Rogue Employers

Contractors could pay a steep price for hiring illegal immigrants.

In March, Homeland Security Department officials raided a New Bedford, Mass., textile plant and arrested hundreds of illegal workers along with the plant's owner and three managers, citing sweatshop conditions and "egregious hiring practices," including the employment of more than 360 illegal immigrants, "widespread use of fraudulent documents and blatant disregard for the rule of law."

The Defense Logistics Agency, however, describes the company another way-as one of its top 100 federal contractors (No. 82 to be precise).

The March 6 raid of Michael Bianco Inc. by Immigration and Customs Enforcement agents caused some discomfort for Defense officials, who have awarded the leather goods manufacturer more than $221 million in federal contracts since 2004. They include a $138 million Army contract for lightweight military backpacks that was awarded in August, three months after federal authorities began their investigation into the factory's alleged exploitation and sponsorship of illegal workers. A Bianco employee tipped off federal authorities in May 2006 that the company was aware of factory workers using counterfeit Social Security numbers and green cards, according to the affidavit. ICE agents launched an undercover operation and discovered that roughly two-thirds of the factory's 500 workers were in the country illegally and Bianco managers often helped prospective employees obtain fraudulent documents.

Pentagon inspectors visited the facility two to four times a week, but since their focus was on meeting delivery orders, they never caught on to workplace conditions. In a statement, MBI's president, Francesco Insolia, said inspectors "interacted with our workers without incident or complaint."

Prosecutors charged Insolia, payroll manager Ana Figueroa, plant manager Dilia Costa and office manager Gloria Melo with conspiring to hire illegal immigrants and offering them inducements to reside in the United States.

The Bianco case is the latest-albeit most egregious-instance of ICE cracking down on federal contractors for hiring illegal immigrants to work at potentially sensitive locations. In June 2005, agents arrested 26 illegal workers with access to a Northrop Grumman Corp. shipyard in Mississippi. A month later, 48 were arrested at Seymour Johnson Air Force Base in North Carolina. The workers had been employed by Salt Lake City defense contractor Parsons Evergreene. In each case, contractors were not charged because they were not aware of the workers' illegal status.

And in January, agents arrested two contractors for conspiring to hire illegal immigrants to work on a construction project at Quantico Marine Corps Base in Virginia. The companies, CCI Virginia Inc. and Commercial Concrete Inc., have been suspended indefinitely from future government projects.

Matt Allen, acting deputy assistant director for ICE's Office of Investigations, says contractors, particularly those with access to critical federal infrastructure, need to be diligent about their hiring practices to root out potential illegal hires. In addition, "Contractors really need to keep their eye on the ball when subcontracting work out to ensure that they are only hiring authorized workers," Allen says.

Congress has taken note of the problem. In January, the Senate unanimously approved an amendment, sponsored by Sen. Jeff Sessions, R-Ala., to increase the penalty for federal contractors that hire illegal immigrants. The provision, originally inserted into the Senate's minimum wage legislation but later added to the Senate's supplemental spending bill, would ban contractors for 10 years for the first infraction. Companies that have not done business with the government would be prohibited from obtaining contracts for seven years.

The ban, which would not be subject to appeal, could be waived for national defense or security reasons. A similar ban died last year in the Senate's comprehensive immigration legislation. The Acquisition Reform Working Group, which includes 10 contracting organizations, opposes the change.

"Large numbers of illegal workers are being hired in America today. We know that," Sessions said when intro- ducing the measure on the floor of the Senate. "The vast majority of businesses carefully follow the law, but many of them, unfortunately, do not. Some are even contractors who are working on sensitive government contracts." Sessions' bill would provide an exemption for companies that use the Basic Pilot Program, the government's automated electronic verification system, to confirm that their employees are in the country legally. The voluntary program already is used by about 13,000 employers nation- wide, as well as by all federal agencies and Congress. Immigration reform advocates believe that rigid enforcement of the Basic Pilot Program could dramatically re-duce illegal immigrants' access to critical federal facilities. "Construction crews for military bases, cleaning crews, even low-level jobs could [provide] access to jobs that are in sensitive locations," says Jessica M. Vaughn, senior policy analyst for the Center for Immigration Studies in Washington. "Illegal workers could even be working at the White House and [White House officials] might not even know about it."

But Larry Allen, executive vice president of the Coalition for Government Procurement in Washington, which represents federal contractors, said the bill "sends a chilling effect through the contracting community.

"While it would catch purposeful scofflaws, it would also catch some law-abiding contractors in the same tide. How do you separate the companies that were deceived by employees from those that willingly hired illegals? Congress is attempting to implement a black-and-white solution in an area that has a lot of gray."

The bill's opposition also includes the Associated General Contractors of America, American Meat Institute, U.S. Chamber of Commerce, National Association of Home Builders, and Associated Builders and Contractors.

The bill could run into another roadblock: It appears to contradict an existing presidential decree. In 1996, President Bill Clinton signed Executive Order 12989, barring companies that knowingly hire illegal immigrants from receiving federal contracts. The disbarment would last for one year and could be extended if the contractor continues to violate the law.

According to the executive order, the attorney general (later changed to the secretary of Homeland Security) is directed to report all contractors that hire illegal immigrants to the appropriate contracting agency. The company's name would be sent to the General Services Administration to be added to its Excluded Parties List so other agencies know not to do business with the firm.

To GSA's knowledge, however, no federal contractor to date has been added to the Excluded Parties List system specifically for violating Executive Order 12989. Michael Bianco, CCI Virginia and Commercial Concrete all are suspended, pending an investigation, "for fraud, antitrust violations, embezzlement, theft, forgery, bribery, false statements, or other offenses indicating a lack of business integrity." But GSA's Web site (www.epls.gov) does not include a cause code that applies to employing illegal immigrants.

It is unclear whether tougher penalties would have prevented the alleged conditions at the Bianco factory. Prosecutors say company president Insolia was a tightfisted miser who provided only one roll of toilet paper in restroom stalls each day, and docked his employees $20 for spending more than two minutes in the restroom and 15 minutes of pay for every minute a staffer was late.

Despite the allegations, Bianco still stands to collect on at least a portion of his defense contracts. The Pentagon already has placed six delivery orders, worth nearly $47 million, on the $138 million Army contract. To date, the service has paid the company roughly $5 million. The Army suspended any future orders on the contract, but work on the existing orders will continue, officials say.

Bianco also signed a separate $83.6 million contract with the Defense Logistics Agency in 2004 to produce 209,000 backpacks or components. The last delivery on that contract was placed in January, according to Jack Hooper, a spokesman for DLA. The company, he says, is expected to complete the order. Between 2001 and 2003, Bianco was the low bidder on a handful of Defense contracts worth roughly $10 million. But as pressure continues to build, federal contracts might not be in the cards for Bianco and other firms that hire illegal immigrants.