Title: Collins v. First Union National Bank
Citation: N/A
Docket Number: 052647
State: Virginia
Issuer: Virginia Supreme Court
Date: November 3, 2006

Present:  Hassell, C.J., Lacy, Keenan, Kinser, and Lemons, 
JJ., and Carrico and Russell, S.JJ. 
 
IAN G. COLLINS, ET AL. 
             OPINION BY 
 
 
 
SENIOR JUSTICE CHARLES S. RUSSELL 
v.  Record No. 052647  
          November 3, 2006 
 
FIRST UNION NATIONAL BANK 
 
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 
Gaylord L. Finch, Jr., Judge 
 
 
This appeal presents the question whether a bank is 
liable to parties designated as beneficiaries of accounts set 
up for their benefit, using the term “For The Benefit Of ___” 
(FBO accounts), when the beneficiaries had not contracted with 
the bank and had no signatory authority over the accounts.  
The dispositive issues are whether the beneficiaries were 
“customers” of the bank as defined by the Uniform Commercial 
Code, Code § 8.4-104(a)(5), or whether the bank had otherwise 
assumed duties to protect their interests. 
Background
 
In 1990, Congress enacted 8 U.S.C. § 1153(b)(5) (1988 & 
Supp. II 1990), known as the EB-5 Investment Visa Program, 
whereby foreign nationals could obtain permanent resident 
status in the United States for themselves and their families 
upon two conditions:  (1) the applicant must invest $500,000 
in a new commercial enterprise located in a rural or high-
unemployment location in the United States, and (2) the 
enterprise must create at least ten new jobs.  Each applicant 
was required to furnish proof that he had at least $500,000 in 
cash, fully at risk, that the source was lawful, and that he 
had a relationship with a financial institution in this 
country that would hold his money on deposit while his 
application for a visa was being processed. 
 
Two individuals, James F. O’Connor and James A. Geisler, 
concocted an elaborate scheme to defraud foreign nationals 
interested in obtaining such visas.1  In 1996, they began to 
market to foreign investors worldwide an “opportunity” to 
enter the EB-5 visa program by making an investment of only 
$100,000 to $150,000 instead of the $500,000 required by the 
federal law. 
 
O’Connor and Geisler were partners in an umbrella 
organization called The InterBank Group, Inc. (InterBank), 
which encompassed a number of business entities that they 
controlled.  Through InterBank, they marketed and sold their 
EB-5 visa program to foreign investors worldwide under the 
name “Invest in America.”  The investors were told that after 
they had contributed $100,000 to $150,000, plus a $20,000 
“processing fee,” InterBank would fund the rest of the 
required $500,000 by a loan InterBank would obtain for each 
                     
1 O’Connor and Geisler were both convicted of a number of 
federal felonies and sentenced to imprisonment as a result of 
a 61-count federal indictment arising from this scheme.  U.S. 
v. O’Connor, 158 F. Supp. 2d 697 (E.D. Va. 2001). 
 
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investor from a bank in the Bahamas.  The investors were told 
that they would not be required to repay the loans or put up 
any collateral to secure them; rather, InterBank would be 
fully responsible for the loans.  The investors were told that 
the money they had contributed would be held in escrow until 
their EB-5 visa application had been approved by the federal 
government.2  Over the life of the “Invest in America” program, 
InterBank took in approximately 21 million dollars from over 
200 foreign investors. 
 
InterBank set up a system of sham loans in order to place 
$500,000 in each investor’s account for a short period of time  
to demonstrate to the federal authorities that the investor 
had the requisite funds on deposit to qualify for an EB-5 
visa.  InterBank first opened an FBO account in First Union 
National Bank (FUNB) for the benefit of an individual 
investor, and in it deposited the investor’s original $100,000 
to $150,000 contribution.  Within 24 hours, InterBank wired 
$350,000 to $400,000 to an account in the Bahamas.  The 
Bahamian bank then wired that sum to FUNB for deposit to the 
individual investor’s FBO account, thus increasing that 
account’s balance to $500,000.  InterBank then obtained a 
                     
2 Each investor was given an “Escrow Agreement” wherein  
“Invest in America, LP” and its attorney agreed to hold the 
investor’s money in an “attorney's trust account” until a visa 
was issued.  No such accounts were ever opened. 
 
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“print screen” showing a $500,000 balance in the investor’s 
FBO account at FUNB as false proof to the federal authorities 
that the investor had indeed put up the amount to qualify for 
a visa.  As soon as the “print screen” had been obtained, 
InterBank, which exercised sole signatory authority over the 
FBO account, promptly removed the entire $500,000 and re-
deposited it in a general account under InterBank’s control.  
As the United States District Court found at O’Connor and 
Geisler’s criminal trial, “These funds were then used, again 
and again, to effect similar sham loan transactions in 
connection with other alien investors.”  U.S. v. O’Connor, 158 
F. Supp. 2d 697, 707 (E.D. Va. 2001).  Needless to say, the 
investors’ funds disappeared entirely in the process. 
Facts and Proceedings
 
The plaintiffs in the present case are 15 foreign 
nationals (the investors)3 who lost their investments as a 
result of the “Invest in America” scheme.  They brought this 
action for damages against FUNB alleging fraud, breach of 
contract, negligence, and civil conspiracy.  After a bench 
trial, the trial court ruled against the investors on all 
                     
3 Ian G. Collins, Pradip Muchala, Manish Patel, Muna 
Zuniera, Kiran M. Shah, Kshama Lodha, Megha Shresta, Archana 
Shresta, Bishnu Shresta, Doraisamy Venkataperumal, Mohammed 
Siddiqi, Roberto Comige Woisky Do Rio, Seyed Ali Shahrokny, 
Simon Oliver, and Carlo Barbieri. 
 
 
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counts.  We awarded the investors an appeal, limited to the 
breach of contract and negligence claims.  The pertinent facts 
will be stated in the light most favorable to FUNB, the 
prevailing party at trial. 
 
The evidence showed that the investors had, together, 
lost $1,872,000 and that none of them had ever received a 
visa.  Their claims against FUNB were based primarily on the 
conduct of Harry Biehl, an assistant vice president of FUNB 
who oversaw the opening and operations of the "Invest in 
America" accounts, including the investors’ FBO accounts.  
Biehl testified that he first met O’Connor and Geisler in 
September 1997 during a visit to InterBank’s offices to 
explore the contemplated business relationship between FUNB 
and InterBank.  He understood that InterBank was dealing with 
foreign investors and his concern was “what assurances as a 
bank do we have that we’re not dealing with some drug 
trafficking, some criminal aspects that might be overseas.” 
 
A few days later, Biehl visited InterBank again.  
O’Connor and Geisler showed him an escrow agreement they had 
prepared with FUNB’s name entered on it.  He testified:  “I 
immediately handed it back to them and told them we would not, 
[on] any condition, open up escrow accounts.”  They then asked 
him, “what it is that we could do.”  In response, Biehl 
suggested a single account under InterBank’s control which 
 
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could receive transfers and from which InterBank could 
disperse funds to invest for their clients in accordance with 
“whatever agreement they might have had.”  O’Connor and 
Geisler told him that they could not commingle the investor’s 
funds; that “[they] had to stay separate.”  Biehl then 
suggested that they set up accounts “for them and for the 
benefit of . . . for their clients” in order to “identify who 
the individuals were that they were opening these accounts up 
for, for their own internal accounting records.”  O’Connor and 
Geisler agreed to this proposal and InterBank opened the 
accounts in the form:  “Invest In America For the Benefit Of 
[name of investor]” or, in short form:  “Invest In America, LP 
FBO [name].”  It is undisputed that the individual investors 
had no direct relationship with FUNB with respect to the FBO 
accounts, had no communication with the bank concerning them 
before Interbank opened them, signed no documents relating to 
them, and had no signatory powers over them. 
 
At the conclusion of the trial, the court took the case 
under advisement and considered briefs filed by counsel.  
Thereafter, the court ruled that the plaintiff investors had 
failed to carry their burden of proving, by a preponderance of 
the evidence, that they were customers of FUNB or that FUNB 
had entered into any agreement to assume fiduciary duties 
toward them.  The Court also held that the plaintiffs had 
 
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failed to prove, by a preponderance of the evidence, that a 
relationship existed between the investors and the bank that 
would give rise to a duty of care on the part of FUNB.  Thus, 
the court found in favor of FUNB on both the breach of 
contract and negligence counts and entered final judgment for 
the defendant. 
Analysis 
 
We give the findings of fact made by a trial court that 
heard the evidence and evaluated the credibility of the 
witnesses at a bench trial the same weight as a jury verdict.  
Those factual findings will not be disturbed on appeal unless 
they are plainly wrong or without evidence to support them.  
Forbes v. Rapp, 269 Va. 374, 379-80, 611 S.E.2d 592, 595 
(2005).  For those issues that present mixed questions of law 
and fact, we give deference to the trial court’s findings of 
fact and view the facts in the light most favorable to the 
prevailing party, but we review the trial court’s application 
of the law to those facts de novo.  Caplan v. Bogard, 264 Va. 
219, 225, 563 S.E.2d 719, 722 (2002). 
 
On appeal, the investors contend that FUNB owed duties to 
them because they were customers of the bank within the terms 
of the U.C.C., and that even if they were not customers, the 
bank nevertheless owed duties to them when establishing their 
 
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FBO accounts, and that in any event, they were third-party 
beneficiaries of the contract between FUNB and InterBank. 
 
The principles of contract law that formerly regulated 
the relationships between a bank and its customers have been 
generally displaced by the Uniform Commercial Code with 
respect to any situation covered by particular provisions of 
Article 4 of the U.C.C.  Schlegel v. Bank of America, 271 Va. 
542, 553-55, 628 S.E.2d 362, 367-68 (2006); Halifax Corp. v. 
First Union National Bank, 262 Va. 91, 104, 546 S.E.2d 696, 
704 (2001).  That part of the U.C.C. has been adopted as Title 
8.4 in the Code of Virginia.  Code § 8.4-104(a)(5) defines 
“Customer” in this context as “a person having an account with 
a bank or for whom a bank has agreed to collect items, 
including a bank that maintains an account at another bank.”  
That definition is the exclusive determinant of customer 
status in this context. 
 
The investors argue that they were “customers” of FUNB 
because InterBank established accounts that were “funded with 
money that beneficially belongs to another.”  We rejected that 
theory in United Virginia Bank v. E.L.B. Tank Constr., Inc., 
226 Va. 551, 555, 311 S.E.2d 773, 775 (1984).  There, E.L.B. 
maintained an account with a bank into which Flippo deposited 
funds to be used to defray future debts Flippo might owe 
E.L.B.  After disputes arose between Flippo and E.L.B., the 
 
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bank permitted Flippo to withdraw funds he had deposited into 
the account.  E.L.B. successfully sued the bank and we 
affirmed on appeal, holding that E.L.B. was the bank’s 
customer and Flippo was not.  The source of the funds was 
immaterial.  Id. at 555-56, 311 S.E.2d at 775-76. 
 
The investors further argue that they were “customers” of 
FUNB because the bank had agreed to “collect items” for them, 
which brought them within the U.C.C. definition quoted above.  
They point out that “Item” is defined by Code § 8.4-104(a)(9) 
as “an instrument or a promise or order to pay money handled 
by a bank for collection or payment.”  Thus, they say, when 
their checks arrived at FUNB and were deposited into the FBO 
accounts, the bank was collecting "items" for them and it had 
“agreed” to do so.  The fallacy in that argument is that if 
FUNB had an agreement to collect items, the agreement was with 
InterBank, not the investors, and the agreement was to collect 
items for InterBank, not for the investors.  Indeed, under our 
holding in E.L.B., if the bank had recognized the investors’ 
interest in the funds deposited to the FBO accounts and 
permitted the investors to withdraw them, it would have been 
liable in damages to its customer, InterBank.  For these 
reasons, we conclude that the investors were not “customers” 
of FUNB with respect to the FBO accounts. 
 
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The investors contend that even if they were not 
customers of FUNB, they were nevertheless third-party 
beneficiaries of the contract between FUNB and InterBank.  
That contention must rest on Code § 55-22, which provides, in 
pertinent part: 
[I]f a covenant or promise be made for the benefit, 
in whole or in part, of a person with whom it is not 
made . . . such person . . . may maintain in his own 
name any action thereon which he might maintain in 
case it had been made with him only and the 
consideration had moved from him to the party making 
such covenant or promise. 
 
 
We have consistently held that this third-party 
beneficiary doctrine is subject to the limitation that the 
third party must show that the contracting parties clearly and 
definitely intended that the contract confer a benefit upon 
him.  Caudill v. County of Dinwiddie, 259 Va. 785, 793, 529 
S.E.2d 313, 317 (2000); MNC Credit Corp. v. Sickels, 255 Va. 
314, 320, 497 S.E.2d 331, 334 (1998); Forbes v. Schaefer, 226 
Va. 391, 401, 310 S.E.2d 457, 463 (1983). 
 
 Here, the trial court, having weighed the evidence and 
evaluated the credibility of the witnesses, found no such 
intention on the part of FUNB and InterBank, the contracting 
parties.  The evidence of FUNB’s intention in setting up the 
FBO accounts was provided by Biehl’s testimony that his main 
concern was to protect the bank from any involvement with 
criminal activity.  He refused to open escrow accounts, which 
 
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would have imposed upon FUNB duties to the investors as well 
as to InterBank, and instead suggested FBO accounts, in which 
InterBank, the bank’s sole customer, would have sole control 
of the funds on deposit.  There was no direct evidence of the 
intentions of InterBank, the other contracting party, but the 
circumstantial evidence of the conduct of its principals was 
sufficient to support the trial court in concluding that 
conferring a benefit upon the investors was the farthest thing 
from their minds. 
 
Finally, the investors contend that the machinations of 
InterBank and its related entities were sufficient to put FUNB 
on notice that its customer, InterBank, was engaging in large-
scale money laundering.  In that event, FUNB would undoubtedly 
have incurred a duty to report the facts to the federal 
authorities, but there is no evidence that it failed to do so. 
The investors cite no authority, however, and we find none, 
that would have imposed upon FUNB any duties to the investors 
if such notice were proved. 
Conclusion
 
Because we find that the evidence supported the decision 
of the trial court, we will affirm the judgment. 
Affirmed. 
 
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