Securities and Exchange Commission
Litigation Release No. 17329 / January 22, 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 the Honorable William J. Hibbler, United States District Court Judge for the Northern District of Illinois has entered Final Judgments of Permanent Injunctions against Kirk I. Koskella (Koskella) and O. Jay Neeley, both of Orem, Utah, and their company, ELTC Limited (ELTC) (collectively, Defendants) as the result of an action the Commission filed against the Defendants on August 14, 2001. The Commission's Complaint alleged that Koskella and Neeley, through ELTC, used fraudulent private placement memoranda to solicit offers from various institutional investors and lenders to purchase or to provide them with a margin loan or commercial loan for two phony industrial revenue bonds with face values of $250,000,000 each. To induce institutional investors and lenders to allow them to do so, the Defendants misrepresented and omitted material facts concerning the legitimacy of the bonds. Among other things, they misrepresented 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 Defendants also sent institutional investors and lenders misleading documentation regarding the bonds, including information reflecting that the bonds were listed on the Reuters Screen. The Defendants knew, but failed to inform the institutional investors and lenders, that the Reuters Screen information was misleading because it created the false impression that the bonds were legitimate debt securities. 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. In addition to ordering permanent injunctions, the final judgments entered against the Defendants provide for a subsequent hearing to set civil penalties against Koskella and Neeley.