TLJ News from August 6-10, 2008

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8/9. President Bush traveled to the People's Republic of China. In his radio address of Saturday, August 9, 2008, he stated that "over the past eight years, America has sought to put our relationship with China on a more solid and principled footing. We've advanced both our nations' interests by expanding free and fair trade and encouraging the rise of a Chinese middle class -- which can be an enormous market for American exports". He also said that "We have seized opportunities for prosperity by negotiating new free trade agreements, including an historic agreement with South Korea -- an agreement which our United States Congress must pass."

PFF and CDT File Amicus Brief in FCC Fleeting Expletives Case

8/8. The Progress & Freedom Foundation (PFF) and Center for Democracy and Technology (CDT) filed an amicus curiae brief [47 pages in PDF] with the Supreme Court in FCC v. Fox Television Stations, a broadcast indecency case.

The PFF and CDT urge affirmance of the Court of Appeals, which held that the Federal Communications Commission's (FCC) new policy sanctioning "fleeting expletives" is arbitrary and capricious under the Administrative Procedure Act (APA) for failing to articulate a reasoned basis for its change in policy.

The PFF and CDT focus on new information technologies, including DVD players, digital video recorders (DVRs), and video on demand (VOD) services, that give parents greater control over what their child watch, and hence, render obsolete the opinion relied upon by the FCC, FCC v. Pacifica Foundation, 438 U.S. 726 (1978).

Background. On November 6, 2006, the FCC issued an Order [36 pages in PDF] on remand regarding complaints that four broadcast television programs contained indecent and/or profane material. The Order concluded, among other things, that comments made by Nicole Richie during "The 2003 Billboard Music Awards" and by Cheryl LaPiere during the "The 2002 Billboard Music Awards" were indecent and profane.

See also, stories titled "FCC Releases Indecency Orders" in TLJ Daily E-Mail Alert No. 1,332, March 20, 2006, and "FCC Releases Order on Remand Regarding Broadcast Indecency" in TLJ Daily E-Mail Alert No. 1,484, November 7, 2006. This order is FCC 06-166.

Fox, CBS, and ABC filed petitions for review of the FCC's order. The U.S. Court of Appeals (2ndCir) issued its divided opinion [53 pages in PDF] on June 4, 2007. See, See, story titled "2nd Circuit Vacates and Remands FCC Profanity Order" in TLJ Daily E-Mail Alert No. 1,590, June 4, 2007.

The Office of the Solicitor General (OSG) filed a petition for writ of certiorari on November 1, 2007. The Supreme Court granted certiorari on March 17, 2008. See, story titled "Supreme Court Grants Certiorari in FCC Fleeting Expletives Case" in TLJ Daily E-Mail Alert No. 1,732, March 18, 2008.

The US and FCC filed their brief [52 pages in PDF] with the Supreme Court on June 2, 2008. Respondents' briefs were filed on August 1.

PFF/CDT Brief. This amicus brief is filed by Adam Thierer of the PFF. The attorneys on the brief are John Morris and Sophia Cope of the CDT.

They urge the Supreme Court to "consider the larger context of the modern media environment, which starkly calls into question the FCC's underlying constitutional authority -- based on FCC v. Pacifica Foundation ... to regulate speech that, when communicated via any medium other than broadcast, is fully protected by the First Amendment."

The argue that "Pacifica is based on an archaic and static understanding of the facts about broadcast television. The state of media and technology today directly challenges this Court’s assumption ...". First, they argue that television no longer has the "pervasive" quality that informed the 1978 opinion.

Moreover, "Technology is transforming how society receives information and entertainment, and it is also transforming how First Amendment principles apply to content delivery."

"Parents have a variety of technological tools, including the V-Chip and digital video recorders (DVRs), with which to guide their children’s development and television viewing habits." (Footnote omitted.)

The PFF/CDT continue that "Beyond the V-Chip, many American homes now rely on a variety of alternative technologies and methods to filter or block unwanted broadcast programming. This is especially the case for 86% of U.S. households subscribing to cable or satellite television systems ... which offer more robust filtering and blocking capabilities than the V-Chip."

They add that "These technologies give parents the ability to accumulate libraries of preferred programming for their children and determine exactly when that programming will be viewed. Using these tools, households can tailor media consumption to their specific needs and values. Parents can amass libraries of programming they believe is educational, enriching, and appropriate for their children, and only allow them to view it when they feel it is appropriate -- in sharp contrast to the ``invasiveness´´ of broadcast television at the time Pacifica was decided in 1978."

This case is FCC, et al. v. Fox Television Stations, Inc., et al., Supreme Court of the U.S., Sup. Ct. No. 07-582, a petition for writ of certiorari to the U.S. Court of Appeals for the 2nd Circuit. See also, Supreme Court docket.

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8/8. The Copyright Office published in its web site a notice [PDF] that will also be published in the Federal Register that extends the deadlines for submitting comments in, and schedules a hearing for, its rulemaking proceeding regarding the scope and application of the Section 115 compulsory license to make and distribute phonorecords of a musical work by means of digital phonorecord deliveries. The old deadlines for initial and reply comments were August 15 and September 2, 2008. The new deadlines are August 28 and September 15, 2008. The hearing will take place at 10:00 AM on September 19, 2008, in the Copyright Hearing Room, Library of Congress, Room LM-408, 4th Floor, James Madison Building, 101 Independence Ave., SE.

8/8. The Federal Communications Commission (FCC) released the text [90 pages in PDF] of its Report and Order and Further Notice of Proposed Rulemaking regarding its collection of FCC regulatory fees for Fiscal Year 2008. The FCC adopted, but did not release, this item at an event on August 1, 2008. This item is FCC 08-182 in MD Docket No. 08-65 and RM-11312. Initial comments in response to the NPRM portion of this item will be due within 30 days of publication of a notice in the Federal Register. Reply comments will be due within 60 days of such publication. This notice had not been published as of the August 11, 2008, issue of the Federal Register.

9th Circuit Rules in Peck v. Cingular

8/7. The U.S. Court of Appeals (9thCir) issued its opinion [11 pages in PDF] in Peck v. Cingular Wireless, a class action against a wireless carrier alleging that its inclusion of a line item on its monthly bills violates a Washington state statute.

The District Court dismissed the complaint on the grounds that 47 U.S.C. § 332(c)(3)(A) preempts the claims in the complaint. The Court of Appeals reversed.

The much litigated subsection 332(c)(3)(A) provides, in part, that "no State or local government shall have any authority to regulate the entry of or the rates charged by any commercial mobile service or any private mobile service, except that this paragraph shall not prohibit a State from regulating the other terms and conditions of commercial mobile services".

Peck is a Cingular Wireless customer. Cingular included a 31 cents line item charge titled "State B&O Surcharge" on his bill. A Washington state statute, codified at Revised Code of Washington (RCW) 82.04.220, imposes a business and occupation tax, and Cingular passed this on to its customers.

However, RCW 82.04.500 provides that "It is not the intention of this chapter that the taxes herein levied upon persons engaging in business be construed as taxes upon the purchasers or customers, but that such taxes be levied upon, and collectible from, the person engaging in the business activities herein designated and that such taxes shall constitute a part of the operating overhead of such persons."

Jared Peck, a class action plaintiff, filed a complaint in state court in Washington alleging violation of RCW 82.04.500. He also also alleged that Cingular failed to disclose that it would pass this State B&O Surcharge on to its customers, and thus, he also pled breach of contract, unjust enrichment, and violation of Washington's Consumer Protection Act.

Cingular removed the action to the U.S. District Court (WDWash). The District Court dismissed the complaint on the basis that the Washington statute attempted to regulate line item charges, and is thus preempted by subsection 332 (c)(3)(A).

Peck brought the present appeal.

After the District Court's dismissal, the Washington Supreme Court, which is the highest court in the state, held in Nelson v. Appleway Chevrolet, Inc., 157 P.3d 847 (2007), that the B&O tax could be passed on the consumers in the form of a line item charge, but only if disclosed and negotiated as an element of the final price.

The Court of Appeals reversed the judgment of the District Court.

The Court of Appeals reasoned that "RCW 82.04.500, as interpreted in Appleway Chevrolet, simply structures the contract's negotiation and disclosure, mandating that businesses quote all prices inclusive of Washington’s B&O Tax. Under RCW 82.04.500, businesses are allowed to itemize the B&O Tax and pass the B&O Tax to the consumer, so long as the tax is disclosed to the consumer ``during the course of negotiating a purchase price.´´"

It concluded that "RCW 82.04.500 therefore acts as a consumer protection statute, regulating the method of disclosure, rather than the reasonableness or propriety of the underlying rate." (Footnote omitted.)

Hence, it held that Section 332 "does not preempt state claims brought pursuant to RCW 82.04.500".

This case is Jared Peck, et al. v. Cingular Wireless, et al., U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 06-36027, an appeal from the U.S. District Court for the Western District of Washington, D.C. No. CV-06-00343-TSZ, Judge Thomas Zilly presiding. Judge Joseph Hood, sitting by designation, wrote the opinion of the Court of Appeals, in which Judges Carlos Bea and Milan Smith joined.

FCC Adopts Third Commercial Mobile Alert System Order

8/7. The Federal Communications Commission (FCC) adopted and released its Third Report and Order [PDF] regarding establishing a Commercial Mobile Alert System (CMAS). This order pertains to carrier participation in this program, and notices to consumers, existing subscribers, and the FCC.

The CMAS was created by the WARN Act in 2006, and is being implemented by the FCC. The CMAS expands government alerts to cell phones and other mobile devices. It is a voluntary program in which carriers can choose whether or not to participate.

The Congress enacted the "Warning, Alert, and Response Network Act", or "WARN Act", as part of HR 4954 (109th Congress), the port security bill, which is now Public Law No. 109-347. The WARN Act begins at Section 601 of the bill.

The WARN Act requires the FCC to promulgate Commercial Mobile Service Alert (CMSA) regulations. The FCC adopted and released its first Report and Order [62 pages in PDF] on April 9, 2008. The FCC adopted and released its Second Report and Order [40 pages in PDF] on July 8, 2008. The just released item is the third order.

The new rules adopted by the order provide that " A CMS provider that elects not to transmit CMAS Alert Messages, in part or in whole, shall provide clear and conspicuous notice, which takes into account the needs of persons with disabilities, to new subscribers of its non-election or partial election to provide Alert messages at the point-of-sale."

The rules add that "The point-of-sale includes stores, kiosks, third party reseller locations, web sites (proprietary or third party), and any other venue through which the CMS provider’s devices and services are marketed or sold." (Parentheses in original.)

The new rules also require notice to existing subscribers of elections not to transmit CMAS messages. The new rules also mandate the content of these notices.

The new rules also require all CMS providers to provide a letter to the FCC regarding whether they will participate, and specifying some of the contents of those letters.

The new rules also provide that "CMS providers shall submit their letter within 30 days after the release of the Third Report and Order in PS Docket No. 08-146." That is, this letter is due within 30 days of August 7, which is September 6, a Saturday. The FCC's web site states that these letters are due by Monday, September 8.

This item is FCC 08-184. The caption of this order, as well as of previous orders, states that this proceeding is PS Docket No. 07-287. However, the rules adopted by this order state that this proceeding is PS Docket 08-146.

7th Circuit Rules in Wine Sales Case

8/7. The U.S. Court of Appeals (7thCir) issued its opinion in Baude v. Heath, a case regarding state regulation of direct wine sales. The Court of Appeals upheld a state statute that prohibits shipping wine to a customer without a face to face meeting. This has the effect of prohibiting Indiana residents from purchasing wine over the internet from west coast wineries.

Judge Frank Easterbrook, who wrote the opinion, concluded that it is not a burden on interstate commerce to require Indiana residents to travel to Napa valley to present a photo ID in person in order to have wine shipped to them in Indiana.

This opinion is a set back for internet wine sales. However, its impact upon electronic commerce involving most other goods and services may be limited. Easterbrook based his holding upon the conclusion that limiting underage wine drinking is a legitimate state interest. Sales of goods and services that are not legitimately restricted by age or identity will not likely be affected.

In 2005 the Supreme Court issued its 5-4 opinion [73 pages in PDF] in Granholm v. Heald holding that Michigan's and New York's regulatory schemes that permited in-state wineries directly to ship alcohol to consumers, but restricted the ability of out-of-state wineries to do so, violate the dormant commerce clause.

That is, states had discriminated against out of state wineries, including internet based wine sales, to protect in state businesses and distribution systems.

The Supreme Court's 2005 opinion made it easier for businesses that engage in electronic commerce to challenge the constitutionality of state protectionist statutes that discriminate against internet based commerce.

See also, story titled "Supreme Court Rules in Internet Wine Sales Case" in TLJ Daily E-Mail Alert No. 1,137, May 17, 2005.

The state of Indiana revised its statutes after the 2005 opinion. However, it continued to regulate wine sales in a manner that harms internet wine sales. Also, some state legislators may have voted for the new regulatory regime with an intent to discriminate against out of state wineries.

The Court of Appeals summarized two statutory provisions at issue in this appeal. It wrote that "wineries inside and outside Indiana may ship to customers, if (a) there is one face-to-face meeting at which the buyer’s age and other particulars can be verified; and (b) the vintner is not allowed to sell to retailers in any state as its own wholesaler."

Patrick Baude and others filed a complaint in U.S. District Court (SDInd) against David Heath, in his capacity as Chairman of the Indiana Alcohol and Tobacco Commission, alleging that the two statutory provisions are unconstitutional restraints on interstate commerce.

The District Court enjoined enforcement of both statutory provisions. It concluded that they have a disparate impact on out of state sellers.

This appeal followed. The Court of Appeals affirmed the District Court's judgment as to the unconstitutionality of the wholesaler restriction. However, it reversed as to the face to face requirement.

Judge Easterbrook cited the Supreme Court's opinion in Pike v. Bruce Church, 397 U.S. 137 (1970), and applied its "test". However, he did not articulate what the test is.

The Supreme Court wrote in Pike v. Bruce Church that "Where the statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities."

Easterbrook wrote that there is a legitimate state interest in "keeping alcohol out of minors' hands". Moreover, if states "make it easier for minors to get wine by phone or Internet", then "sales to minors will increase".

As for the burden on interstate commerce, here is Easterbrook's logic. "Many oenophiles vacation in wine country, and on a tour through Napa Valley to sample the vintners' wares a person could sign up for direct shipments from dozens of wineries." In contrast, Indiana "wineries are all over the map".

Thus, wrote Easterbrook, "A connoisseur might well find it easier to visit and sign up at 30 California wineries than at 30 Indiana wineries."

Therefore, Easterbrook concluded that "Indiana's system does not disadvantage California (or other) wineries in general."

Easterbrook also rejected the argument that "Internet-based age-verification services" would be a less restrictive means to protect the state interest in limiting underage drinking. He wrote that "neither the record in this case nor any third-party testing" shows this.

Easterbrook also wrote that age verification by delivery services is out of the question because of the Supreme Court's recent opinion [17 pages in PDF] in Rowe v. New Hampshire Motor Transport Association. He wrote that "states cannot require interstate carriers to verify the recipients' age".

See also, story titled "Supreme Court Affirms in Rowe v. New Hampshire Motor Transport Association" in TLJ Daily E-Mail Alert No. 1,720, February 20, 2008.

Easterbrook also relied on the Supreme Court's recent opinion [65 pages in PDF] in Crawford v. Marion County Election Board, which upheld the constitutionality of a state law requiring photo identification ID for voting. He wrote that "a belief that in-person verification with photo ID reduces vote fraud has enough support to withstand a challenge under the first amendment, it would be awfully hard to take judicial notice that in-person verification with photo ID has no effect on wine fraud and therefore flunks the interstate commerce clause."

But then, that case is hardly relevant. That was not an interstate commerce case, and voters vote at their local polling stations. For example, there was no requirement that voters wishing to vote for a particular candidate must travel to Napa Valley to vote.

See also, story titled "Supreme Court Upholds State Statute Requiring Photo ID to Vote" in TLJ Daily E-Mail Alert No. 1,756, April 29, 2008.

It should be noted too that prior to the Supreme Court's 2005 opinion in Granholm v. Heald, two circuits had upheld discriminatory states wine sales statutes -- the 2nd and 7th Circuits. Moreover, the 7th Circuit opinion was written by Easterbrook. While his opinion was not under review in 2005, its holding was in effect overturned.

In Bridenbaugh v. Wilson, the plaintiffs challenged the constitutionality of an Indiana statute that made it unlawful for persons in another state to ship an alcoholic beverage directly to an Indiana resident. The District Court held that the Indiana direct shipment regulation was unconstitutional under the Commerce Clause, and granted the plaintiffs' summary judgment motion. See, Bridenbaugh v. O'Bannon, 78 F. Supp.2d 828 (N.D. Ind. 1999). Then, the Seventh Circuit reversed, upholding the constitutionality of the state ban.

Easterbrook wrote in that opinion, "Where's the functional discrimination?"

This case is Patrick Baude, et al. v. David Heath and Wine and Spirits Wholesalers of Indiana, U.S. Court of Appeals for the 7th Circuit, App. Ct. Nos. 07-3323 and 07-3338, appeals from the U.S. District Court for the Southern District of Indiana, Indianapolis Division, D.C. No. 1:05-CV-0735-JDT-TAB, Judge John Tinder presiding. Judge Frank Easterbrook wrote the opinion of the Court of Appeals, in which Judges Bauer and Posner joined.

People and Appointments

8/7. Jeffrey Schmidt, Director of the Federal Trade Commission's (FTC) Bureau of Competition, will leave the FTC. He will be a partner in the New York City office of the Linklaters law firm. David Wales, who is currently a Deputy Director, was named acting Director. See, FTC release. Schmidt, among other things, directed the FTC's efforts to block the merger of Whole Foods and Wild Oats. See, story titled "DC Circuit Reverses in FTC v. Whole Foods" in TLJ Daily E-Mail Alert No. 1,802, July 29, 2008.

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8/7. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register "to clarify which patent-related regulations are currently in effect. The USPTO is identifying the applicability date of those regulatory provisions relating to applications containing patentably indistinct claims which are enjoined in Tafas v. Dudas, 530 F. Supp. 2d 786 (E.D. Va. 2008). Should the injunction be lifted, those regulations will apply only to applications filed on or after any new effective date that would be published by the USPTO in the future." See, Federal Register, August 7, 2008, Vol. 73, No. 153, at Pages 45999-46000. See also, April 1, 2008, opinion [26 pages in PDF] of the U.S. District Court (EDVa) in Tafas v. Dudas, D.C. No. 1:07cv1008 (JCC). And see, USPTO release.

8/7. Karen Fletcher entered a plea of guilty in U.S. District Court (EDPenn) to violation of 18 U.S.C. § 1462 in connection with her online publication of obscene materials. What is notable about this case is that the obscene material at issue did not involve pictures or videos. Rather is was text. The six count indictment lists six files that she published. Five had the file extension .txt. One had the file extension .doc. The statute covers "writing". However, most internet pornography and obscenity cases involve video or graphics. Section 1462 provides, in relevant part, that "Whoever ... knowingly uses ... interactive computer service ... for carriage in interstate or foreign commerce ... any obscene, lewd, lascivious, or filthy book, pamphlet, picture, motion-picture film, paper, letter, writing, print, or other matter of indecent character ... Shall be fined ... or imprisoned ...". See also, DOJ release.

H1B Visas, Tech Sector Jobs, and Visa Fraud

8/6. Information technology (IT) companies, and the groups that represent them, continue to lobby the Congress for legislation to increase the annual quota of H1B visas. Their efforts in the 110th Congress to increase the current cap of 65,000 of visas per year have not yet been successful.

On July 28, 2008, the U.S. filed a criminal complaint against Alexander Vista, who is alleged to have engaged in a long running, large scale and fraudulent H1B visa application scheme.

This complaint sites and relies upon a report written by the Center for Immigration Studies (CIS) that argues that a "significant percentage" of H1B visas are given to people who "enter the illegal alien pool".

Also, the Department of Labor's (DOL) Office of the Inspector General (OIG) submits semiannual reports to the Congress. These contain information about prosecutions. These reports disclose that the U.S. has obtained several convictions per year against persons who have engaged in large scale H1B visa fraud.

The Vista case, other recent cases, and the CIS report offer evidence in support of the proposition that the problem that IT companies face in obtaining highly skilled IT workers under the H1B visa program lies not in the size of the annual quota, but in the DOL's inability to grant H1B visas only to skilled workers who actually have the job stated in their visa applications.

H1B Visa Proponents. IT companies have been vigorously lobbying the Congress for over a decade for legislation to make it easier for them to employ aliens for high skill jobs through the H1B visa program.

For example, Bill Gates, Chairman of Microsoft, testified before the Senate Health, Education, Labor, and Pensions Committee on March 7, 2007. See, prepared testimony [14 pages in PDF], and story titled "Gates Advocates H1B Visas, Permanent R&D Tax Credit, Patent Reform, and STEM Education" in TLJ Daily E-Mail Alert No. 1,549, March 8, 2007.

He said that "we need to attract and retain the brightest, most talented people from around the world. This will not happen until we reform our immigration policies for highly skilled workers." Currently, said Gates, "America's immigration policies are driving away the world’s best and brightest precisely when we need them most."

He elaborated that "It makes no sense to tell well trained, highly skilled individuals -- many of whom are educated at our top colleges and universities -- that the United States does not welcome or value them. For too many foreign students and professionals, however, our immigration policies send precisely this message."

"Under the current system, the number of H1-B visas available runs out faster and faster each year. The current base cap of 65,000 is arbitrarily set and bears no relation to U.S. industry’s demand for skilled professionals."

He continued that "For Fiscal Year 2008, H-1Bs are expected to run out next month, the first month that it is possible to apply for them. This means that no new H-1B visas -- often the only visa category available to recruit critically needed professional workers – will be available for a nearly 18-month period. Moreover, this year, for the first time in the history of the program, the supply will run out before the year’s graduating students get their degrees. This means that U.S. employers will not be able to get H-1B visas for an entire crop of U.S. graduates. We are essentially asking top talent to leave the U.S."

Pending Legislation. Numerous bills have been filed in the 110th Congress in response to the pleas from IT companies. However, the 110th Congress has not yet increased the current cap of 65,000 per year.

For example, Sen. Jon Cornyn (R-TX) introduced S 1083 [LOC | WW], the "Securing Knowledge, Innovation, and Leadership Act of 2007", or "SKIL Act of 2007", on April 10, 2007. There has been no action on this bill in either the Senate Judiciary Committee (SJC) or the full Senate.

Rep. John Shadegg (R-AZ) introduced the companion bill in the House, HR 1930 [LOC | WW], on April 18, 2007. Neither the House Judiciary Committee (HJC), nor the full House, have taken any action on this bill.

The Cornyn bill would exempt from the H1B cap visas for any alien who has earned a master's or higher degree from an accredited U.S. university, or who has been awarded a medical specialty certification based on post-doctoral training and experience in the U.S. It would also provide for a 20% increase in the H1B cap if the quota for the prior year was met.

Sen. Cornyn stated on April 10, 2007, that "our immigration policies prohibit us from retaining some of the ``best and brightest´´ students currently graduating from U.S. colleges and universities -- especially those with advanced degrees in science and technology. We also continue to lose highly qualified and highly skilled workers to foreign competitors because of our failed immigration system." See, Congressional Record, April 10, 2007, at Page S4310.

Sen. Cornyn also introduced a similar bill in the 109th Congress, S 2691, also titled "Skil Act". See, story titled "Sen. Cornyn Introduces SKIL Act" in TLJ Daily E-Mail Alert No. 1,366, May 9, 2006.

More recently, Rep. Gabrielle Giffords (D-AZ) introduced HR 5630 [LOC | WW], the "Innovation Employment Act" on March 13, 2008. There has been no action on this bill either. Her bill would, among other things, raise the H1B cap from 65,000 to 130,000 starting in FY2008.

There are numerous other bills pending in the House or Senate that would increase the annual cap, address fraud in the H1B visa program, and/or make other changes to current law. See for example:

Also, large comprehensive immigration reform bills have provisions related to H1B visas.

H1B Visa Critics. Much of the organized opposition in Washington DC to increasing caps on H1B visas has come from labor unions. Much of the online criticism of H1B visas has been posted by U.S. citizens who understand that they have lost, and/or not been hired for, IT jobs because of foreign IT workers with H1B visas.

In June, the Center for Immigration Studies (CIS) published a paper, which is relied upon by the government in the Vista complaint, titled "H-1B Visa Numbers: No Relationship to Economic Need". Its author is the CIS's John Miano.

It argues that "there is a discrepancy between H-1B visa numbers and job creation. There are more H-1B visas approved for engineers than there are engineering jobs. The number of H-1B visas for computer workers is about 70-80 percent of the rate of job creation. It is inconceivable that H-1B computer workers are taking anywhere close to that percentage of jobs being created."

It then states that "The most likely reason for the discrepancy between job growth and H-1B visas is that a significant percentage of people legally admitted under H-1B visas enter the illegal alien pool. Such illegal aliens would be armed with valid Social Security numbers and would be difficult to detect. The high concentration of visa-to-job discrepancies in certain states suggests that the country has created organized centers for importing illegal aliens through H-1B visas."

The report contains data suggesting such a discrepancy for three states, California, Georgia, and New Jersey. Vista operated in California.

The CIS is opposed to all immigration. The head of the CIS is Mark Krikorian. He is the author of the book [Amazon] titled "The New Case Against Immigration: Both Legal and Illegal", published earlier this year.

U.S. v. Vista. On July 28, the U.S. charged Alexander Sales Vista by criminal complaint with violation of 18 U.S.C. § 1546, in connection with his alleged making of false statements on Department of Labor (DOL) forms titled "Petition for a Nonimmigrant Worker".

Section 1546 provides, in part, that "Whoever knowingly makes under oath ... any false statement with respect to a material fact in any application, affidavit, or other document required by the immigration laws or regulations prescribed thereunder, or knowingly presents any such application, affidavit, or other document which contains any such false statement or which fails to contain any reasonable basis in law or fact ... Shall be fined ... or imprisoned ... or both."

The complaint alleges that Vista, in return for payments of from $7,000 to $12,000, filed about 977 fraudulent applications for H1B visas in just over ten years. The complaint adds that he then would charge persons who obtained H1B visas for "tax payments", which he sometimes, but not always, paid to the government as taxes. It concludes that he made at least $4.9 Million from this fraudulent scheme.

The complaint states that of Vista's about 977 employment based visa applications, "183 were approved, 370 were denied for fraud, 98 were rejected, and 326 were abandoned, withdrawn, or otherwise not granted".

The complaint is dated July 28, 2008. The Office of the U.S. Attorney for the Central District of California (OUSA-CDCal) stated in a release that federal agents arrested Vista on July 31.

The complaint is signed by Aron Klaff, a Special Agent with the DOL's OIG's Office of Labor Racketeering and Fraud Investigations.

The complaint alleges that "Fraud is a common problem in the employment-based visa program. For example, a recent June 2008 Bulletin by the Center for Immigration Studies in Washington DC reports that the number of approved H1-B work visas in the United States greatly exceeds the economic demand for such workers and concludes that the visa-to-job discrepancy suggests that H1-B visas are being used to facilitate illegal immigration."

It further alleges that "employment-based visa fraud usually follows recognizable patterns, specifically:
  a. Fraudulent petitioners commonly invent petitioning companies or employers from whole cloth, and investigation will reveal that the petitioning employer does not exist.
  b. Alternately, fraudulent petitions may list an actual employer's name and location in an employment -based petition but the petitioner will have no intention that the beneficiary alien will ever actually be employed by the listed employer. On some occasions, the listed employer is complicit in the application; on other occasions, the petitioner uses the employer's name without the employer's knowledge.
  c. Fraudulent petitioners also commonly misrepresent the nature of the job available, the wages available, location of the job, and the qualifications of the beneficiary alien in order to influence approval of employment-based petitions by U.S. labor and immigration authorities."

The 100 page complaint details Vista's companies, and the persons for whom he obtained H1B visas. It alleges that many of his "companies are mere shell companies that do not function as employers or that such companies could not possibly have employed the number of alien beneficiaries on whose behalf VISTA filed employment-based petitions for such companies."

It details, on a worker by worker basis, many examples of persons who obtained visas to work as accountants, or other skilled jobs, but did not then work in the position listed in the petition for the visa.

U.S. Attorney Thomas O'Brien stated in the USAO release that "This type of immigration fraud wholly undermines a system that was carefully designed to allow workers to come to the U.S. because their particular skills are needed in our market".

Criminal Prosecution of H1B Visa Fraud. A review DOL/OIG reports to the Congress suggest that there are at least several successful prosecutions per year involving H1B fraud. In addition, these reports sometimes identify other cases involving employment based visa fraud, without stating if H1B visas were involved.

For example, the DOL/OIG's Semiannual Report to Congress [54 pages in PDF] for October 1, 2007 through March 31, 2008 lists one H1B visa fraud case, against Paul Svejda. The report states that Svejda, who has been convicted and sentenced, "set up more than 100 shell companies to file a variety of fraudulent nonimmigrant visa applications, including labor condition applications and visa petitions for H-1B workers; L-1A (intracompany transferee) visa petitions; and E-2 (investor) visa petitions on behalf of his foreign clients. He charged these undocumented aliens between $5,000 and $20,000 for the visas ..." That case is U.S. v. Paul Svejda, U.S. District Court (MDFl).

The DOL/OIG's Report for October 1, 2006 through March 31, 2007, identifies one H1B visa fraud case, against Yongping Liu and Yali Huang. The report states that Huang, an attorney who has been convicted, "conspired with U.S. company owners to make offers of employment to Chinese citizens that allowed them to obtain immigration benefits in the United States. She made payments to these company owners for their sponsorship of the Chinese citizens. In addition, Huang created companies and in some cases used her own residential address as the location for the sham employing company. Her fees for processing fraudulent visa applications ranged from $5,000 to $140,000." That case is U.S. v. Liu, et al., U.S. District Court (SDTex).

The cases described in these and earlier reports reveal several patterns. The U.S. prosecutes those who prepare fraudulent applications, rather than the aliens. The defendants engage in fraud on a large scale -- usually hundreds of applications before being prosecuted. The fees are substantial. Many of the defendants are attorneys.

These reports also state that the DOL's role in the certification process is "perfunctory".

US and Korean Presidents Urge Approval of FTA

8/6. President Bush traveled to Korea, and met with President Lee Myung-Bak. The two urged legislative approval of the US-Korea FTA.

The White House news office released a document on August 5, 2008, titled "Statement of the ROK-US Summit". It states that "The two Presidents reaffirmed that the Korea-U.S. Free Trade Agreement (KORUS FTA) will boost trade, increase economic growth and create jobs in both the United States and Korea, while also adding an enduring economic pillar to our two countries' bilateral partnership. Toward that end, the two Presidents committed themselves to working with their respective legislatures to approve the KORUS FTA as soon as possible."

President Lee stated at a news conference on August 6 that "We also discussed specific ways to strengthen cooperation between Korea and the U.S. President Bush said that he will do his best so that the ratification of the KOR-U.S. FTA, as well as Korea's participation in the visa waiver program will be finalized within this year." See, transcript.

He added that "I will, on my part, continue to convince the Korea National Assembly for ratification".

President Bush stated that "I am worried about the protectionist signals coming out of the U.S. Congress, and one way to kind of send a different message is for the Democratic leadership in the Congress to bring the -- bring a couple of trade bills up, Colombia and Korea, and get some votes out there, and let Congress -- people in Congress declare one way or the other whether they're for open markets and free and fair trade. And I can assure you, Mr. President, this administration is for free and fair trade, and will continue to press hard for what I think is a very good agreement."

The US and Korea completed negotiation of this FTA over 17 months ago. See, story titled "US and Korea Announce FTA" in TLJ Daily E-Mail Alert No. 1,559, April 2, 2007. See also, text of the agreement, and particularly, sections regarding telecommunications [17 pages in PDF], electronic commerce [4 pages in PDF], intellectual property rights [35 pages in PDF].

On September 20, 2007, the U.S. International Trade Commission (USITC) released its report [392 pages in PDF] titled "U.S. Korea Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects", which concludes that if this FTA were implemented, "U.S. GDP would likely increase by $10.1–11.9 billion as a result of tariff and tariff-rate quota (TRQ) provisions related to goods market access."

People and Appointments

8/6. Brian Benczkowski was named Chief of Staff to Attorney General Michael Mukasey, effective August 15, 2008. He is currently Chief of Staff to Deputy Attorney General Mark Filip. He will replace Brett Gerry, who will leave the Department of Justice (DOJ). See, DOJ release.

More News

8/6. The U.S. Court of Appeals (3rdCir) issued an Order Amending Opinion [3 pages in PDF] in CBS v. FCC. This order does not affect the outcome or holding of the case. It revises several footnotes, and in particular, references to Action for Children’s Television v. FCC, 852 F.2d 1332 (D.C. Cir. 1988), and Action for Children’s Television v. FCC, 58 F.3d 654 (D.C. Cir. 1995). See, July 21, 2008, opinion [102 pages in PDF], and story titled "3rd Circuit Overturns FCC's Breast Broadcast Fine" in TLJ Daily E-Mail Alert No. 1,797, July 22, 2008. This case is CBS Corporation, et al. v. FCC and USA, U.S. Court of Appeals for the 3rd Circuit, App. Ct. No. 06-3575, a petition for review of a final orders of the FCC.

8/6. The Federal Communications Commission (FCC) filed its brief [64 pages in PDF] with the U.S. Court of Appeals (FedCir) in Biltmore Forest Broadcasting FM, Inc. v. U.S., App. Ct. No. 07-CV-316.

Go to News from August 1-5, 2008.