CBS News, "60 Minutes"
October 3, 1993

'North of the Border'
Lesley Stahl, reporting

(Footage of a class in India; office of Jim Schneider, Stahl and Schneider)

STAHL: (Voiceover) These college graduates in Bombay, India, are being trained as computer programmers. Soon they'll be assigned by their Indian employer to jobs in the U.S. at top corporations like Hewlett-Packard, Tandem, Unisys. These high-tech migrants are coming through a huge loophole in the immigration law that allows thousands of skilled foreign workers to come here, regardless of the impact on American workers. Jim Schneider, who runs an employment agency in San Francisco, has to compete with those foreign suppliers.

Mr. JIM SCHNEIDER (Owner Employment Agency): The American person, unfortunately, is being displaced. They're out on the market, they're looking for the next job, they're being displaced and replaced by foreign nationals who can come in and work at a much lower rate than is acceptable.

STAHL: You're actually saying, I think, that--that there are computer companies that are firing Americans in order to bring the lower-wage foreigners in…

MR. SCHNEIDER: That's correct.

STAHL: that there is a deliberate attempt here to--to take the Americans off the payroll and bring in someone who they'll pay half or less than half.

MR. SCHNEIDER: That's correct

(Footage of Indian classroom; Demetrious Papademetriou)

STAHL: (Voiceover) How can this possibly be legal? Well, that loophole we mentioned was originally created to give special visas to foreigners, foreigners whose unique talent or skills couldn't be found anywhere else. But according to Demetrious Papademetriou, who used to be the U.S. Labor Department's top immigration official, the imported programmers now using that special visa don't fit that bill.

Mr. DEMETRIOUS PAPADEMETRIOU (Former Immigration Official): These are basically run-of-the-mill people with a degree and some skills, and it seems to me that it is important that we distinguish between people who are truly skilled--who have unique, specialized skills--and people who simply provide labor.

STAHL: (Voiceover) And no matter who they are, the people providing that labor are supposed to do it only temporarily. When you say temporary, is there a time limit?

Mr. PAPADEMETRIOU: Well, there is a time limit. It's usually five or six years.

STAHL: Temporary is years--six years?

Mr. PAPADEMETRIOU: Precisely. And I think you're…

STAHL: Now come on.

Mr. PAPADEMETRIOU: …you're implying it's a ….

STAHL: That's a joke. Everyone's going to laugh.

(Footage of Indian classroom; Papademetriou)

STAHL: (Voiceover) But the biggest joke of all may be the section of the law requiring that these foreign workers be paid the prevailing wage--just what an American would make for the same job. Why is that a joke? Because it is often completely ignored and never enforced.

Mr. PAPADEMETRIOU: An employer makes an affirmation that they are paying these individuals the prevailing wage. The department simply looks at the application for completeness--has it been signed, have all the --you know, the X's and I's been dotted and all that? And then, basically, with the sev--within seven days, agrees to the individual firm bringing in the--the--the foreigners and…

STAHL: So-so no one checks to see if they are paying the prevailing wage…

Mr. PAPADEMETRIOU: Absolutely.

STAHL: ...at all. So companies certify they are paying it and don't, and they know they're not going to get caught. They know no--there's no penalty, so they just lie on their forms. Is that fair to say?

Mr. PAPADEMETRIOU: It is entirely fair to say that some firms are certainly doing that.

(Footage of Papademetriou and Stahl talking: documents; Schneider)

STAHL: (Voiceover) The firms lying on their forms are often those foreign suppliers. They're commonly called body shops. This is a list of applications for the special visas filed last year by one Indian-based body shop. The computer experts had all sorts of different job titles and assignments all over the country. Yet when it came to salaries, virtually all of the 600-odd applications listed exactly the same amount: $26,500. Now is that the prevailing wage for an American who would be doing computer programming?

Mr. SCHNEIDER: No, absolutely not. It's--it's certainly much lower than what a taxpayer in America would make in any similar position.

STAHL: So that any government official looking at that application should know by instinct that there's something wrong here.

Mr. SCHNEIDER: They should know. They should know.

STAHL: But every single one of these applications was approved.

Mr. SCHNEIDER: Right. That's correct.

(Footage of Papademetriou)

STAHL: Is there any office in the government, in the Labor Department or anywhere that's checking on this?

Mr. PAPADEMETRIOU: Abs--absolutely not checking.

(Footage of Indian classroom; Indian worker)

STAHL: (Voiceover) Another thing the government doesn't check is exactly how many foreign computer programmers are here at any given time. Some estimate the number is as high as 100,000, but there's really no way of knowing--they move around all the time. That's the way the computer business operations, both foreign and American programmers go from one temporary assignment to another. This Indian programmer agreed to tell us his story if we concealed his identity.

Unidentified Indian Worker: When I came down to US, I first went to Michigan.

STAHL: Michigan?

Indian Worker: Mm-hmm. There was Saint Joseph, Mitz--Michigan. And I was…

STAHL: Who did you work for there?

Indian Worker: Whirlpool Corporation.

STAHL: Whirlpool?

Indian Worker: Mm-hmm.

STAHL: Mm-hmm.

Indian Worker: Then I went to Richmond, Virginia…

STAHL: Mn-hmm…

Indian Worker:…where I was working for Signet Bank.

STAHL: Signet Bank.

Indian Worker: Mm-hmm. And then I went to New Yo-New York. I was working there for Merrill Lynch.

STAHL: Really? Programming in each one of these places?

Indian Worker: Yes, mm-hmm.

STAHL: (Voiceover) The body shop this man worker for sent him to all those jobs.

(Footage of group of Indian workers; documents; Hewlett-Packard; Indian worker)

STAHL: (Voiceover) When any American company needs programmers, the body shops can often deliver employees all the way from Bombay for rates that are so cheap, Americans just across town can't compete. This is an employment agreement between one foreign programmer and an India-based body shop called Blue Star. It tells her she'll be assigned to Hewlett-Packard in California, that her salary of $250 a month will still be paid back in India, and that she'll received $1,300 a month for living expenses in the United States. Total that up, and it comes to less than $20,000 a year--nowhere near what Hewlett-Packard would have to pay an American. But Hewlett-Packard never actually hired her; they merely made a deal with the body shop and paid the body shop a flat hourly rate. The arrangement between this man and his company, a different body shop, was similar.

Indian Worker: They were paying me 2,200 US dollars on a business visa, which is tax-free money as far as I'm concerned.

STAHL: Tax-free money?

Indian Worker: Yeah.

STAHL: No how much was it again?

Indian Worker: Twenty-two hundred dollars a month?

Indian Worker: Mm-hmm.

STAHL: What about the company? Did the company pay taxes?

Indian Worker: No.

STAHL: They didn't pay taxes either?

Indian Worker: I'm not sure about that.

STAHL: But nobody pays American taxes…

Indian Worker: Yeah. Mm-hmm.

STAHL: ...under the arrangement we're talking about?

Indian Worker: That's right.

(Footage of a California city)

STAHL: (Voiceover) California tax authorities have discovered that many of the body shops and their employees haven't been paying state or federal income taxes, Social Security or unemployment taxes--any taxes at all. So far, six body shops have been hit with fines and back taxes, but nobody's gone after the Hewlett-Packards and the Tandems, the American companies where the programmers actually work. The companies have a built-in system of deniability. They take a 'see no evil, hear no evil' approach. It's the body shops that have all the responsibility because the foreign workers remain their employees. It's the body shops that pick the programmers, then get them their visas and assign them to the American companies where they'll work. It's a way of insulating the American firms. As an executive told us, 'We don't want to know what the body shops are doing.'

(Footage of Lewis Platt; Ukrainian programmers)

STAHL: (Voiceover) Whatever they know or don't know, the big American companies sure don't want to talk to us about it. This is Lewis Platt, CEO of Hewlett-Packard. After he, and everyone else in the industry, turned down our requests for interview, we went and found him at a conference in Washington. Can you just answer one question: why you hire these foreign programmers in a time when American programmers are looking for jobs?

Mr. LEWIS PLATT (CEO, Hewlett-Packard): No. Sorry, no comment.

STAHL: It's not just Hewlett-Packard, sir, it's all the companies and we're told that you all know what's going on, that you're paying below prevailing wage and the reason you hire these people is to get cut-rate work. But the effect is to cut out the American programmers.

Mr. PLATT: I–I really don't have anything to say about this. If you'd like to call our office, you know, perhaps...

STAHL: Well, we've gotten no comment from your office.

MR. PLATT: Well, I don't think we have anything to say.

STAHL: Do you think you're doing anything wrong?

Mr. PLATT: Ah, no, we don't.

(Footage of Patt; Stahl with Alex and Uri)

STAHL: (Voiceover) It's not just huge corporations like Mr. Platt's that are importing foreign programmers. These two Ukrainians, Alex and Yuri–they don't want their full names used–were recruited in 1991 by a man who they say brought them to the US under the guise of developing business for their Russian employer. But then, they say, he put them to work at this house in rural Virginia creating computer programs for American customers. So when you moved into this house, at first there were two of you, but in the end, how many?

ALEX (Ukranian): Ten.

STAHL: Ten people?

ALEX: Ten people in this house, correct.

STAHL: OK, most of you doing what? Computer programs?

ALEX: Eight of us did computer programs.

(Footage of Alex, Yuri and Stahl)

STAHL: (Voiceover) Far from developing business contacts, Alex and Yuri rarely even left the house. Their Russian salaries, amounting to just a few dollars per month, were sent to their families back home. And Alex and Yuri say that during all the time they worked in the house, George Selvais, the man who recruited them, paid them just $20 a week.

Mr. GEORGE SELVAIS (Russian Employer): These people were paid salaries over there and they had allowance here–additional monies here.

STAHL: Twenty dollars a week?

Mr. SELVAIS: Well, you know, I'd have to go back to the records and, you know, I can, you now, see what the cost of everything is.

STAHL: But they're telling us that they lived in this house, several men, writing programs that were given to these American companies, and that they were only paid $20 a week to do that. Under the law–under the visa law, they're not supposed...

Mr. SELVAIS: But that's...

STAHL: ...to do that.

Mr. SELVAIS: That is a lie.

STAHL: And if they get a change in visa, you're supposed to pay them the prevailing wage that an American programmer would get, which, I don't care where they work in this country, they wouldn't be getting $20 a week for writing programs.

Mr. SELVAIS: That is not true.

STAHL: What is not true?

Mr. SELVAIS: You know, what they said. It's not true.

STAHL: Alex, did you write programs for American companies?

ALEX: I wrote programs. I wrote programs.

STAHL: And how did you get paid?

ALEX: I am paid–I am paid, still, $20 per month–per–per week.

STAHL: For continuing to do computer programming?

ALEX: Right.

STAHL: And what about you? I've been watching you smile, Yuri, while George has been telling his story.

YURI (Ukranian); It was $20 per week, per week if you working. If you don't working, you haven't anything.

STAHL: (Voiceover) Alex and Yuri's situation is an extreme example. While Demetrious Papademetriou hasn't studied it, we asked him what can happen in cases like this.

(Footage of Papademetriou)

Mr. PAPADEMETRIOU: Well, here you have violations of labor laws. You probably have violations of human rights. You have evasion of tax laws, and of course, you have total violation of immigration laws, OK, which, of course, suggests that the system needs fixing.

(Footage of man at a computer, Schneider)

STAHL: So why hasn't the government fixed it, closed the loopholes? Many believe it's because the business lobby has put the pressure on to keep things just the way they are, with a ready supply of qualified but inexpensive workers.

Mr. SCHNEIDER: The idea that the–our government would allow businesses to do this–it's almost as if they're promoting the idea.

STAHL: That–that they're just looking the other way...

Mr. SCHNEIDER: That's pretty close.

STAHL: ...because the American businessman wants this to happen?

Mr. SCHNEIDER: It's sort of a deaf ear and blind eye to the whole situation.

(Footage of computer job fair, of Papademetriou)

STAHL: (Voiceover) In the meantime, thousands of unemployed American programmers turn up at every computer job fair in Silicon Valley, and most of them leave disappointed. Why on earth would a company hire an American whom they'd have to pay in some cases twice as much, who they'd have to give a benefit package to, whom they'd have to pay taxes on? I mean, isn't this stacking things against the American?

Mr. PAPADEMETRIOU: I think absolutely so. It is...

STAHL: You do?

Mr. PAPADEMETRIOU: Yes, it is stacking things against the Americans.

STAHL: After our encounter with Hewlett-Packard's CEO, Lewis Platt, the company decided to change its policies, to use fewer foreign programmers, and when it does, to make the body shops prove they're really paying the prevailing wage. And what you've just seen has not escaped the notice of the Clinton administration, which has asked Congress to change the law so that US companies would be forced to look for Americans first before hiring from overseas. Congress is now considering those proposals.