Business
NASA Employee Used COVID Small Business Relief to Fund Illegal Pot Operation
One NASA employee took advantage of small business COVID relief for illegal cannabis operations.
An employee of the National Aeronautics and Space Administration (NASA) pleaded guilty to using COVID relief designed for small businesses to fund an illegal cannabis operation.
A NASA-Jet Propulsion Laboratory (JPL) employee agreed to plead guilty to defrauding a government loan program developed during the COVID-19 pandemic. He admitted that he used part of the proceeds to fund an illegal cannabis grow operation, the Justice Department announced on July 24.
“Armen Hovanesian, 32, of Glendale, a cost-control and budget-planning resource analyst for the JPL, a federally funded research and development center operated by the California Institute of Technology for NASA, agreed to plead guilty to a single-count information charging him with wire fraud,” the Justice department wrote. “Both the information and a plea agreement were filed Thursday in United States District Court. Hovanesian is expected to make his initial court appearance on August 11.”
Per the plea agreement, between June 2020 to October 2020, Hovanesian applied for three loans, using the names of business entities under his control to the Economic Injury Disaster Loan Program (EIDL), a program administered by the Small Business Administration (SBA) that provided low-interest financing to small businesses, renters, and homeowners, in this case, for businesses impacted by the COVID-19 pandemic.
“Hovanesian admitted to making false and fraudulent statements in the loan applications concerning the gross revenues each of the businesses had generated in the preceding year as well as false and fraudulent statements concerning his intended use of loan proceeds.”
The SBA requires—under penalty of perjury—that grantees “use all the proceeds” of the loans for which he applied and caused others to apply for “solely as working capital to alleviate economic injury caused by disaster” consistent with the terms and limitations of the EIDL program.
But instead of using it for COVID relief, Hovanesian used the proceeds for his own benefit, repaying a personal real-estate debt and funding his illegal cannabis cultivation operation.
The Justice Department says Hovanesian fraudulently used the SBA to transfer via interstate wire EIDL proceeds amounting to $151,900.
The punishment is serious: After Hovanesian pleads guilty, he will face a statutory maximum sentence of 20 years in federal prison.
Fraudsters Take Advantage of COVID Relief
Abusing COVID relief funding is commonplace. To combat this, the United States Attorney General established the COVID-19 Fraud Enforcement Task Force in May 2021, and hundreds of alleged criminals have been charged as part of the task force’s work.
COVID relief programs including SBA funding and Paycheck Protection Program, or PPP, were commonly abused. COVID relief loan schemes dominated the years following the pandemic.
NBC News reported how COVID relief funds were abused to buy Lamborghinis, Ferraris, Teslas, and Bentleys.
Justice Department Inspector General Michael Horowitz, who oversees COVID relief spending, told NBC anchor Lester Holt that COVID relief programs were structured in ways that made them especially easy to take advantage of, and businesspeople were caught buying expensive sports cars and other luxuries using the money.
“The Small Business Administration, in sending that money out, basically said to people, ‘Apply and sign and tell us that you’re really entitled to the money,’” said Horowitz, the chair of the Pandemic Response Accountability Committee. “And, of course, for fraudsters, that’s an invitation. … What didn’t happen was even minimal checks to make sure that the money was getting to the right people at the right time.”
“Nothing like this has ever happened before,” said Matthew Schneider, a former U.S. attorney. “It is the biggest fraud in a generation.”
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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