Criminal enforcement and I-9 audits

August 20th, 2019

David A. Selden, Heidi Nunn-Gilman, Jennifer L. Sellers, Julie A. Pace, Yijee Jeong


Trends in criminal enforcement

During the Bush Administration, Immigration and Customs Enforcement (ICE) shifted its enforcement philosophy to emphasize criminal sanctions over fines. Julie L. Myers, then Assistant Secretary of Homeland Security for ICE, compared fines for unlawful hiring practices to an “average traffic ticket,” and noted that under the new enforcement strategy, offending employers “now face jail time and risk significant asset forfeiture.” During the Bush era, criminal arrests for worksite enforcement increased by more than 600%, increasing from 176 in 2005 to 1,103 in 2008.

The Obama Administration continued the trend toward criminal enforcement with a focus on the criminal prosecution of employers who knowingly employed unauthorized aliens, rather than the employees who are working without proper authorization. Under the Obama Administration, the number of I-9 audits increased steeply, but the number of criminal prosecutions for knowingly employing undocumented workers ranged from a low of 116 in 2009 to a high of 194 in 2014.

ICE has continued to use administrative audits to identify employers who are violating federal immigration laws.  In October 2017, ICE announced that it would quadruple to quintuple the number of ICE audits it would conduct, and ICE initiated over 5,200 audits in 2018.  ICE has conducted arrests in conjunction with its worksite enforcement audits, having made 594 criminal and 610 administrative worksite-related arrests between October 1, 2017 and May 4, 2018.   In one of the largest sweeps in 2018, ICE arrested 146 employees of an Ohio-based meat supplier who were using fraudulent identification belonging to U.S. citizens.  ICE is also investigating the company for knowingly and deliberately hiring undocumented workers.

ICE has also indicated that it will use a wide range of investigative methods, including use of confidential sources and cooperating witnesses, undercover agents, and consensual and non-consensual intercepts, as well as I-9 audits. Criminal prosecutions generally focus on CEOs, managers, supervisors, and others in a business-hiring network.

Increasing penalties in enforcement

In addition to the prohibition against hiring unauthorized workers, authorities may also criminally charge employers under statutes prohibiting harboring unauthorized workers and under money laundering statutes. The penalties for these criminal offenses include fines, prison time, and forfeiture of assets used in the offense. The government is increasingly pursuing employers under these alternate statutes because their fines are much harsher than those for unlawful hiring and contain forfeiture provisions. It is essential for employers to implement effective policies and procedures to avoid possible criminal liability.

Felony harboring

The Immigration Reform and Control Act (IRCA) makes it a felony for any person to:

  • bring or attempt to bring persons into the United States knowing that they are an unauthorized individual
  • move or attempt to transport persons within the United States knowing or recklessly disregarding the fact that they are an unauthorized individual
  • conceal, harbor, or shield from detection, or attempt to conceal, harbor, or shield from detection, persons knowing or recklessly disregarding the fact that they are an unauthorized individual
  • encourage or induce unauthorized individuals to come to, enter, or reside in the United States, knowing or recklessly disregarding the fact that such action will be in violation of the law
  • conspire to commit, or aiding and abetting the commission of, any of the above
  • bring in or attempt to bring an unauthorized individual into the United States when knowing or recklessly disregarding that they are an unauthorized individual and do not have prior authorization to enter the United States
  • knowingly hiring for employment at least 10 individuals with actual knowledge that said individuals are unauthorized individual.

Penalties

Criminal sanctions for violations of the harboring statute include:

  • up to 10 years’ imprisonment for bringing an unauthorized individual into the United States or conspiring to do so
  • up to 10 years’ imprisonment for transporting, concealing/harboring, or encouraging an unauthorized individual to come to the United States illegally if the act was done for the purpose of commercial advantage or private financial gain
  • up to five years’ imprisonment for transporting, concealing, harboring, encouraging an unauthorized individual to come to the United States illegally, or aiding and abetting if the act was not done for the purpose of commercial advantage or private financial gain
  • up to 20 years’ imprisonment for any violation of the IRCA in which the unauthorized individual causes serious bodily injury or places any person’s life in jeopardy
  • up to life imprisonment for any violation of the IRCA that results in the death of any person
  • up to 10 years’ imprisonment for bringing in or attempting to bring in an unauthorized individual knowingly or recklessly; more than three years’ if done for commercial advantage, financial gain, or reason to believe the alien will commit a felony; five to 15 years’ imprisonment if it is a third offense or greater
  • up to five years’ imprisonment for knowingly employing 10 or more unauthorized individuals in a 12-month period
  • fines of $250,000 or twice the defendant’s gain, whichever is greater. Organizations can be fined up to $500,000.

Forfeiture

An additional serious consequence of felony harboring offenses is the forfeiture power contained in the IRCA. It allows the government to subject any conveyance used in the commission of a violation, the gross proceeds of such violation, and any property traceable to such conveyance or proceeds to seizure and potential forfeiture. The significant financial consequences of such seizures have made the harboring statute the preferred tool for ICE in their recent enforcement actions against employers.

Example 1:

In 2009, ICE conducted an audit and informed Asplundh that several hundred employees were not authorized to work in the United States.  Asplundh terminated the employment of any active employees on the ICE Notice of Suspect Documents.  In approximately 2011, ICE began a second investigation of Asplundh.  According to ICE, however, between 2010 and 2014, Asplundh deliberately decentralized hiring so that the upper level of management could remain “deliberately blind” to lower level supervisors and foremen hiring and rehiring employees that they knew were not authorized to work in the United States and accepting fraudulent documents.

Many of the employees from the 2009 Notice of Suspect Documents were rehired under different names and using fraudulent documents.  One mid-level manager, who has pleaded guilty to criminal violations of the immigration laws, told supervisors under him that it was okay to rehire these individuals and that the company had plausible deniability for violations because the new identifications could pass E-Verify.

In September 2017, ICE’s six-year investigation resulted in a plea and settlement by Asplundh.  Asplundh agreed to forfeiture of $80 million and to pay $15 million in civil penalties.  The $95 million total penalty is the largest penalty ever for violations of IRCA.

Example 2:

In July 1999, the Immigration and Naturalization Service (INS) informed Golden State Fence that at least 15 of its employees were unauthorized workers. At that time, Golden State agreed to fire those workers. In September 2004, as a result of an audit of military contractors, ICE determined that at least 49 of Golden State’s employees were unauthorized workers, and three were on the list that INS provided to Golden State in 1999. In 2005, ICE executed search warrants on Golden State, finding evidence in hiring records that Golden State had rehired unauthorized workers named in previous audits, and that their employees’ Social Security numbers (SSNs) did not match Social Security Administration (SSA) records.

Golden State’s president and vice president pled guilty to knowingly hiring 10 or more unauthorized workers in a 12-month period. Melvin Kay, Golden State’s president and founder, was sentenced to three years’ probation, six months of home confinement, and a $200,000 fine.  Michael McLaughlin, the vice president, was sentenced to the same probation and confinement with a $100,000 fine. A condition of the plea agreement required the company to forfeit $4.7 million in assets. Then DHS Assistant Secretary Myers cited the case as proof “that employers who knowingly and blatantly hire illegal workers will pay dearly for such transgressions.”

Example 3:

ICE started its investigation of IFCO – a manufacturer of wooden pallets, crates, and containers – in September 2005 when an employee called to report Hispanic employees tearing up their W-2 forms. The employee reported that a manager told him they were doing so because they were unauthorized workers with fake Social Security cards with no intention of filing taxes. On April 19, 2006, agents executed search warrants and arrested several managers on felony and misdemeanor charges.

The indictment alleged a conspiracy among several of the company’s managers to harbor unauthorized workers, to encourage and induce them to enter the United States, and to transport them within the United States. The government alleged that the conspiracy harbored the workers by moving unauthorized workers between IFCO plants to avoid arrest and by allowing them to use multiple SSNs and identities during the course of employment, and on occasion providing them with such numbers and identities. When the conspirators could not find Hispanic laborers in the vicinity of a new plant, they would allegedly recruit and transport undocumented laborers to the site of the new plant, provide them with housing, and give them other financial assistance like check cashing and the ability to purchase food, clothing, and personal items. The aiding and abetting charge carries a five-year maximum sentence, and all other charges carry a maximum 10-year sentence and $250,000 maximum fine.

On December 19, 2008, ICE announced a settlement with IFCO. IFCO agreed to pay a total of $20.7 million to resolve the criminal ICE investigation. Civil fines totaled $18.1 million for the immigration violations, and$2.6 million represented Fair Labor Standards Act (FLSA) back pay and penalties resulting from overtime violations relating to the undocumented workers.

In the settlement agreement, IFCO accepted responsibility for the unlawful conduct of its managers and employees. The agreement was reached before the company was to be indicated by the U.S. District Court for the Northern District of New York.

IFCO was not prosecuted as a company. However, IFCO employees faced criminal charges. Seven IFCO managers were charged in a superseding indictment on January 23, 2009, for various federal offenses, including conspiracy to harbor and encourage unauthorized foreign nationals to reside in the United States, conspiracy to defraud the United States, harboring unauthorized workers, and transporting unauthorized workers. Those charged include the senior vice president of human resources, the senior vice president of finance and accounting, the vice president of new market development, the controller of pallet services, a human resources manager, a new market development manager, and an operations manager of new market development for the Cincinnati area. According to the January 2009 indictment, all seven managers conspired to harbor unauthorized workers and induce them to work in the United States. Four of the managers were charged with conspiracy to defraud the Internal Revenue Service (IRS) and SSA by submitting false payroll information to those companies. A total of 16 managers and employees faced a variety of criminal charges, including harboring and with transporting unauthorized workers.

Several IFCO managers entered guilty pleas related to hiring and harboring unauthorized workers.

Example 4:

The United States v. Tyson Foods is a valuable example of how an effective corporate compliance policy can help to establish a company’s innocence at trial. The U.S. Department of Justice (DOJ) began investigating Tyson Foods in 1997. Federal agents posing as smugglers of unauthorized workers tried to persuade local managers to hire the undocumented workers they brought to Tyson’s local plants from Mexico. At the same time, Tyson’s upper management volunteered the company for a pilot employee verification system offered by the government. When they independently uncovered evidence of false documentation, they alerted the government and worked on a joint investigation.

The DOJ continued its secret investigation and obtained a 36-count indictment against Tyson in 2001. The indictment alleged that Tyson had conspired to violate IRCA by hiring 136 undocumented workers. It further alleged that Tyson created a corporate culture that condoned hiring undocumented workers. Tyson argued that despite the shortcomings of their hiring system, upper management had not conspired to break immigration laws, as evidenced by their status as one of the first companies to volunteer for the government’s pilot verification program. 

At trial, Tyson employed a “rogue employee” defense, arguing that the lower-level managers who broke the laws were acting against upper management’s stated policy. Tyson’s CEO and compliance officer both testified that upper management was committed to compliance with immigration laws. Records documenting Tyson’s attempts to comply were key evidence for the defense. On cross-examination, the government’s witnesses, who were Tyson lower-level managers, admitted that they understood that their conduct was against corporate policy and had been kept hidden from senior management. The trial judge dismissed 24 of the charges related to immigrant smuggling, and the jury acquitted Tyson of the remaining 12 charges.

Example 5:

On May 12, 2008, ICE conducted the largest criminal worksite enforcement operation in U.S. history at the Agriprocessors kosher meatpacking plant in Postville, Iowa. Agents arrested 389 workers and charged 302 with immigration violations. This was the most ever arrests at a single worksite. Ultimately, 297 pled guilty and were sentenced. In the affidavit for the search warrant, Senior Special Agent David Hoagland said that ICE sought the warrant to investigate allegations of harboring unauthorized workers, a pattern and practice of hiring unauthorized workers, misuse of SSNs, and aggravated identity theft.

Anonymous sources alleged several incidents that led to the raid. One source alleged that a human resources manager laughed when presented with a situation where Social Security cards from three separate employees had the same SSN. Sources reported that an Agriprocessors’ supervisor was helping unauthorized workers to falsify vehicle registrations and that another employee was referring them to sources for falsified official documents. Several sources reported a manager who hired employees without any identification, issued their paychecks to an unknown name and SSN, and cashed the checks on site. In many cases, the employees without documentation were allegedly paid below minimum wage. Agents seized the site’s computer system, identification documents, biometric information, and company employee records to investigate harboring charges. Later indictments indicate that 96 fake permanent resident cards and employment applications were seized.

Two Agriprocessors supervisors were arrested in July 2008. Charges against the supervisors included aiding and abetting aggravated identity theft and encouraging unauthorized foreign nationals to reside illegally in the United States. One supervisor pled guilty to charges of conspiracy to hire unauthorized workers and aiding and abetting the hiring of unauthorized workers. In November 2008, the former CEO, three managers, and a human resources employee were indicted on 12 counts, including conspiracy to harbor unauthorized workers for profit, harboring unauthorized workers for profit, conspiracy to commit document fraud, aiding and abetting aggravated identify theft, and aiding and abetting document fraud. One supervisor pled guilty to conspiracy to hire undocumented workers and was sentenced to three years in prison. Another pleaded guilty to conspiring to obtain fake documents for unauthorized workers who worked at the plant and was sentenced to 10 months in jail. A human resources employee pleaded guilty to harboring unauthorized workers and aggravated identity theft and received two years’ probation. Two other human resources employees also pleaded guilty and received probation.

A 99-count superseding indictment was filed January 16, 2009. Many of the charges were related to money laundering, bank fraud, and making false statements to a bank. The indictment alleged, among other things, that the company’s executives certified legal compliance to the bank while knowing the company employed unauthorized aliens. CEO Sholom Rubashkin was convicted of 86 counts of financial fraud and was sentenced to 27 years in prison and ordered to make more than $26 million in restitution. The federal government stopped pursuing the immigration charges after the conviction on the bank fraud charges.

The relationship between money laundering and immigration

Generally, money laundering is using proceeds from a “specified unlawful activity” with knowledge that the money came from a crime. Felony harboring is listed as a “specified unlawful activity,” but misdemeanor hiring is not. Charges for aiding and abetting money laundering and conspiracy to launder money are also available to prosecutors.

Prosecutors use the money laundering offense in employer immigration enforcement for several reasons. It allows them to introduce evidence of defendant’s gain and how the defendant spent the money after it was laundered that would likely not be admissible otherwise. This tends to make juries less sympathetic with defendants. Money laundering also has longer available sentences and increases the amount of the defendant’s property that is forfeitable. While “illegal proceeds” are forfeitable under the harboring statute, all money “involved in” a money laundering violation may be subject to forfeiture.

Prohibited conduct

There are several types of money laundering, but all require the defendant to know that the property involved in the transaction is the proceeds of a “specified unlawful activity.” It is unlawful to oversee a financial transaction in any of the following five instances:

  1. conducted in the proceeds of a specified unlawful activity with intent to promote specified unlawful activity
  2. conducted in the proceeds of a specified unlawful activity with intent to commit tax evasion or make a false statement on tax document
  3. designed in whole or in part to conceal or disguise the nature, location, source, ownership, or control of proceeds of specified unlawful activity
  4. designed in whole or in part to avoid a transaction reporting requirement under state or federal law
  5. conducted with more than $10,000 in proceeds of specified unlawful activity.

Penalties

Criminal sanctions for money laundering offenses include:

  • up to 10 years’ imprisonment for each violation (each transaction is a separate violation) for each violation in category 5 of the previous list.
  • up to 20 years’ imprisonment for each violation in categories 1 through 4 of the previous list 
  • fines of up to twice the amount laundered in each violation in category 5 of the previous list
  • fines of $500,000 or twice the amount laundered, whichever is greater, for each violation listed under prohibited conduct.

Forfeiture

Money laundering forfeiture authorizes the forfeiture of all property “involved in” the money laundering offense, which may be more than the “gross proceeds” forfeiture in a harboring offense. The government can use criminal forfeiture to get a money judgment that is executable against any of the defendant’s property. In satisfying such a judgment, defendants are jointly and severally liable (all defendants are responsible for the entire value of the judgment until it is paid in full).

Example:

HV Connect, Inc. (HVC) was a temporary employment agency that contracted with companies to supply temporary workers.  On October 12, 2006, Trung Nguyen, a company official, pleaded guilty to bringing in and harboring certain unauthorized individuals, mail fraud, wire fraud, conspiracy, and money laundering. An ICE investigation revealed that most of HVC’s employees were not lawfully present and did not possess employment authorizations. The investigation resulted in the arrest of 33 unauthorized workers unlawfully employed through HVC.

HVC provided housing and transportation to the unauthorized employees and assisted them in obtaining fraudulent permanent resident cards, Social Security cards, driver’s licenses, and other identification documents. HVC had earned more than $5.3 million for supplying the unauthorized labor force. On March 14, 2007, ICE agents obtained a Final Order of Forfeiture for property owned by Nguyen that had approximately $100,000 in equity.

Example:

On July 20, 2006, two corporations in Kentucky pleaded guilty to criminal charges of harboring unauthorized individuals and money laundering in connection with a scheme that provided unauthorized workers to Holiday Inn, Days Inn, and other hotels in Kentucky. As part of the plea, Asha Ventures, LLC, and Narayan, LLC, agreed to pay $1.5 million in lieu of forfeiture and to create internal compliance programs. Through their agents, the companies employed numerous unauthorized workers at hotels in London, Kentucky, who were often paid by check made payable to fictitious cleaning companies. On October 20, 2006, Ventures and Narayan were sentenced in the Eastern District of Kentucky to one year supervised probation and each company was fined $75,000.

The misdemeanor charge for IRCA violations has fallen out of favor due to ICE’s expressed preference for the harsher penalties and forfeiture provisions of the harboring and money laundering statutes.

Penalty for hiring unauthorized workers

Prohibited conduct

The IRCA makes it a misdemeanor for any person to engage in a “pattern or practice” of the following:

  • hiring, recruiting, or referring an individual for a fee knowing that the individual is not authorized to work in the United States
  • hiring an individual for employment without complying with IRCA’s employment verification requirements
  • hiring, recruiting, or referring an individual for a fee without complying with IRCA’s employment verification requirements
  • knowingly continuing to employ an individual who has become unauthorized for employment, even if the hiring was authorized.

Penalties

Criminal sanctions for violations of the hiring statute include:

  • up to $3,000 for each unauthorized individual
  • up to six months' imprisonment for the entire pattern.

Forfeiture

There is no forfeiture provision associated with the misdemeanor offense.

The good faith defense

Employers who attempt to comply with the employment verification system have a good faith defense against the criminal charge unless the enforcement agency gives the employer notice of a technical or procedural failure and the employer fails to correct the problem within 10 days.

Civil consequences and liability

The Racketeer Influenced and Corrupt Organizations Act (RICO) includes civil penalties for persons and organizations who engage in a “pattern of racketeering activity.” These penalties allow private plaintiffs to collect triple damages, costs of the lawsuit, and attorney’s fees against defendants who commit any act that falls under the statute’s list of “racketeering activity.”

Inclusion of IRCA violations

Certain acts that would be indictable under the IRCA, such as harboring unauthorized individuals, aiding or assisting unauthorized individuals on entering the United States, and importing unauthorized individuals for immoral purposes, are considered racketeering activity under RICO if the act was committed for the purpose of financial gain. Therefore, corporate defendants who violate the IRCA provisions mentioned previously could “be forced to provide high levels of compensation to the plaintiff, be restricted from engaging in future business activities, and even lose its business completely.”

Potential liability

Private liability for RICO violations include:

  • treble damages to private plaintiffs
  • the cost of the plaintiff's suit and attorney's fees
  • court order for defendant to divest from the enterprise
  • court order restricting defendant's future investment
  • court order forcing "dissolution or reorganization" or defendant's enterprise.

To bring a RICO suit, a plaintiff msut plead:

  • the defendant's violation of RICO
  • an injury to the plaintiff's business or property
  • causation of injury by the defendant's violation.

Example 1:

After the Tyson trial, a class of current and former Tyson employees authorized to work in the United States brought suit against Tyson for violating RICO in the Trollinger v. Tyson Foods case. The class alleged that Tyson conspired to knowingly bring unauthorized immigrants into the country, employ them, and conceal them from government detection in violation of IRCA’s harboring provision. The class argued that this conspiracy enabled Tyson to pay all of its employees less than the going market wage, thus paying the plaintiffs less than they otherwise would be paid. The court dismissed all but one of these claims because the plaintiffs were unable to make a sufficient factual showing that Tyson had acted knowingly.

Example 2:

Valenzuela v. Swift began on December 12, 2006, when ICE officials arrested 1,282 undocumented workers on administrative immigration violations at Swift & Company meat packing plants around the country. ICE did not bring charges against Swift officials resulting from the raids. Three days later, 18 Swift employees filed suit against Swift & Company, alleging that Swift hired undocumented workers in violation of RICO to “illegally depress and artificially lower” its employees’ wages. On December 20, 2007, the court ruled that Swift is potentially liable for any depression in wages that the plaintiffs can show (at trial) was caused by management’s harboring of undocumented workers. At trial the plaintiffs would have been eligible to recover treble damages, costs, and fees if they are able to show that Swift knowingly employed unauthorized aliens that it assisted in obtaining false documentation.  The case was resolved by the parties and dismissed before trial.

Example 3:

The case against Danny’s Family Carwash began in April 2011 when Danny’s was instructed to terminate the employment of more than 900 employees after an ICE audit revealed those employees had presented fraudulent, insufficient, or ineligible documents at the time of their initial hire. It appeared that Danny’s initially attempted to hire lawful employees as replacements but those replacements quickly proved ineffective and/or too expensive. In response, the owner of Danny’s, Daniel Hendon, instructed the company’s managers to “bring back” the old employees. Although some managers expressed discomfort with this instruction, they were threatened with the loss of their jobs if they refused to comply.

The returning employees who were previously found not to be work authorized routinely used someone else’s identification in order to pass the E-Verify background check. ICE’s investigation led to the conclusion that the Danny’s management was aware of, and in fact, often facilitated the acquirement and use of false identification documents for the employees.

On August 17, 2013, ICE served arrest warrants at 16 different car wash locations in the Phoenix area as part of a two-year federal investigation on the Danny’s Family Car Wash chain.  ICE officials claim Danny’s was committing alleged immigration fraud, identity theft, and financial violations. 

As a result of the criminal charges levied against Hendon and 13 managers, plea agreements on various charges including conspiracy, immigration fraud, and identify theft were entered. Hendon was sentenced to 12 months in prison followed by a year of home confinement. Hendon also agreed to divest himself of any future ownership, managerial, or profit-sharing interest in the Danny’s organization. The remaining defendants received sentences ranging from probation to three months in prison. In addition, the corporate entities that comprise the Danny’s organization, which previously pled guilty to employing unauthorized aliens, were ordered to forfeit more than $156,000. All of the defendants previously pled guilty to conspiracy to commit identity theft.

The undocumented workers routinely used someone else’s identification in order to pass their E-Verify background check, and Danny’s management was aware of, and in fact, often facilitated the crime. The scheme continued until August 2013, when Homeland Security Investigations (HIS) special agents executed search warrants at Danny’s corporate headquarters and at various Danny’s car wash locations. More than 230 unauthorized aliens were working for Danny’s on the date of the search.