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CannTrust Weed Cultivation Scandal Prosecution Falls Apart
Charges of fraud and other offenses against three former cannabis company executives were withdrawn by prosecutors in a Canadian court on Wednesday.
Prosecutors with the Ontario Securities Commission (OSC) told a Canadian court on Wednesday that they had no reasonable expectation of gaining a conviction against three former executives of the cannabis firm CannTrust Holdings and asked to withdraw charges against the men. But defense lawyers for former CannTrust CEO Peter Aceto, former chairman Eric Paul and former vice-chairman Mark Litwin have asked the judge for a full acquittal in the case.
“After careful review of the evidence during the trial, we are of the view that as charged, there is no reasonable prospect of conviction,” OSC lawyer Dihim Emami told Victor Giourgas, the judge presiding over the case.
The case involved allegations that Aceto, Paul and Litwin had overseen the illegal cultivation of thousands of kilograms of cannabis for Canada’s regulated market. In July 2019, CannTrust revealed that Health Canada, the country’s national health department and chief federal regulator of the cannabis industry, had determined that the company’s cultivation facility in Pelham, Ontario was found to be non-compliant with some regulations. The company had accepted the finding, noting that five rooms being used to grow cannabis at the Ontario facility were not properly licensed for cultivation between October 2018 and March 2019. The rooms were not fully licensed to cultivate cannabis until April 2019.
“Our team has focused on building a culture of transparency, trust and excellence in every aspect of our business, including our interactions with the regulator,” Aceto said at the time in a statement from CannTrust. “We have made many changes to make this right with Health Canada. We made errors in judgment, but the lessons we have learned here will serve us well moving forward.”
The OSC alleged that the defendants claimed in corporate disclosures that CannTrust’s cannabis operations were fully compliant with regulations. Aceto, Litwin and Paul were charged by the OSC and the Royal Canadian Mounted Police with quasi-criminal offenses including fraud related to failing to disclose the unlicensed cultivation to investors. Litwin and Paul were also charged with insider trading for selling stock in CannTrust after learning about the allegations of unlicensed growing but before they were made public. Additionally, Litwin and Aceto were charged with making a false investment prospectus and a false preliminary prospectus.
Testimony Reveals Weakness Of Prosecutor’s Case
Last week, during the trial of the three former executives, Graham Lee, a former director of quality and compliance at CannTrust, testified that Health Canada staff had inspected the Ontario cultivation in November 2018 and April 2019, but did not take any action related to the unlicensed grow rooms. But at a subsequent visit, Health Canada inspectors inquired about the unlicensed rooms.
“They asked me if plants had been put into the unlicensed rooms, and they had been told other things earlier in the day…and so I clarified for them that, yes, they had been,” Lee testified.
As part of his testimony, Lee also said that CannTrust staff had once staged photographs taken as part of a regulatory submission to Health Canada in an attempt to obscure the purpose of the extra grow rooms. But he also noted that the employees had not been instructed by senior management to do so.
During cross-examination, defense attorneys presented evidence that the Ontario facility had been licensed to grow cannabis that did not contain any references to specific rooms. The revelation made it difficult for prosecutors to prove that unlicensed cultivation had occurred at the facility.
Scott Fenton, an attorney representing Litwin, presented Lee with an April 5 email he sent to others at CannTrust, in which he wrote, “Please find attached, we are now licensed for all of the remaining outstanding Niagara areas.”
“But you told everybody that you’re now licensed,” Fenton said to Lee.
“Yes,” Lee answered.
“And used the wrong terminology?” Fenton asked.
“Yes,” Lee admitted.
“Were you confused regarding the operation of the Cannabis Act and its regulations?” asked Fenton.
“At times,” Lee replied.
On Wednesday, prosecutors told the court that the revelations made during the trial made it impossible to secure a conviction in the case and asked the judge to drop the charges against the defendants. But their lawyers asked Giourgas to fully acquit the former CannTrust executives of the charges against them.
“I am respectfully against dragging this out,” Fenton said. “The prosecution has determined they can’t prove the case. It is time to end it, and it should end today.”
“I can’t tell you how much anxiety there is among the defendants about the end of this matter for the reasons that you can imagine,” added Frank Addario, Aceto’s lawyer.
Prosecutor Emami asked for more time, saying he had received the request for acquittal that day. The defendants were due back in court on Thursday for the judge’s decision on the motion to acquit.
Source: https://hightimes.com/news/canntrust-weed-cultivation-scandal-prosecution-falls-apart/
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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