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A California lawyer was fined by an SEC judge June 13 for helping a marijuana company make millions of dollars in illegal stock sales ( In re DiTommaso , S.E.C., Admin. Proc. File No. 3-17550, 6/13/17 ).
Securities and Exchange Commission Administrative Law Judge Carol Fox Foelak ordered Tod DiTommaso to pay $2,950 in disgorgement and civil penalties after she found him liable in March for issuing improper attorney opinion letters for Denver-based Fusion Pharm Inc. DiTommaso’s documents wrongly allowed the cannabis cultivation system business to sell its restricted securities freely on the market, according to the ALJ.
“A first-tier penalty, rather than a second-tier penalty, is appropriate because DiTommaso’s violative acts did not involve a reckless disregard of a regulatory requirement,” Foelak said.
From 2012 to 2013, DiTommaso issued 10 opinion letters ghost-written by another attorney, whom he met through a friend, Foelak said. Unbeknownst to DiTommaso, financial markets operator OTC Markets Group Inc. had barred the lawyer from rendering legal opinions, according to the ALJ. She said DiTommaso was paid $1,475 for his work.
The stock-selling fraud was allegedly orchestrated by Fusion Pharm chief executive officer Scott M. Dittman and his brother-in-law, William J. Sears. Through fake documents and DiTommaso’s letters, the scheme allowed Fusion Pharm to issue stock to three companies owned by Sears, the Enforcement Division said.
Sears sold the stock for $12.2 million without revealing Fusion Pharm’s connection, according to the SEC. He then moved some of the money from the sales back to Fusion Pharm to pad the company’s revenue figures, the SEC said.
Dittman and Sears settled with the SEC in 2016.
DiTommaso testified at a hearing that he missed “red flags all over the place” by looking at each transaction in isolation, instead of together, according to the ALJ. He added he “would never ever have issued any opinion letters without making sure” that the three companies owned by Sears weren’t affiliates of Fusion Pharm.
The lawyer, who represented himself before the SEC’s in-house court, didn’t immediately respond to requests for comment.
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