SOLVED!!!!!

The problem was indeed the encoding of the file. opening the file via a file handle with the encoding:(UTF-16le) filter did the trick. Here is the working code:

use strict;
use warnings;
use Encode;

my $username;
my $color;
my $filename = shift @ARGV;
my $fh;

open($fh, '<:encoding(UTF-16le):crlf', $filename);
binmode STDOUT, ':encoding(UTF-8)';

while(<$fh>){
    chomp;
    s/"//g;
    ($username,$color) = (split /,/,$_)[2,3];
    if ('agag' =~ m/($username)/){
    print STDOUT "here is the username: $username\n";
    }
}
[download]

Thanks so much to all of you for your help.

Interesting side note: I first learned perl back in 2001, coded a whole lot in a job I had through 2003, and got pretty proficient at it. Then, I didn't code at all (except for numerical stuff in C) until just this week, when all of a sudden I had to deal with some text files. I plowed ahead as if nothing had changed, coding in exactly the same style as I had 10 years ago. Reading all of the stuff on Unicode (by the way, those links are great Anonymous Monk), I see that that was very much the wrong choice! This is great, because it's given me a chance to learn about Unicode.

thanks again!