Last week, U.S. District Court Judge Robert Pratt issued a 41 page ruling dismissing 8 of 18 counts involving mail fraud against Vision Systems Group Inc. and suppressing electronic data.  This has been viewed as a major blow to the government’s case against the New Jersey-based IT company.

In February 2009, U.S. Immigration and Customs Enforcement agents issued a search warrant which permitted them to search Vision Systems’ paper and electronic records.  The agents collected almost 100 boxes of evidence and made digital images of 21 hard drives.  As a result of the search, 11 individuals were arrested in 7 states and criminal charges for conspiracy and mail fraud were brought against Vision Systems.  The government alleged the company established shell companies in Iowa to take advantage of the state’s lower wage requirements for H-1B workers.  Initially, the government sought $7.4 million in forfeitures but this has since been reduced to $4.9 million.

In his ruling, Judge Pratt found the government’s search criteria was “over-inclusive” and that it failed to examine the digital images within the required 60 day timeframe.  He also opined that the government’s handling of the electronic search was “highly reckless.”

The criminal trial is scheduled for April 28, 2010.