DENVER -- Immigration agents arrested seven executives and 1,187 illegal immigrants who are all employees of a manufacturer of crates and pallets as part of a crackdown on employers of illegal workers.

Authorities on Wednesday raided offices and plants of IFCO Systems in at least 26 states, including Colorado. IFCO is the largest pallet services company in the United States, and is headquartered in Houston, Texas.

As part of the national raid, Immigration and Customs Enforcement agents in Denver arrested 38 illegal aliens at one IFCO site, located at 5699 Dexter Street in Commerce City, Colo.

A federal prosecutor said U.S. ICE agents arrested seven current and former company managers on charges they conspired to transport, harbor and encourage illegal workers to live in the United States for commercial advantage and private financial gain.

Two other IFCO employees were arrested on criminal charges relating to fraudulent documents. Federal authorities said roughly 53 percent of the firm's 5,800 employees during 2005 had invalid or mismatched Social Security numbers.

The conspiracy charge carries a penalty of up to 10 years in prison and a fine of up to $250,000 for each illegal immigrant.

The arrests and search warrants are part of an ongoing criminal investigation of IFCO's Pallet Management Services division that began more than a year ago. According to a government affidavit filed in the Northern District of New York, the investigation began in February 2005 when ICE agents received information that IFCO workers in Guilderland, New York, were witnessed ripping up their W-2 tax forms and that an IFCO assistant general manager had explained that the workers were illegal aliens, had fake Social Security cards and did not intend to file tax returns.

According to the affidavit, subsequent investigation indicated that IFCO officials transported illegal aliens to and from work; paid rent for the housing of illegal immigrant employees; and deducted money from their monthly paychecks to cover these expenses. Former IFCO employees also said it was common practice for IFCO to hire workers who lacked social security cards or produced bogus identification cards.

The affidavit also alleges that IFCO officials knowingly hired an illegal alien who was an informant for ICE. In numerous recorded conversations, IFCO officials reimbursed the informant for obtaining fraudulent identity documents for other illegal alien employees; used the person to recruit other illegal workers; and advised the person and other illegal alien employees on how to avoid law enforcement detection, the affidavit alleges.

The German-based company said it will cooperate with the investigation.

"Employers and workers alike should be on notice that the status quo has changed," said Homeland Security Secretary Michael Chertoff. "These enforcement actions demonstrate that this department has no patience for employers who tolerate or perpetuate a shadow economy. We intend to find employers who knowingly or recklessly hire unauthorized workers and we will use every authority within our power to shut down businesses that exploit an illegal workforce to turn a profit."