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By Bruce Buchanan, Sebelist Buchanan Law
After pleading guilty to fraud in relation to H-1B visas, New York immigration lawyer Loreto Kudera, and his wife, Hazel Kudera, the owner of several medical staffing agencies, were sentenced to two years probation and fined $25,000 each. Previously, they had forfeited $1 million.
Hazel Kudera owned multiple staffing agencies in New York that specialized in providing nurses to hospitals, outpatient and skilled nursing facilities. According to the government, Hazel and Loreto Kudera submitted at least 100 fraudulent applications to authorities, and profited from filing fees collected from the nurses and from the health care facilities that paid Hazel Kudera’s staffing agencies.
Hazel and Loreto Kudera falsely stated that the foreign nurses would be working in specialty occupations at prevailing wage rates when in actuality they were going to work as licensed practical nurses (LPNs) or registered nurses (RNs) at much lower rates of pay.
As part of the alleged scam, Hazel Kudera falsified a staffing agreement between NYC Healthcare Staffing and Dewitt Rehabilitation listing job positions that did not exist, such as clinical coordinator and health care quality assurance manager, in order to cover up the false job titles she provided to USICS.
By: Bruce Buchanan, Sebelist Buchanan Law PLLC
A Washington company, DJ Drywall, Inc., and its owner, David L. Jones, were sentenced in U.S. District Court in Seattle, Washington for repeated violations of the Immigration Reform and Control Act (IRCA) of 1986. Previously, in February 2016, DJ Drywall and David Jones pleaded guilty to knowingly encouraging and inducing a Mexican national to reside in the United States in violation of law. The guilty plea followed two civil penalties imposed by Immigration and Customs Enforcement (ICE) regarding the company’s practice of illegally hiring undocumented workers.
In both 2008 and 2011, DJ Drywall was audited by ICE and paid fines of $32,316 and $27,405, respectively, for violating immigration law, including the hiring of 21 known undocumented workers. Additionally, in 2013, ICE found a pattern of DJ Drywall hiring unauthorized workers and paying them ‘off the books,’ or encouraging them to submit false I-9 documents.
Under the terms of the plea agreement, David Jones forfeited $25,000 to the United States and received two years of probation. The company will be on probation for five years and will pay a $75,000 fine. While on probation, DJ Drywall will be required to verify the work authorization of all newly hired employees through the E-Verify system.
By Bruce Buchanan, Sebelist Buchanan Law
The Office of Chief Administrative Hearing Officer (OCAHO) issued another decision arising case out of Buffalo, New York wherein it upheld most of Immigration and Customs Enforcement’s (ICE) proposed fine of $5329.50. See U.S. v. Hair U Wear, LLC, 11 OCAHO no. 1268 (2016). The case is similar to the earlier Buffalo case, Golden Farm Market.
Hair U Wear, a very small business, received a Notice of Inspection (NOI) from ICE in January 2014. After not timely preparing four I-9 forms and failing to prepare two forms, a Notice of Intent to Fine was issued. Hair U Wear denied all allegations and did not raise any affirmative defenses.
Of the four allegations related to not timely preparing I-9 forms, each reflected there was no date in either Section 1 or Section 2 after the signatures. Furthermore, all of the I-9 Forms used the March 8, 2013 edition even though the first day of employment for each employee was listed as October 1, 2003, October 1, 2006, April 1, 2008, and April 12, 2012. This is obvious evidence that the I-9 forms were prepared well after the employees were hired.
ICE asserted the appropriate penalty was $5329.50 based on a 100% error rate – which equals a fine of $935 per violation. ICE mitigated the fine by 10% based on the mitigating factors of a small business and no employment of undocumented workers. It aggravated the penalty by 5% due to the seriousness of the violations. These mitigating and aggravating factors led to a fine assessment of $888.25 per violation.
ICE provided reports reflecting that Hair U Wear reported employing six employees in 2013. Hair U Wear did not dispute this fact. Hair U Wear did not provide I-9 forms for two individuals listed in the reports and conceded it prepared the other four I-9 forms after the NOI.
Concerning the five aggravating / mitigating factors, OCAHO agreed with ICE’s use of three of the five factors, but added a third mitigating factor, lack of prior violations. Concerning the aggravating factor of seriousness, OCAHO cited prior caselaw which states the failure to prepare or timely prepare I-9 forms is a potentially serious violation because the employer has not ensured the individuals are authorized to work without completing the I-9 form. Through the use of these factors, the baseline penalty of $935 was reduced by 10% to $841.50 per violation. Thus, OCAHO found the total penalties should be $4776.50.
As is usually the case, if Hair U Wear had conducted an internal I-9 audit before the NOI, it would have realized it did not have I-9 forms for its employees and sought to resolve the issue. As you can see by this case, even very small employers can face penalties assessed by ICE.
By Bruce Buchanan, Siskind Susser, PC
In a recent decision, U.S. v. Homestead Metal Recycling Corp., 11 OCAHO no. 1251 (2015), an Administrative Law Judge (ALJ) of the Office of Chief Administrative Hearing Officer (OCAHO) found two owners were legally considered employees; thus, the company should have completed I-9 forms for them. However, the ALJ reduced Homestead’s penalties to $2,450 because almost all of the statutory factors weighed heavily in the employer’s favor, especially the general public policy of leniency toward small entities.
After Immigration and Customs Enforcement (ICE) served a Notice of Inspection (NOI) on Homestead, the company failed to present I-9 forms for seven employees. Thereafter, ICE issued a Notice of Intent to Fine (NIF), alleging Homestead failed to timely prepare and/or present I-9 forms for seven employees, including Alejandro Morua and Teresa Rabassa. Homestead argued Morua and Rabassa were two of its present owners; thus, it did not need to have I-9 forms for them.
The evidence reflected Homestead had only one owner, Otto San Roman, at the time of the NOI. ICE said Homestead’s interrogatory answers showed Rabassa became a 10% owner while Morua became a 20% owner after the NOI. Additionally, ICE argued the two individuals had only de minimus corporate voting rights, and were unable to direct or influence corporate affairs. Furthermore, Homestead identified Morua on documents presented to ICE as a “manager” or “foreman,” not company officer, partner, or owner. ICE said that his employment was subject to the control and direction of San Roman.
Legal Standards for Finding an Employee
Under the law, an individual is not an employee of the business if he or she, through an ownership interest, controls all or part of the business. The U.S. Supreme Court foundcommon law agency principles are applied in this analysis with the principal factor being that of control of the business. Clackamas Gastroenterology Assocs. v. Wells, 538 U.S. 440, 448 (2003).
The only evidence that Homestead presented to support its defense were incorporation documents listing Morua and Rabassa as officers of the company, but these documents were not filed until after issuance of the NOI. Furthermore, the ALJ found San Roman was the only individual “having the power of the purse” - he was the only one authorized to conduct transactions from Homestead’s bank account. Morua and Rabassa appeared on both Homestead’s employee roster and on its payroll registry. The fact that Homestead asserted Morua is in charge of the company’s day-to-day operations and Rabassa runs the administrative functions are not sufficient indicia of control to establish that they were not employees at the time of the NOI.
Small Business Owner Status Helps Homestead Reduce the Penalties
The ALJ found all the statutory factors, except the seriousness of the violations, weighed heavily in Homestead’s favor, especially the general public policy of leniency toward small entities under the Small Business Regulatory Enforcement Fairness Act of 1996. Furthermore, ICE’s proposed penalty was more than 50% of Homestead’s bank balance. Therefore, the ALJ reduced the penalties from $5,890.50 to $2,450, a reduction of over 58%.
Take Away – Owners must have Meaningful Control of the Business
In determining whether a company must have an I-9 form for an owner, one must determine whether the owner has meaningful control of the company. In two recent decisions, U.S. v. Santiago’s Restaurant and U.S. v. Jalisco’s Bar and Grill, Inc., OCAHO found an owner with meaningful control of a company did not have to complete an I-9 form for that individual. However, in the present case, the two individuals’ ownership status did not provide for any control of Homestead. The underlying principle in this analysis is one cannot be an employer and an employee. Thus, if it can be established an individual’s ownership status causes him to be in control of the company, he is an employer, not an employee.
By Bruce Buchanan, Siskind Susser
Making this the third decision involving horse racing stables in the last year, an OCAHO Administrative Law Judge (ALJ) reduced a breeder-employer’s penalties by about 50% to $35,900 in United States v. McPeek Racing Stables, 11 OCAHO no. 1249 (2015).
McPeek Racing Stables trains thoroughbred race horses in New York, Kentucky and Florida and is owned by Kenneth McPeek, a horse trainer. On September 23, 2011, Immigration and Customs Enforcement (ICE) served a Notice of Inspection (NOI) on McPeek Racing Stables, which eventually led to a Notice of Intent to Fine. Count I of the complaint alleged McPeek Racing Stables failed to prepare I-9 forms for 62 employees. Count II alleged the company failed to ensure that 37 employees properly completed Section 1 of their I-9 forms, or it failed to properly complete Sections 2 or 3 of the I-9 forms.
ICE initially set the baseline penalty at $770 per violation because McPeek Racing Stables had a 40-49% error rate on their I-9 forms. ICE mitigated the penalties by 5% for each of these factors – small business, no unauthorized workers present, a lack of history of previous violations and a lack of bad faith. However, it aggravated the penalties by 5% due to the seriousness of the violations. Thus, ICE sought a penalty of $654.50 per violation for a total of $64,795.50 in penalties.
McPeek Racing Stables conceded liability for the 99 Form I-9 violations but disagreed with the amount of the penalties. It asserted the proposed penalties would force the company to close, and noted that the proposed penalties were more than 25% of McPeek’s 2013 income. However, McPeek offered only one tax return to support this argument. McPeek Racing Stables also argued that it had implemented I-9 Compliance Policy and Procedures in good faith, and that the horse racing industry is “transient”, which leads to a high staff turnover.
OCAHO stated that the failure to prepare an I-9 form is the most serious violation, and the failure to insure proper completion of Section 1 and to properly prepare Section 2 are also very serious violations. However, apart from the seriousness of the violations, all other factors were in favor of McPeek Racing Stables. OCAHO declined to find inability to pay the penalties as a viable defense because McPeek Racing Stables has substantial assets.
OCAHO held that “given the transient nature of the industry, and in light of the general public policy of leniency toward small entities”, the penalties should be lowered to $400 each for the 62 violations in Count I and $300 each for the 37 violations in Count II. The total penalties assessed by OCAHO are $35,900.
Perhaps if McPeek had implemented an I-9 Compliance Policy before ICE served it with an NOI, the company could have avoided much of its liability. This case is another great example for the need for employers to have an I-9 Compliance Policy and to periodically self-audit to help detect missing I-9 forms and locate errors on existing forms.
A copy of the decision is available here. Cite as: U.S. v. McPeek Racing Stables, 11 OCAHO no. 1249 (2015).
ABOUT THE AUTHOR: Bruce Buchanan is an attorney with the law firm of Siskind Susser P.C. - www.visalaw.com - a full service U.S. immigration law firm representing employers and individuals nationwide for over 20 years. You can also follow Bruce on social media via Facebook and on Twitter @BuchananVisaLaw .
Updated 05-07-2015 at 10:28 AM by BBuchanan