Feds Vow 'Handcuffs' in H-1B Fraud Crackdown Tied to Iowa's Cognizant Deal

The U.S. Department of Labor is taking aggressive action against two major tech firms accused of abusing the H-1B visa system, a move that carries significant weight for Iowa after the state signed a massive IT contract with one of the companies under investigation.

Labor Inspector General Anthony D'Esposito announced on Labor Day that investigations into Cognizant and Cloudera are moving forward with criminal implications. In a post on X, D'Esposito promised that those who defraud the system will face serious consequences.

“Handcuffs await,” D'Esposito wrote, signaling a criminal investigation into the companies' use of the Department of Labor's Program Electronic Review Management, or PERM, system.

What is the PERM visa program and how is it being abused?

The PERM program allows employers to sponsor foreign workers for permanent residency in the EB-2 and EB-3 employment categories. To qualify, companies must prove two things: that there are not enough qualified American workers available for the job, and that hiring foreign labor will not hurt the wages or working conditions of U.S. employees.

Critics say the system relies too heavily on employer attestation. Some companies list jobs in obscure publications aimed at foreign audiences, allowing them to claim no Americans applied. Others act as “body shops,” subcontracting foreign workers to other companies while paying them a fraction of the rate charged to the client.

Iowa's $419 million contract with Cognizant under scrutiny

The investigation hits close to home for Iowa. In June 2026, Governor Kim Reynolds' administration signed a managed-services deal with Cognizant and a cloud migration with Amazon Web Services, projecting more than $525 million in savings over 10 years. Public records later showed combined payments of about $419.7 million over a decade, compared with an estimated $1.98 billion to keep the work in-house.

A WARN notice listed roughly 192 to 200 state IT jobs ending August 3, 2026. Cognizant was expected to offer those workers positions. Reynolds defended the move, saying IT operations were not a core state function and that modernization required private partners.

Reynolds claimed that “at no point during our negotiations was it even considered to employ H-1B visa holders” and that the state and vendor were “fully committed from the onset to employing an Iowa-based workforce.” However, when contract terms became public, they clearly showed offshore Indian workers were part of the arrangement.

Cognizant's troubled history with American workers

Iowa signed the contract two years after Cognizant was found guilty of employment discrimination for hiring Indian workers over Americans. The company paid a multi-million dollar settlement and fine. That track record might have warned off other government clients, but Iowa moved forward anyway.

D'Esposito said investigators have already issued dozens of subpoenas as part of the large-scale probe into labor trafficking and abuse of foreign worker programs.

“Without a doubt... we are going to take an aggressive action, which we believe is probably the most aggressive action against foreign labour fraud by an Inspector General, this administration,” D'Esposito told Fox News. He vowed to “track down every lead” and said whistleblowers had raised concerns over “some of the biggest companies, like Cognizant.”

The investigators will work alongside the president and vice president's fraud task force during the probe.

Cloudera also faces federal action

Cloudera was already under a cloud of suspicion. In April, the Department of Justice sued the company for citizenship-status discrimination in PERM hiring from March 31, 2024, through January 28, 2025. Shortly after, Labor's Employment and Training Administration suspended all PERM applications by or on behalf of Cloudera.

The Cloudera case appears different from the Cognizant investigation. D'Esposito's “handcuffs” comment suggests the Cognizant case is criminal. Cognizant has filed over 100,000 visa applications since 2015, making the potential impact far greater.

Why this matters for American STEM workers

This investigation touches on a broader national concern. American students are encouraged to pursue degrees in science, technology, engineering, and mathematics, yet fewer than one-third of STEM graduates ever work in a STEM field. Nearly 10 percent of computer science and computer engineering graduates cannot find jobs in their field, despite living in what many call the Golden Age of computing.

The question is whether those jobs are being filled by foreign candidates bidding against Americans on price. So long as a single American STEM graduate cannot find work in that sector, there is no room for foreign labor.

President Trump has made cracking down on fraudulent visas a priority, and this investigation appears to be a direct result of that focus. For Iowa taxpayers and displaced state IT workers, the outcome of this probe could have lasting consequences.