UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 17657 / August 5, 2002

Securities and Exchange Commission v. Kirk I. Koskella, O. Jay Neeley and ELTC Limited, Civil Action No. 01-C-6227 (N.D. Ill.) (WJH)

The Securities and Exchange Commission (Commission) today announced that, on July 24, 2002, the Honorable William J. Hibbler, United States District Court Judge for the Northern District of Illinois imposed a civil penalty of $110,000 against Defendant Kirk Koskella (Koskella), of Orem, Utah, in the above matter. Although the Court found that Defendant O. Jay Neeley, also of Orem, Utah, violated Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1993 through fraud and deceit and created a significant risk of substantial losses to other persons, the Court decided not to impose a civil penalty against Neeley based on his inability to pay. On August 14, 2001, the Commission filed the action against Koskella, Neeley, and their company, ELTC Limited (ELTC) (collectively, Defendants). On December 13, 2001, the Court entered a Final Judgment and Order of Permanent Injunction against Koskella and ELTC, by consent, without these defendants admitting or denying the Commission's allegations, except for jurisdiction, which they admitted. On January 15, 2002, the Court entered a Final Judgment and Order of Permanent Injunction against Neeley, on the same basis.

The Commission's Complaint alleged that, in 1997, two private Nevada corporations, JMC International, Inc. (JMC) and Northstar, Inc. (Northstar), which had no assets or operating income, each issued a worthless $250 million face value bond. The Complaint also alleged, in 1999, the bonds were assigned to Koskella and Neeley. Thereafter, Koskella and Neeley, through ELTC, solicited offers from various institutional investors and lenders to purchase the bonds or to provide them with a margin loan or commercial loan for the face value of the bonds. In each case, they misrepresented, among other things, that the bonds were: (i) valid debt securities issued by JMC and Northstar in legitimate private placement offerings in exchange for consideration equal to the face value of the bonds; and (ii) rated by Moody's. They also omitted to state, among other things, that: (i) the bonds were worthless, (ii) neither JMC nor Northstar had ever paid interest on the bonds, and (iii) neither company had any assets, revenues or other financial resources to pay interest on the bonds in the future. The Complaint also alleged that, by these activities, Koskella, Neeley and ELTC violated Sections 17(a)(1) and 17(a)(3) of the Securities Act.

On August 14, 2001, the Commission simultaneously instituted and settled administrative proceedings against JMC, Northstar and these companies' respective controlling officers, Joan L. Fleener, age 61, of San Bruno, California, and Carolla S.R. Hopkins, age 50, of Yreka, California (collectively, Respondents). Respondents settled the administrative proceedings against them by consenting, without admitting or denying the Commission's findings, to the entry of the Commission's order: (1) finding that Respondents caused Koskella, Neeley and ELTC's violations of Sections 17(a)(1) and 17(a)(3) of the Securities Act; and (2) ordering Respondents to cease and desist from committing or causing any violation or any future violation of Sections 17(a)(1) and 17(a)(3) of the Securities Act.