Marijuana-Related Company Charged with Scheming Investors

The Securities and Exchange Commission today announced fraud charges in a scheme involving illegal stock sales and false financial filings of a company that makes containers for growing marijuana.

An SEC investigation found that William J. Sears orchestrated the scheme along with his brother-in-law Scott M. Dittman, who was the CEO and sole officer at Fusion Pharm Inc. while Sears concealed his control from behind the scenes.  Sears and Dittman hired Cliffe R. Bodden to help them create fraudulent corporate documents that enabled Fusion Pharm to issue common stock to three other companies controlled by Sears, who then illegally sold the restricted stock into the market for $12.2 million in profits while hiding the companies’ connection to Fusion Pharm.  Sears transferred some of his illegal proceeds back to Fusion Pharm so the money could be falsely reported as revenue, and the company issued press releases and financial reports that misled investors to believe the revenue came from sales of the containers called PharmPods.

Sears, Dittman, and Bodden as well as Fusion Pharm and Sears’s other three companies agreed to settle the SEC’s charges with monetary sanctions to be determined at a later date.  The SEC barred Sears and his three companies, Dittman, and Bodden from participating in any future penny stock offerings, and Sears and Dittman are permanently barred from serving as an officer or director of any public company.  Dittman also is permanently suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies.

“Sears and Dittman misled investors by recording and trumpeting revenues for purported sales of PharmPods when they were really just round-tripping money from illegal stock sales by hidden affiliates,” said Julie K. Lutz, Director of the SEC’s Denver Regional Office.

In a parallel action, the U.S. Attorney’s Office for the District of Colorado today announced criminal charges against Sears and Dittman.

The SEC separately instituted an administrative proceeding against attorney Tod A. DiTommaso.  The SEC Enforcement Division alleges that he issued attorney opinion letters for Sears and Dittman falsely stating that unrestricted shares in Fusion Pharm could be issued into the market when in reality it was restricted stock.  The matter will be scheduled for a public hearing before an administrative law judge, who will prepare an initial decision stating what, if any, remedial actions are appropriate.

The SEC’s investigation was conducted by Kimberly S. Greer and Ian S. Karpel of the Microcap Fraud Task Force along with L. James Lyman in the Denver Regional Office.  The litigation will be led by Stephen C. McKenna and supervised by Gregory S. Kasper.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Colorado, Federal Bureau of Investigation, Internal Revenue Service, U.S. Postal Service, and Financial Industry Regulatory Authority.