Tech Giant Infosys Earmarks $35M for Immigration-Related Liabilities

"Last Friday, publicly traded tech giant, Infosys, released its second quarterly financial statements*.  The Indian company provides a range of global technology, consulting, as well as outsourcing services to leading U.S. companies.  Aside from satisfying accounting requirements, quarterly financial statements seldom make for splashy headlines.

In this case though, the company has been under investigation since 2011 by the Department of Justice and the Department of Homeland Security (DHS) for immigration-related matters, including its use of B-1 visas, which triggered an audit by Immigration Customs & Enforcement (ICE) of the company’s I-9 forms.

According to the company’s latest financial statement, it is currently and actively “engaged in discussions with the U.S. Attorney’s Office and other governmental departments.”  Thus, any penalty or fine amounts have not officially been levied by the government.

Note that the $35 million earmark is not reserved solely for I-9 fines (if any are levied), but for the entirety of the costs related to the company’s immigration-related investigation (including legal costs)." - Ann Cun, Oct. 15, 2013.

* Page 39, "On May 23, 2011, the company received a subpoena from a grand jury in the United States District Court for the Eastern District of Texas. The subpoena required that the company provide to the grand jury certain documents and records related to its sponsorships for, and uses of, B1 business visas. The company complied with the subpoena. In connection with the subpoena, during a meeting with the United States Attorney‟s Office for the Eastern District of Texas, the company was advised that it and certain of its employees are targets of the grand jury investigation. The company was subsequently advised that this investigation was continuing and that additional subpoenas may be issued. 

In addition, the U.S. Department of Homeland Security (“DHS”) reviewed the company‟s employer eligibility verifications on Form I-9 with respect to its employees working in the United States. In connection with this review, the company was advised that the DHS has found errors in a significant percentage of its Forms I-9 that the DHS has reviewed, and may impose fines and penalties on the company related to such alleged errors. In pursuit of a civil resolution, the company is engaged in discussions with the U.S. Attorney‟s Office and other governmental departments regarding these matters, and based on the current status of such discussions, has recorded a provision of `219 crores including legal costs. The company intends to continue discussions with the U.S. Attorney‟s Office and other governmental departments. However, it cannot predict the final outcome of these discussions.

In the event that the U.S government undertakes any actions which limit the B-1 business visa program or other visa program that the company utilizes, imposes sanctions, fines or penalties on the company or its employees, or undertakes any other actions against the company arising from the investigations or discussions that are currently ongoing, this could materially and adversely affect the company‟s business and results of operations.

EPS for the three months and six months ended September 30, 2013 is `45.96 per share and `87.50 per share respectively, excluding the provision of `219 crore for visa related matters. EPS for the three months and six months ended September 30, 2013 is `42.12 per share and `83.66 per share, including the provision of `219 crores for visa related matters. The difference is `3.84 per share."