In a recent development, a talent recruitment company in the United States has been found to exploit a loophole in the H1B visa lottery system. By using the names of over a dozen companies, this intermediary has submitted as many as 15 H1B visa lottery applications for the same individual to the U.S. Citizenship and Immigration Services (USCIS). Through this method, the intermediary has managed to secure hundreds of H1B visa slots, while individuals who only submit a single application face slim chances of success in the lottery.
H1B visas are work permits granted by the U.S. for foreign immigrants with specialized skills and high technical expertise. With an annual quota of only 85,000, the competition for these visas is fierce. Due to the large number of applicants, the USCIS employs a lottery system to select recipients who can then proceed to submit their final visa applications at U.S. embassies or consulates.
For many foreign students aspiring to stay in the U.S., the H1B lottery process is often a make-or-break bridge they must cross to continue their career prospects in the country.
Critics have long questioned the fairness of the H1B lottery system, and a recent investigation report by Bloomberg sheds light on how some talent intermediary companies manipulate and abuse the H1B lottery system. The report reveals that this manipulation results in depriving U.S. businesses of much-needed talented immigrant workforce, leading to inestimable losses to the American economy.
Based on data obtained through the Freedom of Information Act lawsuit against the Department of Homeland Security, USCIS records of H1B lottery from 2020 to 2023 were made available, providing detailed insights into the rampant abuse of the H1B lottery system in recent years.
In 2023, a staggering 446,000 individuals applied for the H1B lottery to compete for 85,000 visa slots. Among them, over 11,600 slots were secured by multinational outsourcing companies, allowing them to capitalize on their large overseas workforce to gain an advantage in the lottery, crowding out other applicants. An additional 22,600 slots went to IT staffing companies.
Overall, Bloomberg’s investigation and analysis indicate that nearly half of the H1B slots are funneled to outsourcing or staffing companies. Many of these companies employ a strategy known as “multiple registrations,” where they submit multiple lottery applications for the same individual, increasing their chances of being selected.
Federal officials have labeled this practice as “fraud,” while Bloomberg deems it as “massive cheating,” suggesting that intermediary companies exploit the loopholes in the H1B lottery rules to gain unfair advantages.
While the U.S. Congress views the H1B visa program as a means to help American businesses acquire top talent globally, many intermediary companies have distorted the significant role of the H1B program.
For instance, outsourcing and staffing companies often recruit candidates with less impressive resumes, offering them lower wages. This practice, enriching intermediaries while weakening the American workforce, hinders genuinely talented immigrant workers and disappoints U.S. businesses, negatively impacting the American economy.
A study from the Wharton School at the University of Pennsylvania in 2023 found that for every 10 H1B visas lost by top multinational companies, about 9 job opportunities are moved overseas. An economist from the Federal Reserve Bank of Richmond estimates that a mere 10% reduction in high-skilled immigrant workers could shrink the U.S. economy by approximately $86 billion.
Ronil Hira, a public policy professor at Howard University and a long-term critic of the H1B program, stated that the manipulation of the H1B lottery system “runs counter to the program’s intended purpose.” He emphasized that staffing and outsourcing companies displace valuable applicants, favoring low-wage workers with inadequate expertise, noting that the employers most likely to secure H1B slots are those paying the lowest wages.
Since the implementation of the H1B visa quota and its role as a major pathway to U.S. green cards under the Immigration Act of 1990, the relationship between the U.S. Congress, various administrations, and talent intermediary companies resembles a game of “whack-a-mole.” While one side continuously attempts to curb abuse by intermediary companies, the data shows that these intermediaries constantly find new ways to exploit loopholes in the H1B system.
The H1B visa program, born at the dawn of the internet age to help U.S. employers fill high-skilled positions, particularly in industries like technology, has faced scrutiny regarding its potential to displace American workers or depress wages. Consequently, Congress established a minimum wage for H1B workers and set the yearly visa cap at 65,000, issued on a first-come, first-served basis. Many H1B visa holders, mostly engineers and software programmers, come from India due to the abundant pool of educated English-speaking professionals in the country.
Over time, the H1B visa cap increased to 85,000, including 20,000 slots for applicants with a master’s degree or higher and 65,000 for those with a bachelor’s degree. This quota also includes 6,800 slots reserved for citizens of Chile and Singapore.
By the mid-2000s, the exponential demand for high-tech workers in the information technology industry led to the complete exhaustion of the annual H1B quota within a day or two of its release. Consequently, USCIS shifted to a lottery system to randomize the selection process of visa applicants.
The H1B lottery takes place annually in March or April. Graduates in STEM fields (Science, Technology, Engineering, and Mathematics) are granted three years of Optional Practical Training (OPT) after graduation, providing them with three chances to participate in the lottery if their employer supports them. Other graduates have only one year of OPT, allowing them a single lottery chance.
As the number of applicants increases year by year, the odds of securing an H1B slot have drastically reduced, with the lottery approval rate dropping to 14.6% in 2024.
Sandeep Maganti, a 26-year-old software engineer from India, represents the high-skilled immigrant talent that the H1B program aims to attract. With a passion for technology since a young age, Sandeep ventured from a small town in southeastern India to pursue his interest at Arizona State University in the U.S. During his university years, he founded a student association dedicated to blockchain technology, fostering ambitions to start his own venture in America. Upon obtaining his bachelor’s degree, he co-founded a company specializing in blockchain algorithms to predict rental prices for real estate investors, scaling it into a million-dollar enterprise with six employees, three of whom reside in the U.S.
However, due to H1B visa regulations that prohibit Sandeep from being a sponsor for himself, he had to sell his shares and cease working at his company. While still holding a student visa in the U.S., he secured a job at another software company and applied for the H1B visa. He was unsuccessful in the first year’s lottery and continued to face rejections in the subsequent years. With no more chances to apply, Sandeep is contemplative about returning to India to pursue his entrepreneurial dreams.
Expressing his frustration to Bloomberg, Sandeep shared, “I’ve always wanted to start my own company. That’s why I came to the U.S. The (lottery process) is really stringent for legal immigrants.”
Analysts at Bloomberg suggest that the H1B visa lottery system design heavily favors intermediary companies, being disadvantageous to businesses seeking specific skilled talent.
In most cases, employer companies lose out on the talent they desire due to low lottery odds, and even if fortunate enough to secure a slot, H1B visa holders may face prolonged waits of over a year before formally commencing work.
Yet, many intermediary companies, including outsourcing firms with hundreds of thousands of IT employees in India, are well-suited to the lottery-based selection system.
Despite Congressional and USCIS efforts to restrict outsourcing companies, they remain prominent users of the H1B visa program.
Critics argue that these outsourcing companies not only shift American jobs to India but exhibit a preference for visa workers over U.S. employees, as H1B holders are willing to accept lower wages. If these outsourcing companies require employees stationed at U.S. client sites, they frequently transfer Indian workers from their labor pool, who are more flexible in adapting to client site rotations.
Data obtained from H1B applications and a document disclosed in federal court last year reveal the working strategy of outsourcing firms to secure more visas: utilizing a vast foreign workforce to apply for significantly more H1B visas than they actually require, with the mindset that “as long as someone is selected, it doesn’t matter who, we just need someone selected.”
Meanwhile, tech giants like Amazon and Google submit significantly fewer H1B applications compared to outsourcing firms.
Emily Neumann, managing partner at immigration law firm Reddy Neumann Brown PC, told Bloomberg, “Their (outsourcing companies’) system is set up better for them.”
Taking “Cognizant Technology Solutions Corp.,” based in Teaneck, New Jersey, as an example, this outsourcing company with most of its 344,000 employees based in India managed to maintain a consistent number of H1B approvals over the past three years despite a substantial increase in lottery entries and a decrease in approval rates.
Internal planning documents from 2016 at Cognizant revealed their strategy: anticipating requiring fewer than 4,000 new H1B employees for the upcoming lottery, they recommended submitting nearly three times that number of applications for approval, with the idea of adjusting to a 30% selection rate.
This information surfaced in a lawsuit filed last year by U.S. workers, accusing Cognizant of favoring H1B visa holders and discriminating against American employees. Cognizant denied these allegations.
Under H1B rules, companies have to demonstrate legitimate job opportunities for each visa they seek. In a written statement, Cognizant attested to being in full compliance with U.S. visa program laws. Regarding the excess applications mentioned in the 2016 document, Cognizant stated that the ultimate number of approved visas fell below half of the initially suggested count.
They stated, “We have been steadily increasing our U.S. recruiting and decreasing our reliance on the H1B visa program over the past years. However, like most tech companies, when we are unable to fill open positions domestically, we must look overseas for talent, and the H1B visa program is a critical tool.”
Kandi Srinivasa Reddy, hailing from a cotton farming area in India, who obtained a master’s degree in the U.S. and worked as a technical consultant, ultimately settling near Dallas, founded his own staffing company, “Cloud Big Data Technologies LLC,” in 2013. He aspired for his company to become the “Amazon of staffing.”
Most of his company’s strategies revolve around the U.S. immigration system. Cloud Big Data seeks out technical professionals requiring H1B sponsorship to stay in or immigrate to the U.S., offering each hire up to $8,000 in compensation. Once securing H1B visas, the company leases H1B employees to Meta Platforms Inc., parent company of Facebook, and HSBC Holdings Plc., among others, as per contractual agreements.
His company advertises on seeking individuals requiring H1B visas or seeking immigration to the U.S., offering every contractor a 20% to 30% payroll deduction. This equated to an annual sum of $15,000 or more for an average employee.
Federal data indicates that compliant companies in 2020 secured less than half the volume of H1B visas applied for, while Reddy’s applications almost entirely secured approval. However, when it came to final visa submissions, the majority of Reddy’s applicants did not follow through. Despite this, his company still obtained 54 visas, far surpassing previous years.
During the 2020 H1B lottery, Reddy’s “Cloud Big Data Technologies LLC” submitted applications for 288 employees. USCIS officials determined that simultaneously, Reddy’s other dozens of companies – with similar names, websites, and overlapping addresses – submitted numerous applications with identical employee names. Altogether, his companies participated in over 3,000 lottery entries.
Since 2020, Reddy’s companies have consistently won over three hundred H1B slots each year.
As more staffing companies spotted Reddy’s “multiple registrations” tactic, by 2023, thousands of other staffing companies followed suit. During the 2023 H1B lottery, over half of the entries were duplicates, with multiple applications for the same individual.
Witnessing the effectiveness of malpractice, Bloomberg estimates that staffing firms employing the “multiple registration” strategy secured roughly 40,000 H1B slots over the past four years.
With an increasing number of staffing companies engaging in malpractice and a surge in duplicate entries, the total registration count skyrocketed. Under a steady cap of 85,000 slots, register entries for H1B surged to 274,000 in 2021, 309,000 in 2022, 446,000 in 2023, and spiked to 790,000 in 2024.
Many staffing companies, operating more like visa brokers than genuine employers, sell a pathway to the U.S. for ambitious immigrants.
Current and former visa application employees of staffing companies disclosed to Bloomberg that their HR employers often charged visa application fees, submitted false information to the government, withheld wages, and breached other labor laws. Fearful of visa consequences, these employees refrained from complaints, allowing these companies to escape penalties routinely.
In the minority of criminal H1B visa fraud cases brought against employers in the past decade, staffing companies were predominantly involved.
Representing staffing companies, trade organization ITServe Alliance advocated for its members’ importance in the U.S. economy. The group’s chief legal counsel, Jonathan Wasden, stated, “Staffing companies are the necessary flexible force in the IT industry. Without them, you lose a lot of vibrancy in the U.S. business and technology sectors.”
Wasden added that there is no reliable data to suggest widespread fraud and exploitation in the staffing industry. While acknowledging the potential existence of such behavior, he deems it uncommon, noting, “There are unethical individuals in any industry.”
Last year, the median annual salary for employees recruited by staffing companies was approximately $90,000, compared to the median $125,000 offered by typical U.S. employers. Reddy’s new employees garnered an annual salary of around $87,000.
Similar to outsourcing companies mentioned earlier, these intermediary companies pay lower wages to visa workers, who in turn accept reduced salary conditions due to visa dependencies.
Meanwhile, the U.S. immigration authorities note that the strategy of multiple registrations violates federal regulations aimed at ensuring fair procedures. In numerous cases – currently, it remains unclear how many – the USCIS revokes visas upon determining their multi-registration and fraud-acquired nature. These cases may be referred for criminal investigations.
Reddy’s representative lawyer, Lucas Garritson, highlighted that staffing companies’ visas were under USCIS scrutiny for suspected lottery abuse. However, USCIS failed to follow proper procedures to halt the activity and lacked evidence of Reddy’s companies violating regulations.
Conversely, while the USCIS can revoke individual H1B visas, they do not impose a ban on the employer companies’ participation in the H1B lottery.
Garritson mentioned that he was uncertain about potential civil or criminal implications for Reddy’s companies but highlighted that they would continue to compete in the H1B lottery. Thus, even after USCIS released investigative reports on visa activities, Reddy’s corporations received 15 new H1B slots.
As the H1B lottery season commenced earlier this year, Reddy’s “Cloud Big Data Technologies LLC” recruitment adverts resurfaced on social media platforms, mirroring prior years’ patterns.
On Facebook, a recruiter named Sofia offered “H1B sponsorship” to anyone interested. Astonishingly, she boasted that Cloud Big Data held a “100% success rate” in securing H1Bs, writing, “We are ready to assist you. Seize the opportunity promptly.”
In February this year, USCIS introduced new regulations to eliminate the incentives for fraudulent multi-registrations. The revamped lottery system now selects unique individuals rather than random entries from employer registrations, providing equal opportunities to every applicant.
This change resulted in a significant drop in repeated applications for this year’s H1B lottery. However, given that staffing companies can easily submit anyone’s name to the lottery system without multiple registrations, they can continue manipulating the H1B lottery system without resorting to the previous multi-registration tactics.
Bloomberg’s analysis suggests that clues hinting at continued abuse of the H1B lottery system are evident when, post-lottery selection, only half of the staffing company’s applicants complete the final visa submission process for their selection. In contrast, other employer companies exhibit a 90% completion rate.
The laborious pursuit of lottery slots, akin to winning a lottery, followed by renouncing the final visa application upon winning an H1B slot, raises the question: why?
Visa experts suggest that staffing companies typically do not provide genuine employment opportunities to applicants before the lottery, reserving job searches for the selectees only. If unable to secure placements, these companies often forego the final visa application.
These revelations shed light on the intricate web of abuse and exploitation within the H1B visa system, raising critical concerns about the future of high-skilled immigration practices in the United States.