U.S. v. O'Connor

• Decision Date: 16 August 2001
• Docket Number: No. CRIM. 00-285-A.,CRIM. 00-285-A.
• Parties: UNITED STATES of America v. James F. O'CONNOR and James A. Geisler, defendants.
• Court: U.S. District Court — Eastern District of Virginia

158 F.Supp.2d 697

UNITED STATES of America v. James F. O'CONNOR and James A. Geisler, defendants.

No. CRIM. 00-285-A.

United States District Court, E.D. Virginia, Alexandria Division.

August 16, 2001.

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Robert Spencer, Dana Boente, U.S. Attorney's Office, Alexandria, VA, for Plaintiff.

C. Dean Latsios, Fairfax, VA, Michael William Lieberman, Alexandria, VA, for Defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

ELLIS, District Judge.

This sixty-one count criminal Indictment against two defendants, James F. O'Connor and James A. Geisler, came before the Court for a bench trial. In Counts 1-48 of the Indictment, defendants were jointly charged with (i) conspiracy to commit immigration fraud, tax fraud and wire fraud, in violation of 18 U.S.C. § 371 (Count 1), (ii) immigration fraud, in violation of 18 U.S.C. § 1546(a) (Counts 2-25), (iii) conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h) (Count 26) and (iv) money laundering, in violation of 18 U.S.C. § 1956(a)(2)(A) (Counts 27-48). In addition to these offenses, defendant O'Connor was separately charged in Counts 49-52 with filing false income tax returns, in violation of 26 U.S.C. § 7206(1) (Counts 49-50) and failure to file income tax returns, in violation of 26 U.S.C. § 7203 (Counts 51-52). Defendant Geisler, in turn, was separately charged in Counts 53-61 with filing false income tax returns, in violation of 26 U.S.C. § 7206(1) (Counts 53-55) and bankruptcy fraud, in violation of 18 U.S.C. § 152 (Counts 56-61).

In the course of the eleven-day bench trial, held on March 28-April 18, 2001, the government presented the testimony of thirty-seven witnesses. Included in this number were (i) one Immigration and Naturalization Service (INS) adjudication officer; (ii) one special agent of the INS; (iii) one revenue officer from the Internal Revenue Service (IRS); (iv) two special agents of the IRS; (v) one attorney with the Tax Division of the Department of Justice (DOJ); (vi) one immigration attorney involved in defendants' fraudulent immigration scheme; (vii) three former sales agents of InterBank, a company formed and operated by O'Connor and Geisler; (viii) one Bahamian bank representative involved in defendants' fraudulent immigration scheme; (ix) two accountants hired to perform work for O'Connor and Geisler, both individually and on behalf of InterBank; (x) seven alien investors recruited to participate in defendants' fraudulent immigration scheme; and (xi) one forensic accountant.¹

O'Connor and Geisler, in turn, jointly presented the testimony of twelve witnesses, including (i) defendant O'Connor;² (ii) five former employees of InterBank; (iii) a former Associate General Counsel to the INS; (iv) one immigration attorney; (v) one tax attorney; (vi) one accountant hired to perform work for O'Connor and Geisler, both personally and on behalf of InterBank; and (vii) an accounting expert.³

Recorded and issued here, pursuant to Rule 23(c), Fed. R.Crim. P., are the facts found specially from the record beyond a reasonable doubt, and the applicable conclusions of law.

FINDINGS OF FACT

I. The Defendants and the EB-5 Visa Program

1. Defendant James F. O'Connor is the founder and president of The InterBank Group, Inc. (InterBank), an umbrella company encompassing various other business entities controlled by him and his co-defendant, James A. Geisler, including Atlantic Forex, Market Makers and the Toll Taker Fund. Geisler first joined InterBank as a sales manager in 1990, but, since 1991, has served as a paid consultant. At all times relevant to this matter, O'Connor and Geisler were essentially partners in the business operations of InterBank and its various affiliated companies.

2. In 1994 or 1995, Mark Siljander, a former member of Congress who was then serving as a marketing consultant for InterBank, introduced O'Connor and Geisler to the EB-5 investment visa program, enacted by Congress in 1990. See 8 U.S.C. § 1153(b)(5). Under the EB-5 visa program, aliens may obtain lawful permanent resident status in the United States if they invest $500,000 in a new commercial enterprise located in a rural or high-unemployment area of the United States and create at least ten new jobs in the course of doing so. See id. To apply for an EB-5 visa, an alien must file an application, namely INS Form I-526, with the appropriate Service Center of the INS, establishing, inter alia, that his or her $500,000 investment is fully at risk and that the source of the investment is lawful. In this regard, federal regulations allow aliens to borrow funds to meet the required $500,000 investment, but the existence of any such loan is material and thus must be disclosed in the EB-5 application to enable the INS to determine (i) that the financing meets the regulatory definition of "capital,"⁴ (ii) that the debt is secured by the assets of the alien, not of the commercial enterprise in which he or she is investing, and (iii) that the alien is personally and primarily liable for the debt. See 8 C.F.R. § 204.6(e). Indeed, at trial, William Renwick, an INS adjudication officer, testified convincingly that the existence of any loan obtained and used by an alien in order to reach the requisite $500,000 investment amount is material and must be disclosed to the INS on Part 4 of Form I-526.

3. O'Connor and Geisler jointly devised a scheme and plan to induce aliens who wished to receive the benefits of the EB-5 program, but who did not possess the requisite $500,000 investment, to invest some lesser amount of money, typically between $100,000 to $150,000, with a purported EB-5 program operated by O'Connor and Geisler through InterBank. Thus, in 1996, O'Connor and Geisler, through InterBank, began marketing and selling the EB-5 visa program to alien investors under the name "Invest in America." One way in which InterBank accomplished this task was through the use of affiliated immigration attorneys, including Frank Ricci, who, after discussions with O'Connor and Geisler, marketed and sold the EB-5 program to various alien clients throughout the world.⁵ Typically, InterBank paid these affiliated immigration attorneys a fee, usually between $4,000 and $20,000, for each alien investor recruited to participate in InterBank's EB-5 visa program. In addition to using immigration attorneys, InterBank sales staff, including David Barber, David Wong and Gerson Furtado,⁶ also sold the Invest in America program to prospective alien clients directly, using newspaper advertisements, both foreign and domestic, live presentations, and telephone conversations. In this regard, O'Connor and Geisler explained the EB-5 visa program to the InterBank sales staff, created the marketing materials used to promote InterBank's "Invest in America" program, and directed the sales staff regarding the manner in which the program was to be marketed and sold. InterBank employees were typically paid a $4,000 commission for each alien investor recruited into the EB-5 visa program.

4. In selling the Invest in America program, both the affiliated immigration attorneys and the InterBank sales staff, at the direction of O'Connor and Geisler, advised prospective alien clients that the total required investment was $500,000, but that the alien need only contribute between $100,000 and $150,000, plus a processing fee of approximately $20,000.⁷ The aliens were further advised that the balance of the requisite $500,000 would be funded by a loan obtained by InterBank from a Bahamian bank on behalf of the alien client. As to this particular aspect of the investment, alien investors were told (i) that the loan was to be a non-recourse, non collateral loan, secured by the assets of InterBank and its affiliates, not the assets of the particular alien client, (ii) that the loan would be repaid by InterBank and its affiliates, and (iii) that the particular alien was not required to pay the loans or put up any collateral for the loan.⁸ Despite these representations to alien clients, the trial record, including the testimony of Ricci, Furtado, Wong and Barber, establishes that neither the sales staff nor the affiliated attorneys marketing the Invest in America program to alien investors ever actually saw any loan documents.⁹

5. Affiliated immigration attorneys and InterBank sales staff, again at the direction of O'Connor and Geisler, also promised alien clients that any funds contributed by the alien to the Invest in America program would be held in escrow until their EB-5 application was approved by the INS.¹⁰ The promises and representations concerning the escrow account, together with the representations concerning the non-recourse, non-collateral nature of the loans, were important and material to the alien clients and induced at least 200 alien clients to enroll in the Invest in America program, thereby providing InterBank, often by wire, with up to $150,000 in investment funds, plus a $20,000 processing fee. In all, InterBank took in approximately 21 million dollars from its alien client investors during the life of the program.

6. In 1996, the first year of the Invest in America program, InterBank filed five EB-5 petitions with the INS on behalf of alien clients. A portion of the requisite $500,000 investment for each of these petitions was comprised of a promissory note signed by the alien and, at the direction of O'Connor and Geisler, this fact was disclosed to the INS in the five petitions. Late that year, however, O'Connor and Geisler learned that the use of promissory notes in connection with the EB-5 program was drawing strict INS scrutiny and thus, they began searching for alternative means of financing using an overseas bank.

7. In early 1997, James Schmidt, a Florida businessman and attorney, introduced O'Connor and Geisler to Hywel Jones, a consultant to the Canadian Imperial Bank of...