Undercover ICE recordings reveal tactics of fake Farmington University

In February 2018, a foreign student from India called a university in metro Detroit to ask when classes would start.

"University of Farmington, office of admissions," answered a woman who posed as a university official. The woman was actually an undercover agent with U.S. Immigration and Customs Enforcement (ICE).

"Is there any chance to get me ... to know about my class schedule?" the student asked the university official, according to court records.

"Can we do what?" the undercover agent posing as a university official replied. "We're completely full. We don't have any normal classes to put you in. We are just helping you maintain your status by allowing you to enroll here, but you won't be taking any online classes, nor will you be going to any classes. Are you aware of this?"

Sounding confused, the student replied: "I don't know that actually. ... I don't know what to do now."

The undercover recording by ICE, reviewed by the Free Press and partly transcribed in a sentencing memo, offers a peek into a four-year undercover operation by the Department of Homeland Security that set up a fake university in Farmington Hills, luring more than 600 foreign students to enroll. The students had immigrated legally to the U.S., but since the university they enrolled in was created by ICE, unknown to them, they lost their immigration status.

About 250 of them were arrested and detained last year on administrative violations, with 80% of them already deported from the U.S. through voluntary departure, said ICE officials. The Free Press listened to two separate recordings of students, one male, one female, cited in court records in which they can be heard talking with the undercover ICE agent they thought was a university admissions official. Attorney Anjali Prasad said the recordings show that the students were duped by the undercover agents and were not at fault.

Seven of eight student recruiters who were charged criminally in the case have been sentenced and the one recruiter remaining, Phanideep Karnati, 35, of Kentucky, is to be sentenced this month in U.S. District Court in Detroit by Judge Gershwin Drain. All are expected to be deported to India after serving their sentences, said attorneys.

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The Free Press also reviewed transcripts of a phone conversation between an undercover agent and Karnati, and the interrogation in January 2019 of Karnati by federal agents with ICE's Homeland Security Investigations (HSI).

From December 2017 to March 2018, Karnati recruited 39 students for the University of Farmington, including the student who called the university in February 2018 to inquire about his classes, according to his plea deal. He worked in information technology for a health insurance company in Kentucky, and did university recruiting as a side job, court records show.

Karnati pleaded guilty in September to conspiracy to commit visa fraud and harbor aliens for profit, saying he believed that the university had online classes, but later realized that a foreign student can't maintain their immigration status by just online classes. There has to be some classes on-site for foreign students to maintain their status, according to U.S. immigration law.

Karnati's defense lawyer, Prasad, argues that he should not receive any prison time so he can be deported to India along with his wife and two children, whom she said will face hardships in India without his support.

Prasad said he's less culpable than the other seven recruiters because he was in the U.S. on an H1-B visa and was not dependent for his immigration status by being enrolled at the University of Farmington. Federal prosecutors have said the recruiters were involved in what they call a "pay-to-stay" scheme where students pay tuition to remain legally in the U.S.

Prasad and other defense attorneys have questioned the sting operation, saying it targeted unsuspecting students who were in the U.S. legally. A Free Press report in November sparked widespread interest in the case, with Sens. Elizabeth Warren, D-Massachusetts, and Kamala Harris, D-California, among the elected officials raising questions about the operation.

"I think my government's resources would be better spent protecting me from violent criminals and drug dealers," Prasad said. "I'm not sitting around worrying about what highly skilled, well-educated people are doing unless it affects my life and liberty, and it doesn't here. I'm no safer because of the sting operation. There are plenty of ways the government can make me feel safer and this isn't one of them."

Feds say recruiter abused system

The Department of Justice and ICE strongly defend their undercover operation, and have released transcripts and a video they say shows Karnati and the students are to blame. Prosecutors are asking for a sentence of 24 to 30 months.

In their sentencing memo, the U.S Attorney's Office in Detroit wrote that "Karnati, like his fellow conspirators, abused the United States student visa system to line his own pockets. Yet, Karnati is markedly different from his conspirators. Karnati chose to engage in criminal conduct even though he had already achieved what others desired; the ability to live and work in the United States with the possibility of a pathway to U.S. citizenship."

"Obviously, for Karnati, that was not enough," said the memo signed by U.S. Attorney for the Eastern District of Michigan Matthew Schneider. "Despite the fact Karnati was lawfully earning nearly $100,000.00 per year, he decided to knowingly recruit foreign students to the University of Farmington and several other schools, so that he could make more money and that the students could fraudulently remain and work in the United States."

In his guilty plea, Karnati said he had thought that the University of Farmington had online classes.

But in their memo, prosecutors wrote: "the evidence ... unequivocally demonstrates that Karnati knew that the University of Farmington had no classes."

Prosecutors said that another recruiter had "told Karnati there were no classes, the (ICE) undercover agent told Karnati there were no classes, Karnati acknowledged there were no classes and Karnati told his own students there were no classes."

In their memo, prosecutors gave transcripts of undercover recordings of phone calls and WhatsApp chats for their claims.

In a WhatsApp chat in January 2018 cited in the memo, a student writes to Karnati: "No need to go college and no assignments is it true?"

Karnati replies: "S."

Prosecutors said that "S" is shorthand for "Yes."

In their memo, Justice Department attorneys also cited an undercover video made by ICE of a meeting in June 2018 at the University of Farmington with Karnati, another recruiter, and an undercover agent named Ali Milani, who acted as the president of the University of Farmington.

Prosecutors said that the video shows Karnati saying at one point: "Farmington has one plan of … without classes..."

But Prasad, Karnati's defense attorney, said the video of the June 2018 meeting in Farmington Hills at the university shows that Karnati thought it had online classes.

In a discussion about online classes for citizens, Karnati asks Milani: “the citizens, online classes they are all going on still?”

Milani answers: “Ya of course...”

Prasad wrote in her sentencing memo that "Karnati was hardly the mastermind behind a scheme to send international students to a fake university. He was already referring international students to American universities when unfortunately for him he decided to add FU (University of Farmington) to that list."

A transcript of the June 2018 meeting shows Milani, the undercover agent, posing as an Iranian American when discussing the types of students at the University of Farmington.

"I am an Iranian so I have lot of connection with like Middle Eastern people," he said, adding that the university also had Indian and Chinese students.

Most of the students arrested were from India.

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ICE released a separate video last month in a news release that it said showed students interacting with an undercover agent posing as an official at the fake university. The clip shows four groups of people talking with the official about the university.

In one of the clips, a man whom ICE says is a student asks about transferring.

The undercover agent posing as a university official says: "But I don't have any classes to offer you. Do you care about that?"

The student replies: "Anything is fine. But my (immigration) status should be maintained."

Prasad said the video is unclear and that the students are not related to her client.

In a statement to the Free Press, Acting Deputy Director of ICE Derek Benner said: "Farmington is a clear example of a pay-to-stay scheme, which is against the law and, not only creates a dangerous lack of accountability, but also diminishes the quality and integrity of the U.S. student visa system."

Benner said that "each prospective enrollee was informed that there were no classes, curriculum or teachers at Farmington. ... Evidence, including video footage, audio recordings, and correspondence collected during the investigation supports that each prospective enrollee knowingly and willfully violated their nonimmigrant status."

Entrepreneur dreams turn into nightmare

Before his arrest in January 2019, Karnati had it all: a nearly six-figure salary in an industry with growth opportunities, and a wife with two bright boys, the older one excelling in martial arts and chess, court records show.

But his interaction with a fake university set up by ICE would lead to his downfall.

Karnati was born in 1983 in southern India into a Telugu-speaking family. He got his bachelor's degree in electrical and electronics engineering at Jawaharlal Nehru Technological University in Hyderabad, according to his sentencing memo filed by Prasad.

Like many immigrants from India of his generation interested in information technology, he decided to pursue opportunities in the U.S., arriving in 2011 on an H-1B visa.

His wife and child are on H-4 visas, which are issued to dependents of H-1B recipients, said the memo. In 2016, they had a second child, who is a U.S. citizen.

Prasad is arguing for no prison time for Karnati because she says his family would suffer in India without any economic means to support them while he is serving his sentence.

In the U.S., Karnati worked for GE, Syntel, and for five years at Humana, a health insurance company in Louisville, Kentucky, according to his LinkedIn profile, sentencing memo, and his statement to the probation department.

After he was criminally charged in January, he lost his job, but earned this year a master's degree in business analytics at the University of Louisville and enrolled in their PhD program in computer engineering and computer science. He's now working as a lead data scientist at Traveler's Insurance in Connecticut.

In his probation statement, Karnati said he became interested in becoming an entrepreneur, "watching all the Shark Tank episodes."

He said that after attending an entrepreneur's workshop in Louisville by Daymond John, the founder and CEO of the clothing company FUBU, he became "very much motivated and fired up with excitement."

That led him to become a university recruiter, he said. He recruited 39 students for the University of Farmington, being paid $300 per student, according to his plea deal.

University recruiting is a normal practice, but since Karnati was recruiting for a fake university, he was committing visa fraud, said prosecutors.

Karnati says that the university seemed legitimate.

He notes in his probation statement that the university had a professional website, logo, and was listed on the website of the Department of Homeland Security as an approved university for foreign students. Also, an accreditation agency had listed the university.

The Free Press reported last year that an official with the accreditation agency said they secretly worked with the Department of Homeland Security, which oversees ICE, to list the fake university as being accredited.

"My mind intuitively believed that there couldn't be a fake organization on this land which is communicating with government agencies like USCIS/DHS all the time and working with accreditation agencies ensuring standards," Karnati said in his probation statement.

Prasad, his defense attorney, cites WhatsApp messages to show that Karnati was not just recruiting for Farmington, but other universities.

Prasad also cites recordings of a female student who called the University of Farmington in January 2018.

The student called the university "to ask when classes begin," said the sentencing memo.

The woman answering the phone at the admissions office of the University of Farmington replied: "We are currently full. We don’t have any classes to offer you, not even online … what we can do for you to help you maintain your status, we can enroll you as if you are a student here … but you wouldn’t be coming to class nor taking any online classes. ..."

Sounding confused, the student said: "But they didn’t tell me about all this? Because I am supposed to enroll … in order to maintain my status. … Why was I not told about this?"

Arrest and interrogation

In December 2018, Karnati returned a call from 'Ali Milani,' the fictional name of the undercover ICE agent posing as the president of the University of Farmington.

"We have investors, we are trying to expand to California and other states," Milani told Karnati, according to a transcript of the phone conversation in court records.

"Would (you) be able to come here on (Jan.) 30?" the undercover agent asked Karnati.

Karnati replied: "That's perfectly fine then. I will come."

But when Karnati arrived that day at Detroit Metro Airport, he was instead greeted by federal agents with the Department of Homeland Security.

At "the Detroit airport, I was put to the wall, searched, shackled in front of everybody and paraded me all across the airport while everyone is watching," Karnati said in his probation statement. "That was the most embarrassing and shameful moment I ever had in my life."

One of the agents then told Karnati: "We're both special agents with Homeland Security."

Karnati was grilled hard by the agents, according to a transcript in court records. One agent kept on hammering Karnati about his intelligence, noting his degrees and career, asking him if he was so smart, why wasn't he aware of more details about the University of Farmington.

"You are a smart guy," the federal DHS agent told Karnati during his interrogation. "Are you not? ... I'm not an engineer because I'm not smart enough to be an engineer. You are smarter than me."

Karnati replied: "No, sir."

The agent said: "You are. ... Dumb people cannot be computer software developers. ... But when I ask you about the University of Farmington, you are: 'I don't know.'"

The agent asked Karnati if the university had online classes.

Karnati replied: "yeah."

"For sure?" the agent asked.

"Yes," Karnati said.

Contact Niraj Warikoo: nwarikoo@freepress.com or 313-223-4792. Twitter @nwarikoo