On April 11, 2014, the Securities and Exchange Commission filed an action charging Indianapolis-based Timothy J. Coughlin, 63, and two entities that did business as "Oxford International Credit Union" or "Oxford International Cooperative Union" with conducting an Internet offering fraud in which investors lost millions of dollars by investing funds in a fictitious credit union. The complaint alleges that between June 2007 and December 2009, Coughlin and Oxford International Credit Union collected deposits from more than 5,000 investors exceeding $12.8 million dollars. Approximately 3,300 of the investors were U.S. residents, with victims residing in all 50 states and the District of Columbia. The SEC's complaint alleges that Coughlin misappropriated investor money to pay personal expenses, fund unrelated business expenses, and make distributions to other investors in a classic Ponzi-scheme fashion.
According to the SEC's complaint, to further the fraud, the defendants 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 Oxford International Credit Union website (www.oxfordicu.com), for example, showed investors that 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 complaint, however, the defendants did not actually make investments with the members' deposits sufficient to generate the returns they boasted. Coughlin and Oxford International Credit Union also falsely claimed that member accounts were insured by a private insurance company. Then, 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 (www.oxfordprivacygroup.com) from its inception in late 2008 through December 2011.
The SEC's complaint alleges that Coughlin misappropriated at least $5.97 million and used investor money for illegitimate purposes, including $1.57 million used for personal expenditures and $4.4 million (or approximately 35%) 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 in the names of two relief defendants.
According to the SEC's complaint, in late 2008 and 2009, Coughlin began to deny investors' requests for withdrawals from their accounts. To explain his refusal to allow investors to access their funds, Coughlin falsely claimed that Internal Revenue Service and foreign tax authorities had frozen Oxford International Credit Union and Oxford International Cooperative Union's accounts.
In a parallel action, the U.S. Attorney's Office for the Eastern District of Virginia today unsealed a criminal complaint against Coughlin.
The SEC's complaint charges Coughlin, OICU Ltd. and OICU Investments Corp. with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and seeks disgorgement of all ill-gotten gains with prejudgment interest, civil penalties, conduct-based injunctions, and an officer-and-director bar against Coughlin. The SEC also seeks disgorgement and prejudgment interest from relief defendants American Quality Cleaning Services, Inc. (d/b/a "Oxford Privacy Group") and Avocalon LLC.
The SEC's investigation was conducted by Adam J. Eisner and Carolyn E. Kurr in the Washington, D.C. office, and supervised by C. Joshua Felker. The SEC's litigation is being led by Stephan J. Schlegelmilch and Bridget M. Fitzpatrick.
The SEC appreciates the assistance of the U.S. Attorney's Office for the Eastern District of Virginia; the Federal Bureau of Investigation; the Department of the Treasury, Treasury Inspector General for Tax Administration; the Indiana Secretary of State, Securities Division; the National Credit Union Administration; and the Ontario Securities Commission.
The SEC's investigation is continuing.