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IFCO Reaches Record Settlement in Immigration Probe
IFCO Settlement: IFCO Systems agrees to pay a record $20.7 million to settle immigration violations; company admits responsibility but is freed from federal prosecution.

By Chaille Brindley
Date Posted: 2/1/2009

            After two years of investigation by federal authorities, IFCO Systems N.V. has reached a record $20.7 million settlement, which frees the national recycler from criminal prosecution. Investigations continue into illegal conduct by employees and managers. IFCO admitted its responsibility for the past illegal conduct of its managers and employees associated with the employment of illegal alien workers at IFCO pallet plants. This is the largest corporate settlement in a work site enforcement case to date. 

            The settlement will help the company move on from the investigation that has circled the company since raids by immigration authorities in April 2006. Many pallet companies likely have questions about the impact of the settlement on IFCO and the industry. This article is a Q&A covering key aspects of the settlement and its industry impact.


Q: What exactly has IFCO agreed to pay?

A:  IFCO has agreed to pay $20.7 million dollars in civil forfeitures and penalties over four years, making this the largest corporate settlement in a work site enforcement case to date.  The settlement amount includes $2.6 million in back pay and penalties relating to IFCO’s overtime violations with respect to 1,700 of its pallet workers.  IFCO is also paying $18.1 million in civil forfeitures that will be available to support future law enforcement activities.


Q: What illegal conduct did IFCO admit to doing?

A: The federal investigation established and IFCO admitted responsibility for the following actions:

            • Certain IFCO managers and employees hired and employed illegal aliens; transported, harbored, and encouraged and induced to remain in the United States, illegal alien pallet workers; and/or conspired with others or aided and abetted others in connection with these criminal acts.

            • In at least one instance, the conduct of IFCO managers included providing funds for aliens to illegally enter the United States for the purpose of working at IFCO.

            • IFCO received repeated notice from the SSA and others, dating back to at least the year 2000, of the irregularities in the social security numbers used for employment purposes by many of its pallet workers.  IFCO, its managers and employees, failed to take significant measures to verify the social security numbers of these workers, and in 2004 and 2005, failed to make any effort to address the use of invalid social security numbers by numerous pallet employees.

            • Although IFCO did not admit violating the Fair Labor Standards Act, federal investigations further concluded that, at 30 of IFCO’s pallet plants, back wages were due, under the Fair Labor Standards Act, to piece-wage pallet workers – the vast majority of whom were illegal aliens.


Q: Why would IFCO agree to such a large fine?

A: The federal investigation has taken its toll on the company, and the settlement allows the company to move on without fear of prosecution for immigration violations. There is a catch though. IFCO must fully comply with a detailed agreement that calls for the company to take a number of measures to ensure compliance with the law. Additionally, IFCO must coorperate fully with the government’s continuing investigations and prosecutions against employees and managers.

            The settlement does not bind the Internal Revenue Service or the Tax Division of the United States Department of Justice with respect to any possible civil tax liabilities. Neither does the settlement prevent legal action by any state or local law enforcement agencies, any licensing authorities, or any regulatory authorities. Private parties could also file a lawsuit against IFCO for anti-competitive conduct. A number of recyclers are talking about bringing a coordinated legal action against IFCO although no such lawsuit has been filed to date.


Q: Are other pallet companies likely to be raided or fined?

A: That’s hard to say. The U.S. Immigration and Customs Enforcement (ICE) has raided and investigated a number of manufacturing companies outside of the pallet industry since its first high-profile raid of IFCO in April 2006.

            IFCO peaked the interest of federal authorities after employees were seen tearing up W-2 forms. The government conducted a lengthy investigation before conducting raids of IFCO facilities. Beyond simply hiring some illegal aliens by mistake, IFCO managers engaged in a variety of conduct that constituted transporting, harboring and helping illegal aliens obtain fake identification documents.

            According to federal court documents, IFCO managers knowingly hired illegal workers, helped them acquire fake documents, instructed employees to tear up or put fraudulent information on tax documents to avoid taxes, shuttled illegal workers to and from work every day, setup housing for illegal workers and took rent out of their paychecks, hired workers without identification or IDs that bore no resemblance to the person possessing them, changed payroll records to underpay workers for overtime hours, and gave illegal aliens tips on how to avoid being caught by authorities. These actions go way beyond simply suspecting that some workers may not be legal even though they possess proper documentation.

            Smaller pallet companies are less likely a target for federal investigators, although this does not free them from the responsibility of compliance. If you receive No-Match letters indicating that paperwork submitted by an employee does not match information in a federal database, you should take the appropriate steps to reconcile those discrepancies. All companies need to have policies in place to verify work documents and deal with any problems that arise. Companies should consult legal counsel to ensure that your policies follow both immigration and discrimination laws. Using E-Verify, a free software program that checks new hire data with federal records, is another measure that can demonstrate a company’s commitment to hire legal workers.

            Generally, pallet companies that have proper work authorization procedures in place and strive to hire legal workers should not have problems. Federal authorities realize that some people may submit fake paperwork and that companies cannot be document experts. The key appears to be having sound practices in place and following them with all employees. 

            As far as workforce enforcement, it appears the Obama administration may be less vigilant than the Bush administration to crack down on illegal aliens.


Q: What measures has IFCO taken to ensure compliance with federal immigration and work authorization laws?

A: The settlement includes a precedent-setting, compliance and reporting program, designed to prevent the employment of illegal aliens at IFCO plants in the future.  The company will take remedial actions in hiring, such as use of DHS’s “E-Verify” screening program for all new hires, and will verify the social security numbers of all IFCO employees through SSA. 

            The federal government is also mandating that IFCO require contractors and subcontractors to submit sworn affidavits about the work status of its employees. This must specify whether a contractor/subcontractor uses E-Verify and has received No-Match letters. IFCO is required to forward this information onto ICE. 

            IFCO is also required to maintain an employee hotline to receive reports of any suspected violation of law at the company. The agreement runs through the year 2012.

            IFCO already instituted a fairly aggressive compliance program as part of its public relations effort after the initial raids. This included hiring a full-time compliance officer, using E-Verify for new hires, and conducting regular audits of I-9 records by an independent firm. I-9 is the federal form that most be completed by all U.S. employers for all new hires as part of the work authorization process. (Obtain more information at www.uscis.gov/i-9)

            The settlement also called for involvement by IFCO’s senior management and board of directors to monitor the company’s compliance program. Furthermore, the settlement directed IFCO to use Spanish-language instructions for completing the Form I-9 for Spanish speaking workers, develop specific protocol for handling No-Match letters, and send out annual communication to pallet vendors and customers condemning the use of illegal workers.


Q: What did the federal authorities say about the IFCO settlement?

A: Andrew T. Baxter, Acting United States Attorney stated, “This settlement accomplishes the government’s objective of deterring employers who might seek to subvert the immigration laws of this country. The agreement severely punishes IFCO for its serious immigration and employment violations; but it also allows the corporation to continue its operations, so that its lawful employees and innocent shareholders

do not suffer the consequences of a business failure in this economy. It is our hope that the compliance and reporting requirements under the agreement will serve as a model for other businesses.”

            John P. Torres, Acting Assistant Secretary of Homeland Security for ICE, said, “Companies who break the law by employing illegal aliens often exploit them and gain an unfair competitive advantage in the marketplace. By hiring illegal workers, these companies are unjustly able to undercut their law-abiding competition.”


Q: What is the status of the ongoing investigations against IFCO employees and managers?

A: The IFCO managers who previously entered guilty pleas, and the respective charges to which they pled guilty, are as follows:

            • ROBERT BELVIN, of Stuart, FL (former General Manager, Albany IFCO plant):  Conspiracy to Transport and Harbor Illegal Aliens and Conspiracy to Possess Identification Documents with the Intent to Use Unlawfully (felonies);

            • JAMES RICE, of Houston, TX (former corporate New Market Development Manager):  Conspiracy to Transport and Harbor Illegal Aliens (felony);

            • STEVEN MEANS, of Cincinnati, OH (former corporate New Market Development Manager):  Conspiracy to Unlawfully Employ Illegal Aliens (misdemeanor);

            • BRYAN BAILEY, of Nashville, TN (former corporate New Market Development Manager):  Conspiracy to Unlawfully Employ Illegal Aliens (misdemeanor);

            • ABELINO “LINO” CHICAS, of Houston, TX (former Systems Manager): Aiding and Abetting the Transportation and Harboring of Illegal Aliens (felony);

            • MICHAEL AMES, of Shrewsbury, MA (former General Manager, Westborough, MA  IFCO plant):  Unlawful Employment of Illegal Aliens (misdemeanor);

            • CRAIG LOSURDO, of Arlington, TN (former Assistant General Manager, Albany IFCO plant):  Unlawful Employment of Illegal Aliens (misdemeanor);

            • DARIO SALZANO, of Amsterdam, NY (former Assistant General Manager, Albany IFCO plant):  Unlawful Employment of Illegal Aliens (misdemeanor);

            • SCOTT DODGE, of Elmira, NY (former Assistant General Manager, Albany IFCO plant):  Conspiracy to Unlawfully Employ Illegal Aliens (misdemeanor).

            The IFCO managers who are indicted on felony charges and pending trial are: 

            • CHARLES DAVIDSON, of San Antonio, TX (current Vice President – New Market Development; formerly, Director, New Market Development);

            • WILLIAM HOSKINS, of Cincinnati, OH (New Market Development Manager);

            • THOMAS SOTO CASTILLO, of Cincinnati, OH (Foreman, Cincinnati; operations manager for New Market Development);

            • WENDY MUDRA, of Tampa, FL (Human Resources Manager).

            The government’s investigation of the involvement of certain IFCO’s managers and employees in the hiring of illegal aliens and related conduct is continuing.


Q: What agencies are involved in the IFCO investigation?

A: The investigation is being conducted by ICE; the New York State Police,

Special Investigation Unit and

Financial Crimes Unit; SSA, Office

of Inspector General; IRS, Criminal

Investigation; and the U.S. Department of Labor, Wage and Hour Division. 

The Guilderland Town Police

Department and Schenectady Police

Department also provided assistance during the investigation. The prosecution is being handled by Assistant United States Attorney, Tina E. Sciocchetti.


Q: What happens if IFCO breaches its agreement with the U.S. Attorney’s office?

A: At the sole discretion of the U.S. Attorney for the Northern District of New York, IFCO can be prosecuted for the actions outlined in the settlement, if the company gives false information regarding the ongoing investigation or its current policies, violates the agreement or commits or attempts to commit any criminal act.


How to Be Prepared for an Immigration Raid

Given increased enforcement activity by U.S. Immigration and Customs Enforcement (ICE), it is important that companies and employees know how to be prepared in the event of a raid.

 Before a raid…

• Develop policies and procedures for handling a visit by ICE or other federal agents. This should include a chain-of-command hierarchy, suggested guidelines for workers and managers, etc. This should be reviewed by your attorney before being implemented. 

• Have your I-9 forms and other personnel records in one place. These should be well organized and periodically reviewed by management to ensure compliance.

• Distribute to employees and/or unions know-your-rights materials about what to do if raids occur or individuals are detained. This might include role playing for employees so that they know what to do, including foreman and shift managers. Individual have the right to remain silent, refuse to answer questions and request to talk with an attorney.

• Advise individuals not to sign any documents or allow ICE agents to coerce them into signing “stipulated orders of removal” or voluntary departure.

• Develop a rapid response team comprised of attorneys, company management and hr personnel.

 During a raid…

• Contact your attorney immediately and try to get them on-site as soon as possible.

• Be prepared to document all the facts about a raid, including any and all actions taken by ICE agents that may be unlawful, the names and badge numbers of ICE agents, and the names and dates of birth of detained immigrants.

• Obtain contact information, including the phone number, of the local ICE detention center. Obtain the name and contact information of the local ICE special agent in charge (SAC).

• Establish contact or strengthen your relationship with the local (1) Executive Office for Immigration Review (EOIR) chief counsel and (2) Office of the Federal Public Defender.

• If ICE denies detainees access to attorneys, members of the rapid response team can call the Executive Office for Immigration Review’s chief counsel to facilitate attorneys’ access to clients.

            Source: National Immigration Law Center and other legal experts

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