Houston firm to pay $21 million in immigration case

By SUSAN CARROLL | Houston Chronicle
Dec. 19, 2008

A record-setting, nearly $21 million settlement that allowed a Houston-based pallet company to avoid criminal prosecution for hiring illegal workers should send a clear message to employers tempted to break immigration laws, federal officials said.

Prosecutors who handled the case against IFCO Systems North America said it "severely punishes" the nation's largest pallet manufacturing company, which was caught with more than 1,100 illegal immigrants on its payroll in spring 2006.

The settlement agreement announced Friday should send a "powerful message that ICE will investigate and bring to justice companies which hire illegal workers," said John P. Torres, a top Immigration and Customs Enforcement official.

The agreement between ICE and IFCO easily eclipsed the next-largest settlement on record for a company accused of knowingly hiring illegal immigrants. In 2005, Wal-Mart Stores Inc., paid $11 million to avoid prosecution for employing undocumented workers.

ICE has grown increasingly aggressive in pursuing proceeds from businesses that benefit from illegal labor, collecting more than $60 million in workplace-related criminal fines and forfeitures in the last two years, including IFCO's settlement. In 2003, the agency collected $37,500 in workplace fines and seizures, according to the nonpartisan Congressional Research Service.

ICE's strategy of hitting employers in the pocketbook appears to be working, said Don Kerwin, vice president for programs for the nonpartisan Migration Policy Institute in Washington, D.C. Businesses pay attention to the bottom line, he said.

Can't write it off

Mark Krikorian, executive director of the Center for Immigration Studies in Washington D.C., called the size of the IFCO settlement significant.

"It's clearly not something they can just write off as the cost of business," said Krikorian, whose organization promotes stricter immigration controls. "It's likely to prompt them to re-engineer their labor practices so they're less likely to hire illegal (immigrants). And that's the goal."

In fiscal year 2007, ICE secured fines and forfeitures of more than $30 million in worksite enforcement cases. ICE also arrested 863 people in criminal cases and made more than 4,000 administrative arrests during that timeframe — a tenfold increase over a span of five years.

More than 87,000 companies have signed up for the federal government's electronic employment verification system, known as "E-Verify." According to immigration officials, the number of employers registered in the program is growing by more than 1,000 per week.

"The enforcement that's been going on over the past year or two has already had a significant effect on employer behavior," Krikorian said. "A lot of companies are trying to make sure they don't end up in the same hot water."

Kerwin said the IFCO case is not only significant in terms of the size of the settlement, but also because ICE targeted an employer accused of other labor-related crimes. The settlement includes $2.6 million dollars in back pay and penalties from IFCO's overtime violations impacting about 1,700 pallet workers.

For employers who knowingly hire significant numbers of illegal immigrants, and are violating not just immigration laws, but also labor laws, the IFCO settlement "shows them that somebody out there is watching — and that the kind of risks they're running may not be cost-effective," Kerwin said.

The agreement effectively resolved the company's criminal liability in connection with what was at the time one of the biggest workplace enforcement raids in the nation's history.

The government began investigating IFCO following a tip to ICE in February 2005 that illegal immigrants at an IFCO plant in Albany were seen ripping up their W-2 forms. On April 19, 2006, ICE agents arrested 1,187 illegal immigrants at more than 40 locations nationwide including Texas.

7 have pleaded guilty

Seven IFCO managers were charged with crimes including knowingly hiring illegal aliens and transporting and harboring illegal aliens. All seven have pleaded guilty and are awaiting sentencing. Five additional IFCO managers were indicted in February for similar crimes and are awaiting trial.

The federal government's analysis of payroll information IFCO submitted to the Internal Revenue Service and the Social Security Administration suggest that from 2003 through April 2006, as many as 6,000 illegal immigrants worked at IFCO plants, according to federal prosecutors.

The settlement agreement concerns only the liability of the corporation and does not address any pending or possible future criminal charges against individual employees.

In a statement released Friday, the firm said it cooperated with the government's probe.

"Over the last 32 months, we at IFCO have significantly upgraded our compliance procedures to go well beyond what the law requires," said IFCO President Dave Russell.

susan.carroll@chron.com