Defendants misled investors in marijuana hydroponic pod scheme
Date: January 31, 2020
DENVER – Co-conspirators Guy M. Jean-Pierre, William Sears, and Scott Dittman, were sentenced to federal prison for their roles in the FusionPharm securities and financial fraud scheme, which cost investors more than ten million dollars. Jean-Pierre of the Dominican Republic was sentenced to serve seven years in prison based on his conviction at trial of securities fraud, mail fraud, wire fraud, money laundering, and conspiracy. William Sears of Thornton, Colorado was sentenced to a total of eight years in prison for his role in the conspiracy, as well as for tax violations. Scott Dittman of Franktown, Colorado was sentenced to five years in prison. All three defendants will serve an additional three years of supervised release at the conclusion of their years of incarceration.
According to information contained in court filings and evidence presented at trial, beginning in late 2010, the defendants sought to establish a business that would retrofit steel shipping containers so that they could be used to grow plants hydroponically. The defendants acquired a dormant publicly traded penny stock company and changed its name to FusionPharm as part of plans to develop and capitalize the business. The main business plan was to resell these repurposed shipping containers, which FusionPharm called "pharm pods," to hydroponic growers. The pharm pods were, at times, marketed as effective vehicles to get fresh produce, such as lettuce, quickly and efficiently to restaurants and local groceries in urban markets. Over time, however, the pharm pods were marketed to marijuana or cannabis growers in Colorado and other states.
An object of the conspiracy was to conceal the co-conspirators' role in the management and operation of FusionPharm, due to Sears' prior securities felony conviction. Sears and Dittman falsely represented that neither Sears nor companies related to him were an affiliate or control person of FusionPharm, thereby allowing Sears' and the related companies' FusionPharm shares to be treated as unrestricted securities that could be immediately sold in the public securities markets under the ticker symbol FSPM. Additionally, defendants Sears and Dittman reported to the public that certain sales transactions and revenues for FusionPharm had occurred when, in fact, they had not.
Defendant Jean-Pierre, a graduate of Columbia University Law School, prepared and transmitted documents that allowed FusionPharm to sell stock in violation of securities laws, falsely portrayed deposits of proceeds from the sale of FusionPharm common stock as convertible debt obligations, concealed the role of other co-conspirators in the FusionPharm business, falsely represented that disclosure documents and financial statements constituted adequate current information about FusionPharm, and failed to disclose defendant Jean-Pierre's role in drafting documents for another attorney to sign and represented as the other attorney's own work product.
In addition to the sentences announced this week, United States District Court Judge William A. Martinez previously entered preliminary orders of forfeiture in the amount of $12,204,172, based on proceeds and assets the defendants obtained from the scheme.
"Today's sentence will hold these individuals accountable for their criminal actions," said IRS-Criminal Investigation Special Agent in Charge Andy Tsui. "This complex scheme that involved false entity information to defraud investors to purchase their stock for their sole financial gain and evade their tax obligations will not be tolerated. IRS-CI special agents work diligently to identify and bring to justice those who attempt to profit by providing false and misleading information to innocent individuals."
"The FBI will continue to aggressively investigate illusory schemes devised to exploit innocent victims. The recent sentencings of Guy M. Jean-Pierre, William Sears, and Scott Dittman, should send a strong message to anyone considering engaging in white collar fraud schemes," said FBI Denver Special Agent in Charge Dean Phillips. "We will continue to work with our law enforcement counterparts and United States Attorney's Office to protect our citizens and economy from those engaged in white collar crime. We would like to thank the Internal Revenue Service and United State Postal Inspection Service for their partnership and efforts on this case."
"Securities fraud conducted via the U.S. mail through secret arrangements and altered documents can lead to false trust in the markets. Postal Inspectors will never rest in our fight to prevent criminals from using the mail to further their illegal activities," said Stephen Sherwood, Acting Inspector in Charge of the Denver Division of the U.S. Postal Inspection Service.
"Thanks to the tireless work of our prosecutors and law enforcement partners, justice has finally come for the victims of this scheme," said United States Attorney Jason Dunn. "Prosecuting a complex financial scheme like this is challenging and lengthy, but it is critical that the public have confidence in the markets and that those who commit securities fraud be dealt with harshly."
This case was investigated by the IRS – Criminal Investigation, FBI, and United States Postal Inspection Service. Assistant United States Attorneys Jeremy Sibert and Robert Brown handled the prosecution. Assistant United States Attorney Tonya Andrews handled the asset forfeiture issues in this matter.