Father, Sons Get Prison Term for Bank Fraud

A 75-year-old Newport Beach man and his two sons each were sentenced in federal court Monday to three years in prison for concocting an $8.6-million real estate fraud against 11 banks and other financial institutions around the country.

Federal prosecutors said the three men misapplied bank loans designated for construction projects to buy Rolls-Royces and other luxury items. Financial institutions, mostly in the Midwest, loaned millions of dollars to the three men. The trio backed up the loans with guarantee bonds that turned out to be issued by one of their companies.

John Coughlan Sr. and his sons--John Coughlan Jr., 55, of Long Beach and Errol Coughlan, 50, of Malibu--pleaded guilty last November to mail and wire fraud. The Coughlan brothers pleaded guilty the same month to making false statements in a related case involving loan fraud at the failed Trinity Valley Savings & Loan in Cleveland, Tex.

Part of the three-year sentence handed down Monday against the Coughlan brothers covered the Trinity Valley case. Even though the brothers had cooperated in an investigation of the Texas thrift failure, prosecutors had sought a longer sentence.

“The court still viewed the offense as sufficiently severe to warrant three years’ incarceration,” said Terree A. Bowers, chief assistant U.S. attorney. “I think it’s important for those who have a penchant for white-collar crime to realize we are no longer in an era where the courts are willing to simply impose probation.”

The Coughlans secured construction loans through one of their firms--California Pacific Construction Co. in Agoura Hills--purportedly to build projects in Arizona and California. They got guarantee bonds, which ensure the loans will get paid back, from Eagle Bonds and Insurance Brokers Inc., also of Agoura Hills.

What lenders didn’t know was that the Coughlans owned Eagle Bonds and that the loan proceeds were going to benefit them. Though the loans went into default, nearly all of the financial institutions involved have recovered their money through refunds or civil settlements.