Corporate Welfare for IBM, Accenture at Heart of Senate Amnesty Bill
The Senate’s immigration bill contains a tech industry handout for some companies like IBM and Accenture. It would virtually eliminate competitors in the market for highly-skilled immigrant labor.
Multiple sources close to the immigration debate have told Breitbart News that the provision is a key reason the corporate titans helped build support for passage of the immigration bill in the Senate. They fought hard to pass the law in the Senate and have been strategizing to get final passage in the House.
At issue is an overlooked change to the H1B visa system, used primarily by technology companies seeking foreign scientific talent. Companies like Cognizant Solutions, based in New Jersey and Tata Consultancy, based in India, bring foreign engineers into the country on H1B visas and then contract out their services to small and medium sized businesses that need help with specific projects.
Companies like these act almost like third-party human resources departments for businesses not big enough to recruit H1B talent from overseas in specific Science Technology Engineering and Mathematics (STEM) fields. As such, these companies are big competitors to IBM and Accenture, who also provide technology services, but with a different business model. Because some of these companies operating in the US are headquartered in India, the business press refers to them as "Indian IT Industry."
The Senate passed amnesty bill, however, would change the law to prohibit an H1B visa being issued to an employee of a company that contracts out technology services to other businesses. Companies like Congnizant and Tata would have their entire business model prohibited by federal law. IBM and Accenture, who ironically do a significant amount of their services work overseas, would gain valuable business as a result.
On page 917 of the final version of the bill, a section amends current law with regard to H1B visas,
OUTPLACEMENT.—Section 212(n)(1)(F) (8 U.S.C. 1182(n)(1)(F)) is amended to read as follows: ‘‘(F)(i) An H–1B-dependent employer may not place, outsource, lease, or otherwise contract for the services or placement of an H–1B nonimmigrant employee.
‘‘(ii) An employer that is not an H–1B-dependent employer and not described in paragraph (3)(A)(i) may not place, outsource, lease, or otherwise contract for the services or placement of an H–1B nonimmigrant employee unless the employer pays a fee of $500 per outplaced worker.
‘‘(iii) A fee collected under clause (ii) shall be deposited in the Comprehensive Immigration Reform Trust Fund established under section 6 of the Border Security, Economic Opportunity, and Immigration Modernization Act.
‘‘(iv) An H–1B dependent employer shall be exempt from the prohibition on outplacement under clause (i) if the employer is a nonprofit institution of higher education, a nonprofit research organization, or primarily a health care business and is petitioning for a physician, a nurse, or a physical therapist or a substantially equivalent health care occupation. Such employer shall be subject to the fee set forth in clause (ii).’’
MoneyLife reported in May that international investment bank and financial advisory firm Nomura said it would “place the Indian IT business model at competitive disadvantage compared with MNCs and depress margins irrevocably.”
In the current system those foreign workers are brought to America on H1B visas and work for the "Indian IT" firm inside the United States. On a job-by-job basis, they are contracted out to separate companies, or “outsourced” or “outplaced,” in the lingo of this type of immigration law, where they perform the service for that company inside the United States until their H1B visa runs out. At that point they either get a new visa or return home to India.
The Senate bill rips the current system apart to favor companies that use foreign labor to perform those same services for U.S. companies. For instance, IBM has a large workforce inside India that does most of these same services without bringing high-skilled immigrants to the United States to do those jobs here. So does Accenture, which has a headquarters in Ireland and a small U.S. presence.
Instead, this bill would just direct foreign talent on H1B visas to companies that are shipping tech jobs overseas, while effectively wiping out the “outsourcing” companies that are competition to IBM, Accenture and others. IBM, according to a 2012 ComputerWorld article, has more employees in India than it does in the United States.
That would not have much effect on many companies that are customers of that “outsourcing” service of "Indian IT" firms who would be hurt by this bill.
For instance, in that late June Wall Street Journal/LiveMint article, one anonymous executive said if the Senate bill became law he would just ship those duties out of America to somewhere in Europe.
“Unlike a few years ago, when outsourcing vendors were still learning about our business, they are now capable of delivering most of the projects from offshore,” that executive said. “For a global firm like ours, there are many choices; we could make our European office lead onsite related work if the new Bill makes it difficult for us.”
A July 23 study from J.P. Morgan’s Asia Pacific Equity Research arm concludes the same. “The immigration bill (passed by the Senate) puts IBM & Accenture (and perhaps other US firms) at disproportionate advantage vis-à-vis the Indian IT industry,” J.P. Morgan’s analysts wrote. “But these firms’ track-record of job creation in the US over a reasonable time-frame does not seem to square up with one of the bill’s noble intents.”
A tech industry lobbyist told Breitbart News that IBM’s chief lobbyist Chris Padilla orchestrated this provision, and argued that the entire bill and immigration debate is built around this H1B language. Because it is such a boon for IBM, the lobbyist said, Padilla pushed the whole bill across the finish line in the Senate. The lobbyist who spoke with Breitbart News on condition of anonymity said Accenture, another tech company that would benefit from the legislation, helped IBM’s Padilla.
“This is a total jobs package for IBM and Accenture,” the lobbyist said in a phone interview.
“They used Compete America [a lobbying association for big business], smartly, but my hat’s off,” the tech lobbyist added. “It’s really Chris Padilla. He’s one of the best lobbyists in this town and he effectively executed this strategy.”
That lobbyist said, as immigration reform became a hot topic after the last election, Senior US IBM executives reached out to Sen. Chuck Schumer (D-NY) on the H1B language. According to Legistorm, Schumer had previously helped IBM by getting the company a $10 million earmark in 2010.
The lobbyist said that the rest of the bill was written around the H1B deal between IBM and Schema. Knowing that Schumer alone could not get legislation passed into law due to conservative and Republican resistance, the lobbyist said Padilla then used IBM’s connections around the country to bring in Sens. Dick Durbin (D-IL) and John McCain (R-AZ).
“IBM, being as smart as they are, are headquartered in New York,” the lobbyist said. “They have offices in Chicago. But they have a large presence in Phoenix. So they have McCain too. They [IBM and Accenture] were pushing for off-site [language in the bill] and H1B numbers. To them, it’s a numbers game.”
“IBM and Accenture get Schumer and Durbin to do this,” the lobbyist added. “It was put in by Schumer at the behest of IBM, who met with IBM top executives.”
So, with McCain on board, he could bring Sens. Lindsey Graham (R-SC) and freshman Jeff Flake (R-AZ) onto the team.
The last piece left on the GOP side was Sen. Marco Rubio (R-FL), and that was easy because he has higher political ambitions.
The other Democrats, Sens. Bob Menendez (D-NJ) and Michael Bennet (D-CO) were likewise easy to convince to join the team.
Menendez, a Hispanic lawmaker who supports amnesty, had been fighting off scandal after scandal--so Menendez could use political cover from the other Senate heavyweights involved in this fight. Bennet is from Colorado, and serves as the chairman of the Democratic Senatorial Campaign Committee (DSCC)--and he sees this legislation as a way to protect the Democrats’ majority in the U.S. Senate heading into a year where the electoral map gives the GOP a solid chance at winning back the majority.
After the perfect storm was created, and the Gang of Eight had formed, the lobbyist said Padilla influenced the Chamber of Commerce, US India Business Council, and Internet Technology Industry Council. IBM is one of the biggest members of each of those groups as is Compete America.
After the legislation passed the Senate Judiciary Committee, Padilla praised it on IBM’s corporate public relations website.
“We are pleased with the bipartisan support for the package, and we particularly wish to thank Senators Schumer, Hatch and Durbin for defining a common-sense high-skilled framework that enabled final passage of the bill out of Committee,” Padilla said in a May 22 statement. “We look forward to supporting the bill on the floor and hope for bipartisan passage of this important legislation."
As more evidence of IBM’s and Accenture’s critical involvement in getting the legislation passed, the lobbyist lays out those who win if the bill ever becomes law. “You got to look at the big winners of this bill,” the lobbyist said. “There are four huge winners. IBM, number one. Accenture, number two. Hewlett-Packard, number three. And the AFL-CIO, number four.”
“The Reason IBM, Accenture, and HP win is simple, already laid in the H1B language and offsite language,” he added. “The estimates of revenue are in the billions for them which they need to help their declining earnings.”
A business lobbyist told Breitbart News that the reason why the AFL-CIO is a winner with this bill is because it caps construction worker visas at 15,000. “There are 1.5 million temporary construction workers in the U.S.,” the business lobbyist said. “And there are only 15,000 visas for them? How the hell are you going to build houses? It’s a joke. You need 15,000 people to build houses in Phoenix alone"
Ultimately, that means, the business lobbyist said, “you can’t have temporary construction workers.”
Equally important in this debate, the lobbyists said, is who loses. “Here are the losers,” the tech lobbyist said. “If you are a small to midcap US company on the NASDAQ, you are harmed both in stymieing innovation and expanding local growth because of the heavy fees, huge Department of Labor bureaucracy and onerous restrictions, so why expand operations in the US?”
When asked questions about this matter, IBM’s Padilla refused to answer any specifics and did not challenge the assertions of the tech lobbyist who spoke with Breitbart News.
Instead, another IBM official responded on his behalf and told Breitbart News that “Mr. Padilla has no comment on your questions, and just has a general statement to share with you.” That spokesman then provided the following statement, one that is almost identical to the public ones Padilla issued throughout this fight:
IBM applauds the U.S. Senate's passage of the Border Security, Economic Opportunity and Immigration Modernization Act, which further strengthens our economic competitiveness and includes significant provisions that help high-skilled workers. We believe this represents an important milestone in the process to create an immigration system for the 21st Century economy. We are grateful to all those in the Senate who supported this bi-partisan legislation and now look forward to working with the House to advance much-needed reform of the immigration system.
Accenture’s senior director of corporate communications James McAvoy told Breitbart News that the company did not lobby for certain provisions because they would drive other companies out of business; rather, he said Accenture lobbied on behalf of certain provisions because they would help Accenture.
Your sources’ allegations are not true. Accenture has not advocated for any changes to U.S. immigration law with the intention of penalizing another company. Accenture’s focus has been only on aspects of the legislation that directly impact our ability to have continued access to and use of high skilled visas."
When asked in a follow-up question whether Accenture supported the specific provisions Breitbart News has laid out here, McAvoy would not answer. Instead, he replied: "We supported the Bill, but we do not discuss pending legislation, and certainly not specific provisions of pending legislation. Again, we did not advocated for any changes to Bill with the intention of penalizing another company. We will leave it at that."
Offices of Sens. Schumer, McCain, and Durbin did not respond to Breitbart News’ requests for comment on their involvement in this matter.