The dust-up over the role of the H-1B program at Wright State University in Ohio has grown into a full-fledged scandal, with the university apparently playing an exploitative role similar to that of the Indian tech-worker body shops.
In an earlier blog, I speculated that the demoted provost (and two other demoted/fired executives) may have been manipulating the H-1B system for personal reasons. There's still a possibility of that but for now it looks like the university was using its favored position as a university to squeeze profits out of foreign workers and both the H-1B and the Social Security systems while, at the same time, denying jobs to resident workers.
Plenty of middleman organizations have made scores if not hundreds of millions out of the H-1B program, but this is the first time I have seen a university play that game. WSU is a state-run, non-profit institution. Four of the key players in the drama, incidentally, have subcontinent names.
A quick sketch of the H-1B scene in Dayton shows:
- The university, not exactly in the top tier of U.S. educational institutions, reacting to the H-1B situation by firing/demoting/forcibly retiring four key officials, each of whom had six-figure salaries;
- A trustee of the university whose own for-profit organization was using the university to obtain the services of at least one tech worker at below-market rates;
- A middleman organization named Web Yoga was making many of the university's H1-B decisions since the H-1Bs really worked for it rather than for the university; and
- A slew of jobs that could have been filled by the university's own graduates went to underpaid H-1B workers.
Indian outsourcing firms (or body shops) have these characteristics: They are largely Indian-managed and owned; they use the H-1B program to obtain skilled workers, usually from India, at below-market costs; and they turn around and rent those workers, at a profit of course, to other entities to do IT work. Two of the four WSU (now punished) executives have Indian names, and presumably made money for the university by obtaining H-1B visas for workers and then renting out those workers to other outfits.
WSU, in a series of probably illegal moves, had four advantages for its clients that exceeded the already too-generous employer benefits usually found with the H-1B body shops:
- The wage scales used by WSU in the Department of Labor hiring process were those of academia, which are below those of industry;
- Since the workers were nominally on the payroll of the university, the lend-lease employers (and their workers) did not have to pay Social Security taxes, though most H1-Bs (and their employers) do have to pay FICA;
- Because the H-1Bs were regarded as university hires, there were no problems with numerical ceilings that complicate life for other H-1B employers; WSU could say to both its clients and to the workers that it could hire H-1Bs at any time its wanted without regard to the ceilings, and
- While the body shops are usually regarded as H-1B-dependent, and such firms pay more in fees to USCIS (a $2,000 difference) than other employers, in the cases of the leased workers those fees would disappear as the university is not regarded as H-1B-dependent.
Both the university and its client firms must have known about these advantages.
Some of these savings went to the university, and some to the client firms; in the case of a woman named Satya Ganti, who held a PhD in Materials Science from WSU, and who has written several published scientific papers, WSU secured her H-1B and she was then hired by a defense contractor (EUS) owned by Nina Joshi, who, coincidentally, is a member of the WSU board of trustees.
In this case, Dr. Ganti was paid $65,000 a year, a probably below-market rate, and the university charged Dr. Joshi's firm $20,000 in overhead, according to a useful blog by Norm Matloff, a professor at UC-Davis and the nation's leading H-1B critic.
The university's relations with Web Yoga were similar to those with EUS, but on a much larger scale. According to an excellent bit of investigative reporting by the Dayton Daily News, "Wright State sponsored 19 workers on H-1B visas for Web Yoga," a Dayton-based firm.
The Daily News reported that WSU had "brought in 19 workers under temporary work visas [H-1Bs] — 17 software developers and two business analysts. The visa applications ... list Web Yoga's corporate address as the job location. The workers were paid $40,000 a year plus [unspecified] benefits."
The newspaper did not state when those wages were paid, and I suspect it was two to four years ago, but $40,000 a year for a near-indentured H-1B programmer was a real bargain for the employer at the time.
The level of overhead charged by the university was not reported by either Matloff or the Daily News, but the latter wrote that "the company [Web Yoga] paid Wright State $1.9 million to "develop and implement the program," so there was a substantial transfer of moneys from WY to WSU.
The president of Web Yoga is Vijay Vallahbaneni. He was in China when the Daily News sought to interview him.
An unnamed federal agency, presumably the Department of Labor, is investigating these matters; it is not clear to me when that began, and but the university started its own investigation this spring.
Four one-time university officials are in trouble so far. The provost, the number-two man on the campus, was Sundaram Narayanan; he has been removed from that position, and the university is exploring its options regarding depriving him of tenure as a professor. He was paid $351,642 a year.
"Gwen Mattison, the university's top attorney, recently took a $300,000 separation agreement after months of paid leave," according to the Daily News. She signed off on the H-1B documents.
Ryan Fendley, an assistant to the provost, was paid $174,500 a year prior to his firing.
Phani Kidambi who ran the WSU international research office, had been paid at the rate of $113,621 a year. He, too, lost that job and the university is examining his tenure as a faculty member.
As this story develops I would not be surprised to see the university president, David Hopkins, resigning, too. This is a major blot — or should be — on the reputation of WSU.