Nice catch for Homeland Security

Terry Jeffrey
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Posted: Apr 26, 2006 12:05 AM

After Immigration and Customs Enforcement (ICE) agents last week secured criminal charges against seven current and former corporate managers and detained 1,187 illegal aliens working for IFCO Systems, a pallet and plastic-container company, Homeland Security Secretary Michael Chertoff said this was just the first step in a new campaign to strictly enforce the law against large-scale employers of illegal aliens.

"We're going to move beyond the current level of activity to a higher level in each month and year to come," he said.

It's about time.

The IFCO bust was the biggest ever for ICE. But if Chertoff follows through, IFCO may soon seem like just a nice-sized fish in a sea teeming with monstrous scofflaws.

The Social Security Administration (SSA) already knows where the immigration-law-breaking Leviathans lurk. We will soon learn if Congress and the administration really want to catch them.

Last year, I wrote a series of columns and testified on June 21 in the House Judiciary Subcommittee on Immigration about the Social Security Administration's Earnings Suspense File (ESF) and how it could be used to enforce the immigration law.

The ESF is where the Social Security Administration puts W-2 reports when the Social Security number on the report does not match the name. According to the Government Accountability Office, the ESF is growing by about 9 million W-2s per year.

This growth is primarily driven by employers who hire illegal aliens and file W-2s on their behalf using either another person's or a fake Social Security number.

Each year, SSA produces an internal list naming every employer that filed 100 or more non-match W-2s the previous year. SSA Spokesman Mark Lassiter told me this week that SSA also sends a notification letter to each employer who filed more than 10 bad W-2s in a year if those bad W-2s exceeded 0.5 percent of the employer's total W-2s.

Most employers on the list of those filing 100 or more bad W-2s most likely received a letter from the government telling them they had filed those bad W-2s.

This brings us to a second list. Call it the Leviathan List. In October 2004, the SSA inspector general released an audit report listing the "Top 100" employers that had filed the largest number of bad W-2s in the five years from 1997 to 2001. The report did not name the employers, but listed them by the state in which they were headquartered, the number and percentage of their bad W-2s, and other payroll data.

According to an affidavit filed by an ICE investigator in the IFCO case, IFCO filed about 5,800 W-2s for its pallet division in tax year 2005 and 53.4 percent of those were bad.

A similar performance in 1997-2001, however, would have landed IFCO's pallet division only in the bottom half of the SSA inspector general's Top 100. Seventy-five employers on that list averaged more bad W-2s per year than the approximately 3,097 filed by IFCO in 2005. Twenty-five filed percentages of bad W-2s higher than IFCO's 53.4 percent.

The unnamed California employer that ranked 13th, for example, filed 39,171 bad W-2s over five years (an average of 7,834 per year), or 78.38 percent of its total.

The Illinois employer that ranked first filed 131,991 bad W-2s (26,398 per year), or 11.68 percent of all its W-2s. It reported paying more than half a billion in wages on bad W-2s over five years.

One employer in the "Top 100" was a state government agency. The inspector general's report also mentioned a security guard service that submitted 8,902 W-2s in 2001, of which 4,321 were bad.

I asked the inspector general's office last June for the name of the security guard company and, in October, for the name of the state government agency. Each time, I was given the same answer: Section 6103 of the Internal Revenue Code prevents the SSA not only from giving the public the names of these employers, but it also prevents SSA from giving their names to the Department of Homeland Security (outside the context of an ongoing criminal investigation).

In his press conference about the IFCO case, Chertoff said he was asking Congress for "carefully crafted access to Social Security no-match data, so that we can detect those employers who are systematically employing workers despite the fact that there's an obvious mismatch between the names and the Social Security numbers in question."

Senate Finance Chairman Charles Grassley, the Iowa Republican, has inserted language into the Senate immigration reform bill that would require SSA to hand over to Homeland Security its annual list of all employers who file 100 or more bad W-2s.

No matter what else the Senate does this year on immigration, this provision should be made law.

Chertoff's agents should sharpen their harpoons. Whale season may be coming.