* Company had reserved $35 million for settlement
* Infosys says no limit on eligibility for U.S. federalcontracts
By Harichandan Arakali and David Ingram
BANGALORE/WASHINGTON, Oct 30 (Reuters) - Tech services giantInfosys Ltd agreed on Wednesday to pay $34 million toend a U.S. investigation related to the widespread practice byIndian firms of flying workers to client sites in the UnitedStates on temporary visas.
The settlement, which the U.S. Justice Department said wasthe largest in a case of alleged civil fraud over visas, wasfiled in U.S. District Court for the Eastern District of Texas.
Infosys, India's second-largest IT services exporter, agreedin the settlement that it committed civil violations of U.S.employment law, but it was not required to admit and did notadmit widespread further wrongdoing.
"Infosys denies and disputes any claims of systemic visafraud, misuse of visas for competitive advantage or immigrationabuse. Those claims are untrue and are assertions that remainunproven," Infosys said in a statement.
The company emphasized that the allegations were notcriminal, and that there would be no limitations on itseligibility for U.S. federal contracts or access to U.S. visaprograms as a result of the settlement.
The Justice Department had alleged in court papers thatInfosys knowingly and unlawfully sent people to work withoutproper visas, that there were widespread failures in thecompany's record-keeping and that the company tried to deceiveU.S. consular officials with false "invitation letters", whichtell the government the purpose of travel.
One invitation letter from May 2010 for someone identifiedin court papers as "AR" said the person "would be involved inmeetings and business discussions," but the real purpose of thetrip was for computer coding and programming, the JusticeDepartment said.
One reason the Justice Department decided to settle itsallegations rather than try to prove them at trial was thatInfosys took steps to fix irregularities and agree to outsidemonitoring, said U.S. Attorney John Bales of the EasternDistrict of Texas.
Bales said the Justice Department had anecdotal evidencethat problems with I-9 forms - used to verify employmenteligibility - and visa forms were common in the tech servicesindustry. While he would not confirm that there are other opencases, he said others should pay attention to the Infosyssettlement.
"They do acknowledge that there are problems with their I-9process, and that however it happened - unintentional or not -their visa practice had some irregularities," Bales told Reutersin a phone interview. "They have pledged to be more accurate."
"We've learned a lot in the case, and we're going to usethat knowledge," he said.
U.S. lawmakers are considering legislation that would makeit more difficult and costly for Indian IT firms to send workersto the United States on temporary, restricted visas.
Infosys employs roughly 15,000 people in the United States.As of March 31, about 10,800 of those were on H-1B visas, whichallow an employee to stay and work in the United States up tosix years, and 1,600 were on temporary L-1 visas, a companyfiling said.
The U.S. investigation focused on the use of B-1 businessvisas and I-9 forms, Infosys has said. A person on a B-1 visa inthe United States can participate in meetings but is not allowedto work.
"It is likely to add more fuel to the ongoing debate aroundvisa reforms," Chirajeet Sengupta, practice director in Mumbaiat Everest Group, which advises clients on technology vendors,said on Tuesday after reports that a settlement was imminent.
"These reforms, if executed, have the potential to impactIndian service providers' landed resource model that is largelydriven by access to H-1B visas in large numbers," he said.
In its statement, Infosys said only .02 percent of the daysthat Infosys staff worked on U.S. projects last year wereperformed by people on B-1 visas.
"The Company's use of B-1 visas was for legitimate businesspurposes and not in any way intended to circumvent therequirements of the H-1B program," the Bangalore-based companysaid.
Infosys has secured roughly one B-1 visa for every 10 H-1Bvisas, according to a person with direct knowledge of the matterwho declined to be identified.
U.S. authorities had been looking into Infosys' use of visassince 2011. This month, Infosys set aside a reserve of $35million, including legal fees, as it worked towards a resolutionof the U.S. investigation.
The case is "an important event in the annals of Indian ITindustry," Sundararaman Viswanathan, a consultant in Bangalorewith Zinnov, which advises U.S. corporations on sendingoutsourcing work to India, said ahead of the settlement.
"This is a common issue amongst all the Indian serviceproviders - just that Infosys had to deal with it," he said.
"Though the Indian service providers do not intend to floutthe visa regulations, there was definitely a lack of regard forcertain norms and procedures. This will be fixed. There will bean increase in onsite hiring," he said.
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