A U.S. District Court judge in Alexandria, Va., sentenced Timothy J. Coughlin, 63, of Indianapolis to more than seven years in federal prison the week of Oct. 20 for embezzling $10 million through a fake credit union.
Judge Leonie M. Brinkema also ordered Coughlin on Oct. 24 to pay $10,084,625 in restitution. He pleaded guilty to wire fraud and impersonating a federal official in June and will be required to serve three years of supervised released after serving his prison sentence, according to court documents.
A SEC complaint filed earlier this year showed that between June 2007 and December 2009, Coughlin operated Oxford International Credit Union or Oxford International Cooperative Union and collected deposits from more than 5,000 investors exceeding $12.8 million. Approximately 3,300 of the investors were U.S. residents, with victims from 50 states and the District of Columbia.
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Through a website, Coughlin attempted to fool investors by claiming the credit union was insured and even posted an image of a check to the CUNA for $56,200 to show that the insurance premium had been paid. However, the check was never sent to CUNA, no insurance was ever obtained, according to court documents.
The SEC said Coughlin misappropriated investor money to pay personal expenses, fund unrelated business expenses, and made distributions to other investors in a classic Ponzi scheme. He also posted false information to investors' online accounts to create the appearance that their deposits in the fake credit union were earning substantial daily investment returns, the SEC said.
On the fake credit union's website, investors were told their deposits were purportedly earning investment returns that averaged, during the January 2007 through December 2009 period, 0.471% each trading day, equating to an approximately 356% average annual rate of return. According to the SEC complaint, however, the defendants did not actually make investments with the members' deposits sufficient to generate the returns they boasted.
Beginning in December 2008, Coughlin began operating a successor to Oxford International Credit Union, called Oxford International Cooperative Union, which also boasted bogus investment returns on its website, Oxford Privacy Group, from its inception in late 2008 through December 2011, the SEC said.
The SEC's complaint alleged that Coughlin misappropriated at least $5.97 million and used investor money for illegitimate purposes, including $1.57 million for personal expenditures and $4.4 million to pay other investors who had requested withdrawals from their Oxford International Credit Union accounts. Coughlin also transferred money from Oxford International Credit Union's accounts to bank accounts he controlled, according to the SEC.
In late 2008 and 2009, Coughlin began to deny investors' withdrawal requests from their accounts, the SEC said. In explaining his refusal, he falsely claimed that the IRS and foreign tax authorities had frozen Oxford International Credit Union and Oxford International Cooperative Union's accounts, authorities said.
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