In a case that has implications for companies that utilize US work and business visas, the US District Court for the District of New Jersey recently ruled on two theories under the False Claims Act (FCA) related to the use of such visas. The court’s rejection of one of the theories marks the first time a court has ruled on a direct FCA claim alleging misrepresentations in connection with visa applications.

The case, Jean-Claude Franchitti v. Cognizant Technology Solutions Corporation et al., involved allegations that Cognizant, a technology services provider that utilizes three primary visa types—B-1, H-1B, and L-1—for its foreign employees to travel to the United States, violated the FCA by submitting false documents in support of visa applications. The plaintiff in the case, a former assistant vice president for Cognizant, alleged in a qui tam complaint that the company routinely filed applications for H-1B visas for highly skilled workers that included falsified job descriptions and invitation letters so that the company could have a group of “travel ready” workers who could immediately enter the United States on H-1B visas when actual needs arose. The plaintiff further alleged that the company submitted fraudulent invitation letters attesting to the managerial responsibilities or special skills required for L-1 visa holders and used employees with L-1 visas or B-1 visas, which are for short-term business trips, to perform work that should legally have been performed by H-1B visa holders. The federal government elected not to intervene in the case.

The allegations in the case implicated both a direct FCA theory and a reverse FCA theory. A direct false claims act theory, which is codified in 31 U.S.C. §§ 3729(a)(1)(A) and (B), involves the knowing submission of “a false or fraudulent claim for payment or approval.” The plaintiff’s direct false claims argument was that Cognizant included false documentation or representations in visa applications. Under the FCA, a “claim” is defined as a request for either government money or property. According to the court, the plaintiff’s direct FCA theory required B-1, H-1B, and L-1 visas to be considered “property” to meet the law’s definition. 

The court rejected the direct FCA theory, ruling in an order on a motion to dismiss that visas do not qualify as “property” for purposes of the FCA. In analogies with cases in which courts found that video poker and fishing licenses do not qualify as property, the court concluded that visas are more akin to those types of licenses than a traditional property right that would satisfy the definition of a “claim” under the FCA. In particular, the court concluded that licenses have “no economic or commercial value in the hands of the government but, rather, allow it to collect processing fees from license applications” and that “such a ‘purely regulatory’ scheme does not invoke traditional property rights.” This is the first reported decision in which a court has concluded that false statements in B-1, H-1B, and L-1 visa applications may not—as a matter of law—support a direct false claims theory. 

By way of contrast, a reverse FCA theory, which is codified in 31 U.S.C. § 3729(a)(1)(G), prohibits the knowing submission of a false record or statement to avoid paying an obligation to the government. The plaintiff’s reverse false claim argument was that Cognizant avoided paying the government for more expensive H-1B visas when it used B-1 and L-1 visa holders for work that should have been done by H-1B visa holders.

The court declined to dismiss the plaintiff’s reverse FCA claims. Assuming the plaintiff’s allegations were true for purposes of the motion to dismiss, the court concluded that Cognizant had an obligation to pay for the more expensive H-1B visas based on the work it intended its employees to engage in, and that it avoided that obligation by misstating the intended activities of those employees in applications for B-1 and L-1 visas. The court concluded that the failure to satisfy the obligation to use the more expensive H-1B visas gave rise to a reverse FCA claim. In this regard, the court split with an earlier ruling from the US District Court for the Northern District of California, which concluded in a case involving substantively similar allegations that an obligation to pay the government for more expensive H-1B visas would not have occurred unless and until the defendant actually applied for H-1B visas. See Lesnik v. Eisenmann SE, 374 F. Supp. 3d 923, 940 (N.D. Cal. 2019) (“[T]he obligation to pay the government only arises upon applying for a visa.”). The Lesnik court concluded that because the defendant did not actually apply for H-1B visas, a reverse FCA claim could not be sustained, regardless of whether B-1 visas were used for work that should have been performed by H-1B visa holders.

That same court in the Northern District of California ruled in another case that with respect to B-1 visas specifically, a reverse FCA claim related to the use of B-1 visas instead of H-1B visas could not be sustained because it is not clear what activities are and are not permitted on a B-1 visa, meaning the defendant could not have intentionally made a false statement related to their use, as is required by the FCA. See United States ex rel. Krawitt v. Infosys Techs. Ltd., Inc., 372 F. Supp. 3d 1078, 1090 (N.D. Cal. 2019). The Cognizant  court did not consider this argument in its ruling. 

Finally, the court also rejected the plaintiff’s argument that Cognizant’s scheme, alleged to include paying wages less than legally required, deprived the government of payroll taxes by underpaying H-1B visa holders. The court ruled that this allegation violated the FCA’s “tax bar,” which states that the law does not apply to false statements made or records submitted to the IRS.