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SEC Gets Judgment Against Recidivist Lawyer

A federal judge granted the SEC summary judgment against a former San Diego attorney and recidivist who bilked penny-stock investors through a phony marijuana business in Colorado.

SAN DIEGO (CN) — A federal judge granted the SEC summary judgment against a former San Diego attorney and recidivist who bilked penny-stock investors through a phony marijuana business in Colorado.

It wasn’t the first time around for Andrew Fellner, CEO of San Diego-based Strategic Global Investments. “In July 1982, Fellner pleaded guilty to conspiracy and federal mail fraud for his role in a multimillion-dollar real estate and forgery fraud scheme. He served approximately three years in prison,” the SEC said in its complaint.

This time, U.S. District Judge Jill Burkhardt granted the SEC partial summary judgment on April 17, finding that in 2014 Fellner knowingly misled investors about his company’s entrance into Colorado’s recreational marijuana industry.

Fellner, who has a law degree from Thomas Jefferson School of Law, had a tax practice in San Diego before he acquired controlling interest in Strategic in 2010. Soon after Colorado legalized recreational marijuana in 2014, Fellner claimed in several news releases that he and Strategic owned a profitable marijuana cultivation facility, though “at the time, [Strategic] was involved in industries wholly unrelated to marijuana,” the SEC said.

On Feb. 5, 2014, Strategic purchased the only-issued share of common stock in BearPot, Inc., a Colorado corporation and controlling entity of a marijuana cultivation facility in Teller County, Colorado. BearPot did not own any real property and had been leasing its marijuana cultivation facility. Its assets included about $10,000 worth of equipment and $5,000 worth of healthy plants. But Teller County had voted to prohibit marijuana grows and Colorado law prevented people from outside the state, such as Teller, from owning cannabis-related companies.

Despite this, Strategic and Fellner issued six news releases after the acquisition hailing the company’s entrance into Colorado’s pot market. Bearpot never got a license to grow marijuana, had no authorization to sell it and the operation folded before the end of 2014.

“There is no doubt that the disclosure that Strategic’s marijuana cultivation facility was located in a county that prohibits these facilities and that defendants were prohibited from obtaining a license to legally operate the facility based on their residency would have been viewed by the reasonable investor as having significantly altered the total mix of information that Strategic provided to the public,” Burkhardt wrote in her ruling.

The SEC sought summary judgment on its first cause of action against Strategic and Fellner, violation of Securities Exchange Act Section 10(b) — making untrue statements or misrepresentations in connection with the purchase or sale of a security. It said that due to the misleading news releases and stock registration forms, Strategic’s trading volume mushroomed from 5.13 million shares in the 10 months before Feb. 10, 2014 to 849 million shares in the 6½ weeks after Feb. 10, 2014.

Strategic’s website has been taken down. Its last venture was supposedly a 10-acre development property in Los Cabos, Mexico. The company claimed to have acquired permits to construct 35 luxury homes in a development near Punta Perfecta, a famous surfing spot.

A phone call to Fellner was not returned Wednesday.

The SEC seeks an injunction, civil penalties, and wants Fellner barred from participating in penny stock offerings and from acting as an officer and director of publicly traded companies.

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