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IFCO ICED?
Government conducts immigration raids, levels criminal charges against IFCO managers.

By Chaille Brindley
Date Posted: 11/1/2006

Agents from the Immigration and Customs Enforcement (ICE) along with other law enforcement authorities recently raided IFCO Systems facilities across the country as part of a national sting operation . These actions come as the federal government begins cracking down on businesses that hire illegal aliens.

Authorities arrested approximately 1,187 people at IFCO facilities. Criminal complaints were filed against seven IFCO managers or former managers in connection with the company’s employment practices.

The raids were part of a highly publicized announcement by the Department of Homeland Security (DHS) as it unveiled new enforcement initiatives . DHS is moving from a policy of fines and civil penalties to more aggressive enforcement and the leveling of criminal charges against businesses that knowingly skirt immigration laws.

The IFCO investigations have sparked concern among industries around the country where many immigrant workers are utilized. Of course, this includes the pallet industry, especially pallet recycling. Even some companies with thorough screening processes have taken notice because it can be easy to acquire fake documents , especially Social Security cards. Businesses just want to know what they have to do to be legal.

ICE Enforcement & Criminal Conduct Guidelines                                                                              Bill Riley , former national unit chief for worksite enforcement and a special agent with the Philadelphia ICE office, said, “ Managers are not getting arrested for oversight .”

In the case of IFCO, Riley said that these were not “misunderstandings .” He characterized the allegations as “criminal actions” and deliberate attempts to get around the law .

Riley said that there are good faith provisions in the law that keep people from being prosecuted just because they make mistakes. Simply having a suspicion that some employees might be illegal is not the same as knowingly trafficking or hiring illegal workers . It all gets down to a matter of intent. If I-9 forms are properly filled out and an employer does not knowingly hire workers that are illegal, then individuals can’t be charged with criminal conduct, according to Riley.

I-9 process is part of the employment eligibility verification system established by the Immigration Reform and Control Act of 1986.

Riley said that ICE is targeting employers that make a profit out of exploiting undocumented workers . Riley recalled one previous investigation where ICE found 100 illegal workers even though it could not show any criminal conduct on the part of the employer. He said, “Just because illegal workers are arrested at a worksite doesn’t mean that a company did anything to violate the law.”

Allegations against IFCO                                                                                                                         In the case of IFCO, the allegations go way beyond basic I-9 compliance issues. According to an affidavat filed by federal authorities, the following actions were taken by IFCO managers:

  • Some IFCO employees were seen ripping up their W-2 forms under the supervision of IFCO management. The manager explained the action by saying that the Hispanic males were illegal aliens with fake social security cards, and they did not intend to file taxes. 
  • IFCO managers are accused of helping illegal aliens acquire fake documents that would allow them to work in the United States .
  • It was a common practice for the Guilderland, N.Y., IFCO facility to hire workers who lacked social security cards or produced identification cards that contained photos that bore no resemblance to the person possessing them.
  • An IFCO assistant general manager instructed employees to enter “eight” for the number of allowances on their W-4 tax forms to limit withholding because they were not going to file tax returns anyway.
  • A former IFCO bookkeeper from one facility told federal authorities that she was instructed by IFCO managers and company headquarters to record only up to 40 hours of work per week on the payroll records for all piece rate workers, including pallet repairmen. The bookkeeper stated that this procedure meant that piece rate workers were underpaid for the overtime they worked.
  • IFCO managers gave illegal aliens tips on how to avoid being caught by authorities.

IFCO maintains that the allegations are limited to a few isolated locations. Mike Hachtman, IFCO’s vice president of business development, said, “Each of our operations runs fairly autonomously. We are proud of the entrepreneurial spirit that each of our managers has. And it does appear that those alleged incidents are isolated.”

A number of the men arrested in the recent raids are no longer with the company. IFCO has placed on administrative leave all the mangers that were arrested in the raids as the company institutes its own internal investigations into the criminal allegations.

Hachtman said, “We are cooperating fully with ICE and other authorities including voluntarily allowing ICE to visit many of our facilities this past Wednesday. We are now working to understand the facts and will implement any additional changes necessary to further improve our current procedures.”

 According to Michael Chertoff, Secretary of Homeland Security, the IFCO raids are the largest single worksite enforcement operation against a company in American history . Authorities indicated that the company has been under investigation for more than a year. Raids took place at over 40 individual locations in 26 states.

Chertoff used tough language as he compared those companies that knowingly hire illegal workers to “other criminal organizations.”  He said, “We are not focused on individual cases involving a single violator here or a single violator there. But actually looking at those people who adopt as a business model the systematic violation of  U.S. law.”

ICE claims that IFCO officials knowingly hired an illegal alien who was an informant for ICE. The government alleges that in numerous recorded conversations, IFCO officials reimbursed this person for obtaining fraudulent identity documents for other illegal alien employees and used the person to recruit other illegal workers .

The Dilemma of Social Security Data                                                                                             Government records suggest that approximately 53.4% of the Social Security numbers contained on the IFCO payroll of roughly 5,800 workers during 2005 were either invalid, did not match the true name registered with the Social Security Administration for that number, or belonged to children or deceased persons. The Social Security Administration (SSA) sent at least 13 written notifications to IFCO headquarters about discrepancies on its payroll records.

DHS and ICE made a big deal of the repeated notifications by the SSA . That may be the most intriguing part of the story for typical pallet companies. It is not uncommon to receive a notification from the SSA that information given by an employer does not match Social Security records.

Federal law prohibits the SSA from releasing information to DHS and other law enforcement agencies unless the company or individual is actively being investigated . Chertoff called on lawmakers to make it easier for DHS to access Social Security data in order to identify companies that have a high percentage of illegal workers.

Ian Band, a partner with Hunton & Williams who specializes in immigration law, said, “The biggest problem for employers is that the government’s position is that we have given you this process. We are not sure how you do it right. But we will let you know when you do it wrong. It puts employers in a bad position .”

 “If you read some of the articles on this raid, one of the ICE agents said, ‘Well, they should have known that there was something wrong because they got 13 letters from Social Security.’ ” Ian added, “If you read the Social Security letter, all it says is that you have an obligation to report social security numbers and names, and some of those don’t match. You need to provide us with the right numbers. And by the way, don’t use this as a basis to terminate anybody.”

The SSA indicates that using faulty data notices could put employers in jeopardy of being sued for illegal discrimination while the DHS points to bad Social Security numbers as proof of a problem . This fact does not seem to be lost on DHS.

Chertoff admitted, “ Employers who want to stay within the law need a clear set of rules to follow. ICE and DHS will seek to develop an administrative regulatory program to provide clearer guidance to employers.”

In the meantime, employers have to reduce risk and develop a smart policy that is used across the board for all new hires. The government does offer a data search program to help companies comply with immigration laws. But this program is not mandatory and come with its own limitations.

Smart companies should consider consulting an attorney with expertise in immigration law to help them develop sound policies and documentation procedures. Employees should be educated on these procedures to ensure that the system works as intended.

Market Impact of the IFCO Shakeup                                                                                               IFCO is the largest recycler in the United States . It operates pallet management and recycling systems for many large retailers including: Wal-Mart, Target, The Home Depot, Kmart and Office Depot. IFCO’s strong relationship with major retailers gives it access to millions of pallet cores . This gives IFCO an edge in many markets where the core supply is tight.

At this time, federal authorities refused to implicate IFCO senior managers and executives in any illegal activity. But ICE chief Julie Myers said, “There's no allegation of that at this time. It's certainly an ongoing investigation. I will tell you, though, that we are troubled by some of the things that we've seen at IFCO ."








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