of people.

Lucas Garritson, a Texas lawyer representing Reddy, said a number of the companies’ visas had been challenged by the USCIS for abusing the lottery system. But he said USCIS hadn’t followed the proper procedures for prohibiting the activity, nor did it have proof that Reddy’s companies broke the rules.

As his H-1B business surged, Reddy appears to have prospered. He set up a foundation to help farmers near his hometown back in India and started his own TV and online news operation there. He jumped into local politics, becoming an aide to the chief minister of the state of Telangana. Last year, he ran for a legislative seat, presenting himself to voters as a man of humble roots who’d become a successful entrepreneur in the States. He lost.

By last year, thousands of other staffing firms had caught on to the trick and flooded the system. By then, more than half of all lottery entries were for workers whose names had been submitted more than once.

Cheating worked. Companies that used the multiple registration tactic pulled in about 40,000 H-1Bs over four years, Bloomberg estimates.

The lottery maneuvers changed not only the kind of companies winning H-1B visas but also the kind of workers being admitted to the US. The median salary at a staffing firm last year was about $90,000, the data show, compared with $125,000 for regular employers. Reddy’s recruits made about $87,000.

Wasden, of the staffing-industry group ITServe, said the lottery rules were vague and poorly drafted, and that employers shouldn’t be blamed for spotting a loophole and exploiting it.

“You only cheat when you break a rule,” he said. “The clarity of the rules were such that you can’t really say they violated anything. Did they game the system? Yes.”

That’s not the government’s view. The USCIS says the multiple registration tactic violates federal regulations meant to ensure a fair process. In a number of cases — it’s unclear how many because the proceedings are usually confidential — the agency has revoked visas involving multiple registrations after determining they were obtained through fraud. The USCIS has also referred cases for criminal investigation. It declined to comment on any specific companies.

Garritson said he’s not aware of any civil or criminal repercussions for Reddy’s companies, and that they continue to have access to the H-1B lottery. In fact, even after USCIS published its report about the scheme, the firms received 15 new H-1Bs.

In February, the USCIS issued new regulations that removed the incentive to cheat with multiple registrations. Rather than picking randomly among employer entries, it instead selects from among unique individuals, giving every worker an equal chance.

The change resulted in a sharp decline in duplicate applications this year. But given how easy it remains for a staffing firm to submit anyone’s name to the lottery, they can game the system without using multiple registration.

One clue that the system is still prone to abuse: After one of their workers gets selected in the lottery, staffing firms end up completing a full application only about half the time, Bloomberg’s analysis shows. (The norm for other companies is about 90%.) According to visa experts, that suggests staffing firms often do not have real jobs lined up before the lottery — instead, they try to find work for those candidates who get picked. And if they can’t, they simply don’t apply.

The low filing rate might reflect the short-term nature of many staffing-firm projects, rather than evidence of bad faith, said Wasden. Typical contracts last six months, he said, and the visa application process can take longer.

As the lottery season began earlier this year, advertisem*nts from Cloud Big Data recruiters popped up again, as they had in previous years.

On Facebook, a recruiter named Sofia was offering “H-1B sponsorship” to anyone who was interested. She boasted, fantastically, of Cloud Big Data’s “100% success rate” in getting H-1Bs and of a team that could help candidates find actual jobs. She even offered to help enter workers’ names in the lottery more than once. “We are ready to assist you,” she wrote. “Grab the Opportunity As Soon As Possible.”