The federal government is set to slap Infosys Ltd. (500209.BY) with the largest immigration fine ever, claiming the Indian outsourcing giant illegally placed workers on visitor, rather than work, visas at big corporate clients across the U.S.

The government is expected to announce Wednesday it will fine Infosys about $35 million, according to people close to the matter. An investigation by the Department of Homeland Security and the State Department found that the Indian company used inexpensive, easy-to-obtain B-1 visas meant to cover short business visits-instead of harder-to-get H-1B work visas-to bring an unknown number of its employees for long-term stays, these people say.

The probe comes amid a debate over whether foreign workers, particularly in the software sector, are displacing qualified Americans because they are cheaper. The investigation spurred the government to say it intends to tighten regulations that critics say allow employers to abuse the immigration system.

"This complaint and large settlement should be a wake-up call to all employers that the government is serious about enforcing the H-1B visa regulations," said Stephen Yale-Loehr, a Cornell University immigration-law professor.

Infosys said in an email that it is talking with the U.S. Attorney's office, "regarding a civil resolution of the government's investigation into the company's compliance" with employment-record "I-9 form" requirements and past use of the B-1 visa. A company spokesman, who confirmed a resolution will be announced Wednesday, said Infosys had set aside $35 million to settle the case and cover legal costs. He said the sum was "a good indication" of the amount involved.

A spokesman for Homeland Security Investigations, the DHS unit leading the probe, declined to comment before an official announcement. An official with the U.S. Attorney's office confirmed the resolution would include only civil penalties and constitute "a full resolution to the case."

A media advisory issued by the Office of U.S. Attorney John M. Bales for the Eastern District of Texas said DHS and the State Department would on Wednesday "announce the settlement of systemic visa fraud and immigration abuse allegations with an international corporation."

The alleged practice enabled Infosys to undercut competitors in bids for programming, accounting and other work performed for clients, according to people close to the investigation. Infosys clients have included Goldman Sachs Group, Wal-Mart Stores Inc. WMT, -1.02% and Cisco Systems Inc. CSCO, -1.38% .

A Goldman spokesman declined to comment.

A Wal-Mart representative said he wasn't able to comment without knowing more about the situation.

A Cisco spokeswoman said the company still uses Infosys but couldn't comment further.

The Infosys spokesman declined to comment on the details of the investigation.

H-1B visa holders can remain in the U.S. for as long as three years and are paid locally; their employers withhold federal and state income tax. B-1 visa holders are paid by the employer from their home country.

B-1 visas are intended for foreign nationals who come to the U.S. for purposes such as attending business conventions, consulting with business associates or installing machinery. The U.S. issues just 65,000 H-1B visas a year, and demand sometimes exceeds supply. H-1Bs take several months to be processed and can cost $5,000 per individual, including $2,000 in filing and legal fees. There is no cap on B-1 visas, which can be obtained in a matter of days for $160.

In recent years, Congress has introduced antifraud, training and other fees that have raised the price of securing an H-1B visa.

Infosys is best known as an outsourcing company that provides India-based computing and other technology services to Western clients. But it also boasts thousands of U.S.-based employees who develop and install software for back-office accounting, logistics and supply-chain management for companies in retailing, finance and manufacturing.

As the controversy unfolded, Infosys continued to expand its business, bringing in $7.4 billion in revenues in the fiscal year that ended last March, 5.8% higher than a year earlier. During the same period Infosys's net profit rose half a percent, to $1.73 billion.

The allegations came to light publicly in February 2011 after Infosys employee Jack "Jay" Palmer sued the company for harassment and breach of contract. Mr. Palmer alleged that managers retaliated against him after he raised concerns that the firm may have violated immigration laws.

Mr. Palmer said he attended meetings in Bangalore, where Infosys officials discussed the need to find "ways to creatively get around the H-1B limitations and process to work the system to increase profits and the value of Infosys" stock," according to the lawsuit. According to Mr. Palmer's complaint, he was asked to prepare letters in support of B-1 applications stating "the employee was coming to the United States for meetings, rather than to work at a job."

The federal judge dismissed that case in August 2012, saying that Infosys's treatment of Mr. Palmer didn't reach the threshold for harassment and contract breach under laws in Alabama, where he worked. Mr. Palmer has been cooperating with the investigation, according to his attorney, Kenny Mendelsohn.

Mr. Mendelsohn said he couldn't comment before an announcement is made. Mr. Palmer remains an Infosys employee but he isn't assigned any work, Mr. Mendelsohn said.

--Justin Baer contributed to this article.

Write to Miriam Jordan at miriam.jordan@wsj.com and Joel Schectman at joel.schectman@wsj.com

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