The revelation comes as issues of migrant pay and working conditions widen following large increases in farm placements in New Zealand during the past year.
Newly-appointed community development worker for the council Raewyn Barclay told Courier Country that allegations of pay skimming and passport retention had been supported by the council's own investigations that saw one Mid Canterbury migrant's passport returned to the council's Cass St Ashburton office within hours of a request by Immigration New Zealand following a council tip-off to the department.
The migrant worker had been trying for eight months to get the passport.
She said immigration officials who visited Ashburton recently for a four-hour session included a compliance officer for the South Island and an officer specialising in working with farm workers.
"It was a huge coup to get them here," Ms Barclay said.
"But now, that initial meeting has widened to include regular contact with the immigration fraud investigation team in Auckland and just in the last week I have taken advice from the immigration advisory authority, because we have been very concerned about what we can and cannot say to migrants.
"We are not immigration advisers."
Ms Barclay, whose job is funded by the Department of Internal Affairs, but based at the Ashburton Safer Communities Council and established to grow networks between the various groups, said the migrant farm worker issue in New Zealand was a disgrace.
"I am absolutely appalled that there are New Zealanders fleecing our migrant workers.
"It's total exploitation and a common occurrence in Mid Canterbury," she said.
Ms Barclay, a former Child, Youth and Family case worker, said New Zealand-based recruitment agencies were not all at fault, and neither were most of the country's farmers, many of whom were ignorant about what was going on.
"It's hard to know just how many recruitment agencies are operating in New Zealand.
"The potential is there for unscrupulous operators.
"However, New Zealand does have some important consumer safeguards.
"But the problem is that agencies operating from overseas are not governed by our laws.
"And so how do you get the message to migrants not to use them? Some of these offshore agencies are using very clever names to make people think they must be legit," she said.
"Immigration fraud is looking at this, too."
She said she believed incoming migrants were being met at the airport by recruitment agency officials and asked to sign documents they could not understand.
"They are later finding that $250 is coming out of their every pay and being paid to the recruitment agency on an ongoing basis."
The assumption was that passports and qualifications were handed over at that point, she said.
"Without those documents they cannot get driver's licences.
"They can't do anything if they have to leave the country in a hurry.
"They are stuck."
Ms Barclay said the single biggest impediment to remedying the migrant worker issue and the reason it was being allowed to continue was fear among the migrant workers that to speak up would mean being sent home.
"My message to the migrants is clear.
"Despite what you might have been threatened with by recruitment agencies or farm owners and managers, the only people that can have you deported is Immigration New Zealand and the courts (seen as the police by migrants).
"And, for that to happen, you must have committed a crime," Ms Barclay said.
She urged all "frightened" migrants to come forward fearlessly and bring copies of their contracts and documents to her at the Ashburton Safer Community Council.
Immigration New Zealand was extremely concerned at exploitation of migrant workers, she said.
"It is giving New Zealand an extremely bad name.
"Immigration wants to help you, but they need hard evidence.
"They need copies of letters and contracts.
"The fraud squad in Auckland is very keen to get their hands on this sort of hard evidence."
She said any fraud in Mid Canterbury might not have started there.
"Migrants move and people recruited by agencies outside the district have ended up in Mid Canterbury.
"What we are seeing could be the result of unscrupulous actions outside the region," Ms Barclay said.
"I believe that some recruitment agencies are milking the migrants and taking money on an ongoing basis that they ought not to be.
"That's why fraud [immigration] is investigating in Mid Canterbury.
"The agencies are skimming off poor people who think that this is normal."
Ms Barclay said the key to resolving the issue was building enough confidence in the migrant workers to get them to come forward.
"I am going to ask the Auckland fraud people to think about ways we can talk to the migrants here.
"They are so scared of reprisals and they don't want to rock the boat.
"I mean, they have come from countries where corruption is rife.
"These people know what corruption is, many New Zealanders don't.
"So I am going to ask if immigration would send someone to Mid Canterbury to speak to them with an assurance that what they say will be held in confidence," Ms Barclay said.
Courier Country's attempts to reach the immigration fraud officials involved in the inquiry for comment were unsuccessful late last week.
Courier Country is aware numerous recruitment agencies are operating within New Zealand and offshore in the job placement of migrant dairy farm workers.
We endeavoured to seek comment from some New Zealand agencies to provide an opportunity for a response to allegations of pay skimming and passport retention levelled against their industry.
We attempted to contact three agencies through the internet, and then by the phone numbers given.
Two could not be contacted by phone, and the third had not responded to our questions by the time of going to press.