Feds sue Indianapolis man over fictional credit union

Timothy J. Coughlin, who in 2008 tried to bring a 20-story balloon ride to White River State Park, has been accused by federal regulators of running a Ponzi scheme that collected $12.8 million from investors in all 50 states.

The Indianapolis resident between 2007 and 2009 conducted an Internet fraud using a company known as Oxford International Credit Union, which in fact was not a credit union, the Securities and Exchange Commission alleged in a suit filed late Friday in U.S. District Court for the Southern District of Indiana. The fradulent firm also went by Oxford International Cooperative Union.

Also last week, the U.S. Attorney for the Eastern District of Virginia unsealed a criminal complaint against Coughlin. A warrant was issued for his arrest. Coughlin could not be reached for comment.

In the credit union fraud case, the SEC said Coughlin, 63, misappropriated at least $5.97 million in investor funds, including $1.57 million used for personal expenses.

Another $4.4 million went to pay investors who requested withdrawals.

The agency said Coughlin also transferred money to two Indianapolis firms. One was American Quality Cleaning Services, which purportedly protected individuals’ personal information. Coughlin was president of that firm, investigators said.

The other firm receiving money was Avocalon LLC, which provides services to those involved in political advocacy. Coughlin was registered agent of Avocalon.

The two firms are named in the SEC complaint as relief defendants.

Coughlin drummed up at least 5,000 investors in Oxford International Cooperative Union, with about 3,000 living in the United States, the government said.

As part of his appeal to investors, Coughlin held himself out as a retired naval aviator, “serving meritoriously in Grenada,” when in fact he never served, the SEC said. “Like Coughlin’s supposed investing prowess, this reputation was also a fiction.”

For example, he did not tell investors he previously was convicted of bank fraud in the early 1990s and was sentenced to 24 months in federal prison, plus four years of supervised home release.

Alleging numerous securities law violations, the 25-page lawsuit said the fictitious credit union told members it invested their money in FOREX trading opportunities, in real estate ventures, and in various other lucrative investments.

“The investment choices purportedly offered annual rates of returns between 458 percent and 960 percent,” the lawsuit said.

The SEC alleged that the defendants preyed on elderly, unsophisticated and otherwise vulnerable investors. Elderly victims included a 76-year-old retired nurse who used proceeds from her husband's life insurance policy to invest.

According to an affidavit filed by an FBI agent in federal court in Virginia, Coughlin posted several pre-recorded audio calls that touted terrific long-term gains.

“Back when we opened on May 27, 2007, someone who had come in with a $10,000 deposit has a current value of $66,341. That’s with no additional deposit, no withdrawals. That’s just putting the money in and letting it ride.”

Investors weren’t the only people Coughlin appeared to have fooled.

He previously served as a director of Indianapolis-based Global Water Technologies, which provides water purification and treatment services.
 
In 2009, Coughlin was named chairman of the company, which lists its address as the IU Technology Research Park, near the IUPUI campus downtown.

Global Water said Monday that Coughlin resigned from the board in 2010. It declined to comment further. Global Water was not named in the complaint.

The SEC actions aren’t Coughlin’s first brush with regulators.

In 2006, the Indiana Securities Division filed a complaint against Coughlin and several business partners in the firm Retirement Planners of America.

The state alleged that they sold unregistered securities, acted as unregistered broker-dealers, and committed fraud in the offer and sale of securities.

Division records show that Coughlin was permanently barred from selling securities in Indiana shortly thereafter.

In February 2013, the division ordered Coughlin to pay investors restitution totaling $211,162, plus a civil penalty of $55,000.

In 2004, Coughlin and Retirement Planners of America also got into trouble over an agreement to purchase the Winningham Insurance Group, of Indianapolis, for $900,000.

According to Indiana Court of Appeals records, RPA made payments of $410,000, but further payments ceased in 2005 after a dispute between the parties.

The previous owners of the agency filed a complaint for damages against Coughlin and a business partner. In 2008, a trial court awarded the former owners $490,000 in damages for breach of purchase agreement. Coughlin’s attorneys in 2009 made an unsuccessful appeal before the Indiana Court of Appeals.

Coughlin briefly won notoriety in 2008 when he proposed a 20-story tower for White River State Park. A balloon was to have floated within the structure, giving visitors a thrilling view of the city.

Coughlin teamed with a legitimate local balloon ride operator—Tony Sandlin, owner of Fishers-based Midwest Balloon Rides.

The so-called Aerophare never got off the ground, however, as the White River State Park Commission rejected the idea.