Cannabis Company Executive to Pay $1 Million in SEC Fraud Case

A former executive listed as chief financial officer for a cannabis cultivation and distribution company will pay more than $1 million after a federal judge held him liable in an SEC suit charging the company with issuing “wildly inflated” financial statements.

J. Bernard Rice consented to pay $581,000 in disgorgement, a roughly $236,000 civil penalty, and more than $270,000 in prejudgment interest for his role in the scheme, according to a final judgment March 13 in the US District Court for the Central District of California. He’s also barred from serving as an officer or director of a public company for five years.

Rice and two other executives at American Patriot Brands Inc. made material misstatements to investors about the health of the business, Judge Anne Hwang ruled last June.

The Securities and Exchange Commission had alleged that APB raised more than $30 million from investors by providing inflated financial information, while Rice and other executives pocketed millions and left investors with worthless securities.

Hwang held that the SEC had presented sufficient evidence to avoid trial on the fraud claims against the individual defendants, who allegedly created a false impression that the company was much larger than it was.

Proceedings against CEO Robert Y. Lee and Chief Operating Officer Brian Pallas are still pending in the Central California district court.

Clark Hill LLP represents APB and the executive defendants.

An SEC spokesperson didn’t immediately respond to a request for comment.

The case is SEC v. American Patriot Brands, C.D. Cal., No. 2:23-cv-05379, 3/13/26.