UNITED STATES OF AMERICA
In the Matter of
Joan L. Fleener, JMC International, Inc.,
|ORDER INSTITUTING CEASE-
PURSUANT TO SECTION 8A
OF THE SECURITIES ACT
OF 1933, MAKING FINDINGS
AND ORDERING RESPONDENTS
TO CEASE AND DESIST
The Securities and Exchange Commission (Commission) deems it appropriate that cease-and-desist proceedings be instituted pursuant to Section 8A of the Securities Act of 1933 (Securities Act) against Joan L. Fleener (Fleener), JMC International, Inc. (JMC), Carolla S.R. Hopkins (Hopkins) and Northstar, Inc. (Northstar) (collectively, Respondents).
In anticipation of the institution of these cease-and-desist proceedings, Respondents have submitted Offers of Settlement (Offers), which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceeding brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the Commission's findings, except as to jurisdiction and those findings contained in paragraphs III.A. and III.B. below, which are admitted, Respondents, by their Offers, consent to the entry of this Order Instituting Cease-and-Desist Proceedings Pursuant To Section 8A of the Securities Act of 1933, Making Findings And Ordering Respondents To Cease And Desist (Order).
Accordingly, IT IS ORDERED that cease-and-desist proceedings pursuant to Section 8A of the Securities Act be, and hereby are, instituted.
On the basis of this Order and the Offer submitted by Respondents, the Commission finds that:
A. Fleener, age 61, is a resident of San Bruno, California. At all relevant times, Fleener was the President and Chief Executive Officer of JMC. In 1997, Fleener caused JMC to issue a $250 million face value bond that is the subject of this proceeding (JMC Bond). Fleener, JMC and others also prepared a private placement memorandum for the JMC Bond.
B. Hopkins, age 50, is a resident of Yreka, California. At all relevant times, Hopkins was a Vice President and the Secretary of Northstar, Inc. (Northstar). In 1997, Hopkins caused Northstar to issue a $250 million face value bond that is the subject of this proceeding (Northstar Bond). Hopkins, Northstar and others also prepared a private placement memorandum for the Northstar bond.
C. JMC International, Inc. is a Nevada corporation formed by Fleener on July 6, 1995. The corporation has no assets or apparent business. In 1997, JMC issued one of the two bonds in question. Neither JMC nor its securities are registered with the Commission in any capacity.
D. Northstar, Inc. is a Nevada corporation formed by Hopkins on March 18, 1996. The corporation has no assets or apparent business. In 1997, Northstar issued one of the two bonds in question. Neither Northstar nor its securities are registered with the Commission in any capacity.
E. Beginning in 1997, Respondents and others1 engaged in a scheme to obtain money under false pretenses by issuing securities, namely, two worthless corporate bonds with an aggregate face value of $500 million. Specifically, Fleener and Hopkins caused their respective corporations, JMC and Northstar, to issue the bonds. Fleener and Hopkins also took a series of actions, in their capacity as officers of their respective corporations, to create the false impression that the instruments were genuine debt securities. Among other things, Respondents: prepared and disseminated private placement memoranda for the bonds which, among other things, materially misrepresented and omitted to state material facts regarding the assets and financial condition of the issuers of the bonds, the issuers' ability and intent to pay interest on the bonds, the existence of a "Liquidity Facility" provided by a "Top 100 World Bank," and the intended use of the bond proceeds; and, under false pretenses, caused the CUSIP Service Bureau (CSB) to assign the bonds corporate bond identification (CUSIP and ISIN) numbers, and Reuters America, Inc. (Reuters), to list the bonds on its Reuters 3000 Fixed Income Screen (Reuters Screen). Respondents undertook these acts with full knowledge that the bonds were not backed by any assets and that neither JMC nor Northstar had any assets, revenues or other financial resources to make the interest payments reflected on the bonds. Moreover, they released the bonds into the stream of commerce when they knew or should have known that the bonds would be offered to investors based on this false and misleading information.
F. Thereafter, with Respondents' knowledge that they were seeking purchasers of the bonds on Respondents' behalf, beginning in 1999, two promoters used this materially false and misleading information to solicit offers, through an offshore company they controlled, to purchase the bonds, to offer the bonds to broker-dealers as collateral to open a margin account, and to offer the bonds to a foreign bank as collateral to establish a commercial loan. Specifically, in the offer of these bonds, the promoters made material misrepresentations including, among other things, that the bonds were: (i) valid debt securities issued by JMC and Northstar in legitimate private placement offerings; and (ii) rated by Moody's. The promoters also omitted to state material facts including, among other things, that: (i) the bonds were worthless, (ii) neither JMC nor Northstar had ever paid interest on the bonds, and (iii) neither JMC nor Northstar had assets, revenues or other financial resources to pay interest on their respective bonds in the future. As a result, both the promoters and the offshore company through which they offered the bonds violated Sections 17(a)(1) and 17(a)(3) of the Securities Act.
G. Based on the facts and circumstances described in paragraphs III.A. through III.E., Respondents caused the promoters' violations of Sections 17(a)(1) and 17(a)(3) of the Securities Act described in paragraph III.F.
Accordingly, IT IS HEREBY ORDERED, pursuant to Section 8A of the Securities Act, that Respondents 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.
By the Commission.
Jonathan G. Katz
|1||Simultaneous with the issuance of this Order, the Commission filed a civil action in the United States District Court for the Northern District of Illinois, Securities and Exchange Commission v. Kirk I. Koskella, O. Jay Neeley and ELTC Limited. Through ELTC, an offshore company they controlled, Koskella and Neeley, both of Orem, Utah, made the offers that are described, infra, in this Order. In its Complaint, the Commission alleged that the defendants violated Sections 17(a)(1) and 17(a)(3) of the Securities Act in the offer of the bonds. The Commission's Complaint seeks a permanent injunction against the defendants against future violations of Sections 17(a) (1) and 17(a)(3) of the Securities Act and civil penalties against Koskella and Neeley.|
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