SPECIAL REPORT---FRADULENT TESTIMONY TO SENATE

6/11/2000 

I know a lot of you receive a large amount of e-mail, but you need to pay extra attention to this one. Forgive me for writing in all-caps, but the information here is that A HIGH-TECH INDUSTRY CEO SUBMITTED *FRAUDULENT TESTIMONY* TO THE SENATE IMMIGRATION SUBCOMMITTEE IN SUPPORT OF RAISING THE H-1B CAP.

Many of you will remember womenConnect.com CEO Susan deFife, poster woman for the industry lobbyists. The lobbyists put her on the ABCWorld News Tonight story just last week (June 6), for  example, highlighting the H-1B she hired. She highlighted the same H-1B in her testimony to the Senate in October 1999, saying:

Now, I thought it would be interesting to know just how much Ms. deFife is paying this "rare worker" she sponsored for an H-1B visa, so I took a look at H-1B Hall of Shame online database of H-1B applications, which were obtained under FOIA from the Dept. of Labor. (This is the first time I used the database. I must say it is an amazingly powerful tool.) Enter Virginia for the state and womenConnect.com for the company name---and voila!, there is the entry for deFife's H-1B.

(The database does not give names, but this entry is the only one for womenConnect.com. The year of hire is given as 1998, matching what deFife testified, the job title matches, the company name and place match. Rob assures me that the database is complete for Virginia.)

So here it is: deFife hired this system administrator for only $35,000! Remember, she said that this woman was a new graduate, and at that time (NACE survey, 3 months after the hire) new IT graduates were being paid on average $45,000 for a Bachelor's degree!

No wonder some of the industry lobbyists have reportedly been pushing to remove a provision from Rep. Lamar Smith's H-1B bill which would set a floor of $40,000 for salary. The national median IT salary is over $60,000, so setting a $40K floor might seem rather toothless---it is rather toothless, actually, but one can see why the lobbyists' constituency like deFife even object to a $40K floor.

In short, this is perhaps the worst outrage I've seen in all the years I've been following the H-1B issue. I knew that some H-1Bs were being paid salaries as low as this, but I never thought that a CEO TESTIFYING ON THE MATTER WOULD SO BRAZENLY MISLEAD THE SENATE. Here deFife is telling what a dearth of IT workers we have, and yet she is paying her "rare find" well below average.

By the way, I just checked Ecutel, another Virginia firm whose CEO has testified to Congress in favor of raising the H-1B cap. I already knew they were suspect, because a member of my e-mail list who possessed the skills they wanted applied to them, contacting them repeatedly, and was never even given an interview. The H-1B database shows them hiring several H-1Bs in 1997 as software engineers at salaries at the $35,000 level. That level would have been below the average for new graduates, and if they weren't new graduates, the gap would be even bigger.

I hope that FAIR, NumbersUSA, APG, AEA, IEEE-USA (!), etc. really run with this one. The public may or may not understand that a veteran programmer can easily pick up a new language like Java, but the public certainly can easily see that fraudulent testimony---claiming a "desperate" shortage while egregiously underpaying one's workers---is an absolute disgrace.

Norm 

more on Susan deFife

Several items on Susan deFife, the CEO whom I accused of presenting misleading testimony to the Senate last October on her claimed need to hire H-1Bs:

1. She sent me e-mail today, saying that her company, as a startup, pays low salaries because it offers stock options and offers workers a flex-time work schedule. I replied that startups generally pay wages comparable to those of established firms (most startup stocks end up worthless), and that flex time is a given in this industry.

2. Ms. deFife's firm, womenCONNECT.com, complains (correctly) on its Web page that there is a gender gap in IT wages. Yet the mean wages she quoted for system administrators are higher than those at which she hired her H-1B system administrator. Of course, those averages include people with more experience than the H-1B she hired, but that illustrates the point I often make that employers would rather hire a younger, thus cheaper, H-1B than hire an older, thus more expensive, U.S. citizen or permanent resident.

3. Ms. deFife said last week on ABC World News Tonight that her firm is looking for more people to hire. (See transcript below, sent to me by a member of this e-mail list.) Yet http://job4.cbdr.com/womenconnect/ (which, granted, may not be an up-to-date listing) says there are no openings at the firm.

Norm

----------------------------- Begin Transcription 6/6/00------------------

From ABC World News Headquarters in New York... this is World News Tonight

with Peter Jennings....

[Jennings] Good evening... The economy has produced three meaningful headlines today... the productivity of the American Worker is increasing, up 2.4 % in the first quarter of the year... the internet sector is now growing faster than many people thought it was and its growth is now threatened by an acute shortage of workers who are adequately skilled... We're going to begin with the productivity, here's ABC's Bob Jamison...

[Jamison] The growth in productivity of American workers has now doubled in just 4 years... most economists credit heavy investment in computers and other information technology for the surge in productivity... and there's no sign it will slow down...

[Female Interviewee] It depends to some extent on how this new technology is being absorbed at every level, every sector of the economy and it can last for quite a while

[Jamison] Evidence of that can be found in study funded by Cisco Systems of 3000 new and old economy companies... The study reported the number of people employed in internet related jobs doubled last year to 2.5 million and that business done on the internet jumped 62% to 524 billion dollars. Cisco future is tied directly to the internet and some economists today said the numbers may be only half as big as Cisco says... but, even at the smaller numbers, in just three years the internet has become as big as the auto industry.

[Male Interviewee] The reason for this tremendous growth is because we're talking about a revolution in the way production is planned and implemented and these kind of revolutions transform the economy.

[Jamison] ... Which is why the development of the internet is now largely driven by traditional by old economy companies, and not just to sell their products... Many companies like Honeywell use the internet to buy parts used in production, to control inventories, and to instantly deal with customers.

[Male Interviewee] We found sustained improvement in productivity and if anything, have been able to accelerate it in a way that wasn't possible before.

[Jamison] With more and more companies interegrating their operations, there are forecasts of business done on the internet this year could reach 1 trillion dollars. Bob Jamison, ABC News, New York... 

[Jennings] On capitol hill today, leaders of technology and internet companies warned that the shortage of skilled workers in the United States threatens to undermine its competitive advantage in the world The business leaders said that if the law doesn't make it easier to bring workers here, US business will have to go there. Here's ABC's John Martin...

[John Martin] DoubleClick is an ad placement firm for the internet. It has 2000 workers and reportedly would like to hire 2600 more.

[DoubleClick spokesperson] When the talent isn't there, we don't want to stop our business because there's no talent -- we'll set it up elsewhere if that's the case.

[John Martin] womenconnect.com offers women advice on jobs in the workplace. It has only 19 employees and says it too needs more people. [womenconnect.com spokesperson] We put a job announcement out, and it was six months before we even had a qualified applicant.

[Jennings] That was when it hired this women, a Mexican systems engineer working in the US on an H-1B visa given to foreigners with skills needed by US companies. H-1B's are good for 6 years; this years quota, 115,000, has already been handed out. Today, the companies that need workers the most urge congress to raise the quota. 

[Bill Gates] The basic tradeoff for us as an industry is whether we can continue to do 90% of this work here in the United States or whether we have to go out... outside the United States to do the work.

[Jennings] American firms have already shifted work to India where many are skilled at software engineering. 

[John Martin] The companies say they'd like to keep these jobs and payroll in the United States, but unless Congress raises the number of visas, they might loses their competitive edge. John Martin, ABC News, Washington...

[Jennings] On Wall Street today... (snip)

---------------------------- End of Transcription ------------------------

deFife's company folds

A few months ago, when I reported to this e-mail list that Susan deFife, a CEO who had testified to the Senate that she had hired an H-1B only because she couldn't find Americans to fill the job, turned out to be paying the H-1B a salary well below normal. She somehow got wind of my posting, and replied to me the next day. In her message, she complained that her company was struggling for funding, so reading between the lines, she seemed to be thinking that hiring cheap H-1Bs is the only route to solvency. Of course, this is a ridiculous excuse, and of course the indirect government subsidy she got in the form of this cheap H-1B is greatly at odds with the "free market" philosophy espoused by the high-tech industry.

The enclosed article reports that deFife's company has finally reached the end of the line. This was not surprising; not only did I have deFife's e-mail message to go on, but also a Web search (deFife had excellent access to the press, and was in demand as a speaker) showed that she said she was very lucky to get her previous round of funding, as she secured it just before funding in general contracted.

Norm

Washington Post
By Shannon Henry
Thursday, August 31, 2000

One of Washington technology's Internet content pioneers is shutting the doors of her company today, having run out of money and potential buyers.

Susan Williams DeFife started WomenConnect.com, a Web site aimed at professional women, in 1994 from the sun room of her McLean house, where her kids would sit in the kitchen nearby and watch Mom talk to venture capitalists and install computer after computer in the windowed room.

DeFife eventually moved to real office space in McLean, ran a staff of 25 and raised $5.5 million from area investors including John Burton of Updata Capital, Mid-Atlantic Venture Funds and Women's Growth Capital Fund.

Her site offered lots of original content for women. Some of the stories focused on why women should have a strong handshake, how workaholics can reclaim their weekends and how to resign gracefully. A resources section advised how to find child care, and the site held live online chats on issues such as how to find the right career.

DeFife slowly but steadily built the business, becoming a well-known speaker in the tech community and forming partnerships with CNNfn and Lycos.

Then the Internet market took a nose dive in April. All of a sudden, potential investors who once cared only about how many "eyeballs" WomenConnect.com could draw were demanding profitability, of all things. It didn't help that other, better-known women-only sites such as iVillage and Oxygen.com also started to struggle. 

"I was surprised how big and fast the drop was," says DeFife, 39. "On April 14, the rules changed overnight."

DeFife says WomenConnect.com lost 90 percent of its value in a couple of weeks.

"We tried to turn the ship," she says, by drastically cutting expenses and laying off several workers, but it didn't save the company.

DeFife says she talked seriously to three companies over the past nine months about selling WomenConnect, but each deal fell through. "The likely acquirers are having their own difficulties," DeFife says.

DeFife says she can't blame the downturn in the market for all her problems. She says she did not understand how much money she would have to raise to expand or "scale" the company. She thinks she should have taken in more investments when she had the chance, instead of priding herself on how slowly she burned through money--compared with other Internet companies.

And then there was another obvious problem: "We didn't have enough traffic."

DeFife says her experience taught her that maybe women don't particularly want women-only Web sites.

"Women are not going to women's sites to spend their money," she says. And a prediction: "You're not going to see independent women sites existing within a year."

But she does think the business-to-consumer market will make a comeback.

Two weeks ago, DeFife realized the company wasn't going to be bought and she'd have to let her remaining 17 employees go. The site will remain up for another 30 days, and DeFife will try to sell the content database and maybe even the domain name. Then the servers will be shut down permanently.

"It's tedious," DeFife says of the unplugging process. She's not sure yet if she'll file for bankruptcy or liquidation, having just about $300,000 of debt outstanding.

She says she's not taking a vacation after this experience but wants to jump back into the next thing and has no intention of leaving Washington. "I was here when it started to percolate," she says.

So what may be the next thing for DeFife? She's not ready to say.

"I want to do the early stage again," she says. "But I want to do it right."