UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 17695 / August 22, 2002

SEC V. NORTHSTAR NETWORK, INC., TIMOTHY J. BUZZELLI AND DAVID DUTTON, DEFENDANTS, AND SHEILA DUTTON, RELIEF DEFENDANT (U.S. District Court for the Northern District of Texas, Dallas Division, Civil Action No. 3:02-CV-1788-M).

SEC FILES FRAUD CHARGES AGAINST COMPUTER COMPANY AND ITS PRINCIPALS

On August 21, 2002, the Commission filed a securities fraud case in federal district court against NorthStar Network, Inc., a publicly held company, its former president, Timothy J. Buzzelli, and its former vice-president, David Dutton. The Commission's complaint alleges that Buzzelli and Dutton fraudulently sold unregistered shares of NorthStar common stock to over 200 investors nationwide, raising approximately $1 million. According to the complaint, Buzzelli and Dutton, directly and indirectly, falsely represented to investors that NorthStar had over $10 million in assets, that major defense contractors were interested in its purportedly patent pending computer cooling system, and that the company had multi-million dollar contracts with large, publicly traded telecommunications companies. The complaint further alleges that Buzzelli and Dutton misappropriated investor funds to acquire personal property and to pay personal debts. In addition, the complaint charges that NorthStar filed a registration statement with the Commission that contained false and misleading statements concerning the compensation paid to its officers and directors, and the existence of an ongoing unregistered securities offering. Finally, NorthStar is alleged to have failed to file its required periodic reports with the Commission.

According to the Complaint:

• Defendant NorthStar is a Washington corporation, headquartered in Dallas, Texas. During the relevant period, NorthStar purported to be an Internet service provider and computer company, and its common stock was traded on the Over the Counter Bulletin Board.

• Defendant Buzzelli, a resident of Corinth, Texas, became president of NorthStar in October 1999, and served in that capacity until June 2000. Until the Texas Board of Public Accountancy revoked his license on March 22, 2001, Buzzelli was a Certified Public Accountant.

• Defendant Dutton, a resident of Lake Hawkins, Texas, was NorthStar's Vice President of Business Development during Buzzelli's tenure as president.

The complaint charges NorthStar, Buzzelli and Dutton with violations of 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 ("Exchange Act") and Rule 10b-5. The complaint additionally charges NorthStar with violations of Sections 13(a), and 13(b)(2) of the Exchange Act and Rules 13a-1 and 13a-13, and Buzzelli with violations of Section 13(b)(5) of the Exchange Act and with aiding and abetting violations of Section 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 13a-1 and 13a-13. In addition to permanent injunctive relief against each defendant, the complaint seeks an officer and director bar, an accounting, disgorgement plus prejudgment interest, and civil money penalties against Buzzelli and Dutton. The complaint also seeks disgorgement from Dutton's wife who was named solely as a relief defendant.

Simultaneously with the filing of the complaint, NorthStar, without admitting or denying the Commission's charges, consented to the entry of a permanent injunction enjoining it from further violations of the securities registration, antifraud, reporting, and books and records provisions of the federal securities laws. Further, in a separate Commission administrative proceeding, NorthStar consented to an order revoking the registration of its common stock [see Securities Exchange Act Release No. 34-46388 / August 21, 2002].

SEC Complaint in this matter

http://www.sec.gov/litigation/litreleases/lr17695.htm