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3 months ago
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Cnn Investigates
The pot farm next door: Black market weed operations inundate California suburb, cops say
Scott Glover Kyung Lah
By Rob Kuznia, Scott Glover, Yahya Abou-Ghazala, Kyung Lah and Yong Xiong, CNN
13 minute read
Published 5:00 AM EDT, Sat August 31, 2024
A marijuana grow room inside a residential home in Contra Costa County, CA. California Department of Cannabis Control
Antioch, California
CNN
—
Just after dawn on a recent spring morning, police dressed in tactical gear and armed with a search warrant pounded on the front door of an upscale home in a quiet suburban neighborhood an hour outside San Francisco.
When no one answered, the officers with California’s Department of Cannabis Control, which polices the legal sale of marijuana in the state, took a battering ram to the steel-reinforced door. When the door didn’t budge, they used a power saw to cut their way through a fortified back entrance and into the spacious five-bedroom property.
Inside, investigators found precisely what they were looking for: evidence of yet another black-market marijuana operation hidden in plain sight amid the cookie-cutter homes of suburbia.
They removed 80 pounds of weed from the pricey two-story home in Antioch, California. With curious neighbors looking on, they?repeated the spectacle twice more on the same block that morning in late April. The raids filled a dump truck with about $1 million worth of illicit weed cultivated by unlicensed growers.?Although cars were parked in the driveways, no people were found in any of the homes and no arrests were made.
Marijuana plants inside a grow house room
video
Related video
Lots of raids, few arrests: Illegal pot farms persist in this California suburb
Among California’s marijuana cops at Cannabis Control, Antioch has developed a reputation as a hub for high-yield, covert indoor grow operations. They have raided at least 60 alleged grow houses in the city over the past two years and suspect?well over 100 more remain in operation.
But that’s not all. Investigators say the illegal pot production in Antioch provides a glimpse of a hidden world – one that mirrors a trend playing out not only in?California, but in states such as Oklahoma, Oregon, New Mexico and Maine: groups of people with apparent ties to foreign countries – most notably China – producing weed in colossal volumes.
A CNN investigation has found that, in this unassuming city of 115,000, the minimal consequences and hefty rewards for producing illicit marijuana in huge volumes has led to a whack-a-mole pattern of enforcement and a brazenness on the part of participants – all while neighbors look on in dismay.
The unlicensed operations, which can cause house fires and mold, often leave homes in a severely damaged state. Properties deemed uninhabitable by the city after raids are sometimes quickly rehabbed and sold for much more than the prior sale. Throughout, operatives in the schemes are seldom held accountable.
Law enforcement breaking through a reinforced back door to raid a marijuana grow house. CNN
The dynamic in Antioch is a microcosm of greater California, where lax laws on black-market weed are doing little to change the state’s status as a gargantuan producer of it.
The Golden State, whose cannabis enjoys a global reputation similar to that of Napa Valley wines, produces about 40% of the nation’s weed – the vast majority of it by unlicensed growers, according to Beau Whitney, an economist who specializes in the cannabis industry. The runner-up state – Oregon – produces less than a fifth of California’s output, he said.
This means California is fueling a massive underground economy, as three-quarters of the US marijuana market is illegal, Whitney said.
Law enforcement officials – including former DEA leaders and FBI director Christopher Wray –?attribute much of the activity?nationwide?to Chinese organized crime.
In Antioch, the operations bear the hallmarks of “the Chinese criminal syndicate,” said Bill Jones, chief of law enforcement at the California Department of Cannabis Control. He added that criminal networks made up of Chinese nationals have become the dominant presence in the state’s illegal cannabis trade over the past five years, eclipsing Mexican cartels.
Law enforcement officials said they’ve seen evidence that the activity in Antioch amounts to organized crime, citing the sophistication of the operations and apparent coordination of some of the people involved. But they declined to elaborate, citing ongoing investigations.
A review of search warrant affidavits, online property records and interviews with neighbors of some of the raided homes showed that the vast majority were owned or occupied by people with Chinese names, in a city where Asians make up about 15% of the population.
The home that Cannabis Control agents had to power-saw their way into belongs to Samson Liu, a police officer in nearby Oakland, California, CNN found. Cannabis Control declined to say whether Liu lived in the home or had tenants, citing an ongoing investigation.
Liu’s home not only contained what police said was 80 pounds of illegal marijuana trimmings stashed away in piles of garbage bags, officials said it was also extensively modified for the sole purpose of cultivation: The doors were fortified; the windows were boarded up. A heavy-duty generator sat in the laundry room to maximize power. Silver industrial air ducts snaked in and out of rooms for ventilation.
Law enforcement officials recover marijuana from inside a grow house. CNN
Almost every US state – even the most liberal – and the federal government considers the cultivation and/or sale of unlicensed marijuana a serious crime that carries felony-level fines and prison time, according to a CNN analysis of data from the National Organization for the Reform of Marijuana Laws.
But in California, the feds in recent years have largely taken a hands-off approach to marijuana, officials say. And under state law, any amount of illegal weed – save a few exceptions, such as the culprit being a registered sex offender or selling it to a child – is a misdemeanor offense.
As for the house owned by Liu, Cannabis Control agents have referred the matter to the internal affairs division of the Oakland Police Department, but have made no arrests in connection with the contraband.
CNN’s efforts to reach Liu by phone, email and a visit to his home were unsuccessful. The Oakland Police Department told CNN it is cooperating with outside law-enforcement agencies and investigating the case as a personnel matter; Liu was placed on administrative leave the day of the raid in late April.
Despite the large loads of marijuana and cash?taken?during roughly 60 raids in Antioch?since 2022, only two people associated with the busts in that city have been arrested and charged; both were given misdemeanors, according to records provided by Cannabis Control.
Although the state routinely seizes cash from the raided homes, it does not seize the homes themselves. Of the 60 raided homes in Antioch, about half were fixed up and sold by the original owner – often for a significantly higher amount than the prior sale – after the busts, CNN found.
CNN identified one real estate agent who has had a hand in selling four residential homes raided by authorities in Antioch. A review of online property records shows that she herself owns one of those homes, from which $937,000 worth of illicit cannabis was seized during a raid in December.
This summer, the agent listed another Antioch home for sale, less than three months after it was raided and deemed uninhabitable by the city due to issues related to its past use as an illegal grow house.
In a brief interview with CNN, the agent brushed aside questions about her involvement with properties associated with marijuana cultivation.
BEFORE: A bathroom inside a marijuana grow house.
BEFORE: A bathroom inside a marijuana grow house. California Department of Cannabis Control
AFTER: The same bathroom after the home was renovated and listed on the market.
AFTER: The same bathroom after the home was renovated and listed on the market. From online listing
“We pay the fine,” the real estate agent said, without elaborating. “There is no problem.”
The real estate agent’s attorney, Darius Chan, said his client is not involved in any “illegal operation” involving marijuana.
Chan acknowledged that his client owns a home that was used for illegal marijuana cultivation, but said she leased the house to a tenant who used it as a grow house. As for her role in real estate transactions involving suspected illicit marijuana operations, Chan said his client learned only afterwards that the properties had been converted to grow houses. He added that such conversions were a “persistent issue” in the area.
“It is not fair to tie a few houses to her or to tie her to the illegal cannabis operation,” the lawyer said. “She’s a victim of circumstance.”
‘People are smoking pesticides’
California,?despite its legalization of recreational marijuana in 2016, remains?a haven for?unlicensed?black-market entrepreneurs, officials say.
Illegal operators ignore the rules and fees of California’s highly regulated system under which marijuana can be legally produced and sold. They also skirt taxes and can thus undercut the prices of the legal market, which in California is struggling – in part because of the surplus flowing from the black market.
All the while, the rogue entrepreneurs enjoy the protection of doing business?in a state where a voter-approved legalization law has a clause that effectively eliminates felony prosecutions when it comes to marijuana. In almost every other state – including Washington and Colorado, the first two to legalize recreational marijuana – high-volume producers and/or distributors of illegal weed face felony charges, according to CNN’s review of state laws.
In California, “You can have seven plants or 70,000 plants and it still is that same misdemeanor violation,”?said?Siskiyou County Sheriff Jeremiah LaRue, whose sprawling northern California district is notorious for outdoor illegal marijuana cultivation. “It’s actually just a joke.”
Shannon Dicus, the sheriff of San Bernardino County in Southern California, said the state’s weak law creates an environment in which black-market growers have lots to gain and little to lose.
“It’s risk versus reward,” Dicus said. “Very small risk, very high reward.”
Unlicensed operators ship their in-demand California product to locations across the United States, including the East Coast, where it’s harder to grow outdoors in colder seasons.
Meanwhile, the illicit farming of marijuana?is associated?with?a wide array of problems. It can be a magnet for violent crime, such as armed robbery.
The grow houses are typically left in degraded condition due to the excessive amounts of power and water needed to produce the crop, which often requires makeshift electrical wiring and leaves walls covered in mold. Workers who tend to the plants are sometimes exploited or even trafficked, Cannabis Control officials said.
Mold growing on the wall and ceiling inside a marijuana grow house.
Mold growing on the wall and ceiling inside a marijuana grow house. California Department of Cannabis Control
One little-recognized problem, police say, is that untested weed from illegal growers?sometimes finds its way?into legal dispensaries where customers don’t realize what they’re buying.
“People are smoking pesticides,” said Kevin?McInerney, a commander with the Department of Cannabis Control.
Two recent cases filed in federal court in California offer a rare glimpse into how the more organized rings of grow houses can operate.
In one, federal authorities in 2018 alleged that about 100 homes in Greater Sacramento had been purchased by Chinese nationals and converted to weed-cultivation centers.
The investigation led to money-laundering and marijuana-manufacturing charges against four co-conspirators, including a real estate broker whose office was located in a strip mall.
The down payments for the homes were financed by wire transfers from China.
In the other federal case, a real estate agent used millions of dollars from Chinese investors to purchase nine homes in San Bernardino County that were converted into illegal marijuana cultivation sites.
The agent faced life in prison, but after pleading guilty in 2020 to conspiracy to possess, manufacture and distribute at least 1,000 marijuana plants, he ultimately was sentenced to six months.
In a letter to the judge, the real estate agent said he was lured into the scheme based on a promise to share in the profits and an assurance that marijuana cultivation was “only a misdemeanor.”
An emptied marijuana grow room.
An emptied marijuana grow room. California Department of Cannabis Control
Some politicians and law enforcement officials in the US have gone so far as to theorize that the Chinese government may have a hand in the illicit cannabis grow house operations?– or at a minimum are monitoring them. For instance, two members of Maine’s Congressional delegation – an Independent and a moderate Democrat – issued a joint press release in February expressing concern about “the Chinese Communist Party (CCP) affiliated marijuana cultivation operations” in their state and across the nation.
But Wray, the FBI director, said at a public hearing earlier this year that while his agency is starting to see “more ties between a lot of these growing operations and Chinese organized crime,” it hasn’t yet found any direct links between the marijuana farms and the Chinese government.
‘You have to steal electricity’
CNN?interviewed four?Mandarin-speaking Chinese nationals?who said they worked in the illegal marijuana trade.
One of the men, who asked that he not be named due to his immigration status and fear for his safety, said he crossed the Mexican border about a year ago and found work in the underground cannabis market through a Los Angeles-area employment agency geared toward recent Chinese immigrants.
The man, who spoke with a Mandarin-speaking CNN producer in a series of telephone interviews, said he first spent seven months working for a friend who runs several unlicensed outdoor greenhouses near Fresno, California.
The man said he then moved to the San Diego area, where he helped to produce?between 40 and 50 pounds of marijuana a month from inside a home.
“You have to steal electricity,” he told CNN. “If you don’t steal electricity, the monthly electricity bill will be over $10,000.”
He said the drug sells for $1,000 a pound and is picked up by Chinese buyers who show up at the door. He doesn’t know where it goes from there.
Details of the man’s account could not be independently verified, but he did provide photos of large bags of marijuana he said were produced as part of the operation.
Photo provided by Chinese national depicting marijuana that he said he helped cultivate.
Photo provided by Chinese national depicting marijuana that he said he helped cultivate. Obtained by CNN
The other three men who spoke with CNN shared similar accounts.
Vanda Felbab-Brown, an expert on transnational crime and nontraditional security threats at the Brookings Institute, said the trafficking of Chinese migrants – many of whom end up cultivating illegal marijuana – appears to be organized by “a combination of … Chinese criminal networks and Mexican criminal groups.”
It’s something she believes the US government needs to be paying closer attention to.
“We have been prioritizing China military decision-making, but Chinese organized crime and organized crime more broadly has not been a high priority in intelligence collection,” she said. “That needs to change.”
Marijuana houses sold at elevated prices
In Antioch and other nearby cities in recent years, investigators with Cannabis Control began receiving a steady flow of anonymous tips and complaints from neighbors.
As they began to investigate, one tell-tale sign of cultivation was off-the-charts usage of power.
“There was one neighbor, she got her PG&E (utility) bill and it was for $40,000,” said Jones of Cannabis Control. “And she’s like, ‘Whoa.’”
The bill, it turned out, had landed in the wrong mailbox: It belonged to a grow house across the street.
In one raid this spring, authorities found about $1 million worth of illegal weed in a spacious five-bedroom?home?on Shell Ridge Way.
City records obtained by CNN show that an inspector deemed the house uninhabitable on the day of the raid in March, citing a fire hazard and “a lot of chemicals” that he believed were ending up in the house’s drainage system. The inspector came back less than a month later and removed the designation.
By June it was back on the market, described as a “dream home” listed?for?$889,000 – nearly $200,000 more than it sold for in 2020.
BEFORE: A living room space used to store marijuana plants.
BEFORE: A living room space used to store marijuana plants. California Department of Cannabis Control
AFTER: The same living room after the home was renovated and listed on the market
AFTER: The same living room after the home was renovated and listed on the market CNN
McInerney of Cannabis Control said untangling what he suspects are the complex networks behind illegal grow houses will require not only more resources, but also a fundamental culture change at his own agency – one he is?pushing to achieve.
The idea, he said, is to supplement the current narcotics-investigation approach of surveilling suspicious characters and banging down doors – the “fun stuff,” as he said – with another dimension: the duller white-collar work of delving into paperwork.
“That’s where we can get the people that are making the money,” McInerney said. “But we’re swimming upstream.”
Regardless of whether organized crime is at play, the phenomenon strikes some Antioch residents as not only strange, but frustrating.
Bill Tillson, who lives on the same block where three homes were raided this spring – including that of the Oakland police officer – told CNN that he’d since seen people associated with the homes cleaning the properties, removing marijuana-growing equipment and putting one of the houses up for sale, price tag: $900,000. The whole dynamic struck him as unfair.
“It’s like, yeah, we’ll buy these houses, we’ll use them as a grow house … it’s a misdemeanor. No big deal,” Tillson said.
“Where are the higher-up people, the politicians?” he asked. “I mean, they’re letting them get away with this?”
CNN’s Anna-Maja Rappard and Majlie de Puy Kamp contributed to this report.
Canna_Business
4 months ago
$MRMD: Earnings 8/7/2024
MRMD: MariMed Inc. (Balance Sheet Summary)
Current Assets: Increased from $51,432,000 in 2023 to $53,054,000 in 2024, indicating a stronger short-term financial position.
Cash and Cash Equivalents: $10,192,000 (2024) compared to $14,645,000 (2023), a decrease but still maintaining significant liquidity.
Accounts Receivable, Net: Improved slightly from $7,199,000 to $7,744,000 suggesting better collection from customers.
Inventory: Increased from $25,306,000 to $31,139,000 indicating growth in production and product availability.
Non-Current Assets: Grew from $144,691,000 in 2023 to $155,480,000 in 2024, reflecting investment in long-term growth.
Property and Equipment, Net: Increased to $93,977,000 from $89,103,000 showing investment in physical assets.
Intangible Assets, Net: Increased from $17,012,000 to $20,404,000 reflecting growth in intangible value.
Goodwill: Increased from $11,993,000 to $15,812,000 indicating potential acquisitions or value addition.
Finance Lease Right-of-Use Assets: Increased from $3,295,000 to $4,151,000 suggesting expanded leasing activities.
Total Assets: Increased to $208,534,000 in 2024 from $196,123,000 in 2023, indicating overall growth.
Accounts Payable: Increased from $9,001,000 to $11,854,000 showing more operational activity.
Non-Current Liabilities: Increased slightly from $76,347,000 to $80,272,000 indicating more long-term obligations but manageable.
Positives:
1. Total Assets Growth: Significant increase in total assets from $196,123,000 to $208,534,000 reflecting overall growth.
2. Inventory Growth: Increase in inventory to $31,139,000 indicating higher production capacity.
3. Investment in Property and Equipment: Increase to $93,977,000 showing commitment to expanding physical infrastructure.
4. Intangible Assets and Goodwill: Growth in intangible assets and goodwill, suggesting value creation and potential acquisitions.
5. Increased Paid-In Capital: Increase in additional paid-in capital, reflecting investor confidence and additional equity financing.
These points indicate a positive trajectory with investments in assets and infrastructure that suggest growth and expansion potential.
Six months ended June 30:
• 2024:
o Revenue: $78,371,000
o Cost of Revenue: $44,990,000
o Gross Profit: $33,381,000
o Gross Margin: 42.6%
o Operating Expenses: $30,404,000
o Income from Operations: $2,977,000
Positives:
Revenue Growth:
Three months ended June 30: Revenue increased from $36,519,000 in 2023 to $40,438,000 in 2024.
Six months ended June 30: Revenue increased from $70,899,000 in 2023 to $78,371,000 in 2024.
Gross Profit Increase:
Three months ended June 30: Gross profit increased from $16,376,000 in 2023 to $16,909,000 in 2024.
Six months ended June 30: Gross profit increased from $31,764,000 in 2023 to $33,381,000 in 2024.
Improvement in Operating Income:
Three months ended June 30: Despite an increase in operating expenses, the company maintained positive income from operations ($956,000 in 2024).
Six months ended June 30: Income from operations was $2,977,000 in 2024, indicating effective cost management despite higher operating expenses.
Reduction in Interest Expense:
Three months ended June 30: Interest expense decreased from $2,640,000 in 2023 to $1,724,000 in 2024.
Six months ended June 30: Interest expense decreased from $5,145,000 in 2023 to $3,353,000 in 2024.
Cash Flows from Investing Activities:
• 2024:
o Purchases of property and equipment: $8,336,000
o Business acquisitions, net of cash acquired: $4,250,000
o Purchases of cannabis licenses: $623,000
o Proceeds from notes receivable: $13,000
o Net cash used in investing activities: $13,809,000
Cash Flows from Financing Activities:
• 2024:
o Proceeds from Construction to Permanent Commercial Real Estate Mortgage Loan: $2,948,000
o Proceeds from mortgages: $1,163,000
o Principal payments of finance leases: $676,000
o Distributions: $83,000
o Net cash provided by financing activities: $2,961,000
Positives:
1. Positive Cash Flow from Operating Activities:
o 2024: $6,395,000 indicating the company is generating cash from its core operations.
2. Strong Depreciation and Amortization Contributions:
o Significant amounts for depreciation and amortization ($3,946,000 and $1,183,000 in 2024) demonstrate substantial investment in assets and intangible resources.
3. Increased Cash Flow from Financing Activities:
o 2024: Positive net cash provided by financing activities ($2,961,000), showing successful financing strategies, including new mortgage loans and managing finance leases.
4. Investment in Growth:
o Continued investment in property, equipment, and business acquisitions, reflecting the company's commitment to growth and expansion.
5. Reduction in Cash Outflows from Investing Activities:
o Despite significant outflows, the company is strategically investing in key areas such as property, equipment, and licenses.
These points indicate that MariMed Inc. is focusing on operational efficiency, strategic investments, and effective financing to support its growth trajectory.
Positives:
1. Positive Adjusted EBITDA:
o Three months ended June 30, 2024: Adjusted EBITDA is $4,371, ,000 showing positive earnings before interest, taxes, depreciation, and amortization adjustments.
o Six months ended June 30, 2024: Adjusted EBITDA is $9,032, ,000 indicating strong operational performance.
2. Improvement in Non-GAAP Gross Margin:
o Three months ended June 30, 2024: Non-GAAP Gross Margin improved to 42.9% from GAAP Gross Margin of 41.8%.
o Six months ended June 30, 2024: Non-GAAP Gross Margin increased to 43.3% from GAAP Gross Margin of 42.6%.
3. Reduced Non-GAAP Net Loss:
o Three months ended June 30, 2024: Non-GAAP Net Loss is significantly lower at $(232,000) compared to GAAP Net Loss of $(1,639,000).
o Six months ended June 30, 2024: Non-GAAP Net Loss is $(822,000), substantially less than GAAP Net Loss of $(2,931,000).
4. Consistent Adjustments for Amortization and Stock-Based Compensation:
o Adjustments for amortization of acquired intangible assets and stock-based compensation provide a clearer picture of the company's operational performance by excluding non-cash expenses.
5. Maintained Positive EBITDA Margins:
o Despite the lower GAAP income, MariMed has maintained positive Adjusted EBITDA margins (10.8% for the three months and 11.5% for the six months ended June 30, 2024), indicating operational efficiency.
These points highlight MariMed Inc.'s operational strengths, including strong Adjusted EBITDA, improved non-GAAP gross margins, and a significantly reduced non-GAAP net loss.
Six months ended June 30: 2024
o Product revenue - retail: $45,969,000
o Product revenue - wholesale: $30,373,000
o Total product revenue: $76,342,000
o Other revenue: $2,029,000
o Total revenue: $78,371,000
Positives:
1. Strong Growth in Wholesale Revenue:
o Six months ended June 30, 2024: Wholesale revenue grew substantially by 41.9% to $30,373,000 from $21,407,000 in 2023.
2. Overall Revenue Growth:
o Six months ended June 30, 2024: Total revenue increased by 10.5% to $78,371,000 from $70,899,000 in 2023.
3. Stable Retail Revenue:
o Despite a slight decrease, retail revenue remains a significant portion of the total revenue, contributing to a balanced revenue stream.
o Six months ended June 30, 2024: Retail revenue was $45,969,000 compared to $47,519,000 in 2023, showing resilience.
4. Increase in Other Revenue:
o Six months ended June 30, 2024: Other revenue increased slightly to $2,029,000 from $1,973,000 in 2023, demonstrating growth in additional revenue streams.
These points highlight MariMed Inc.'s robust performance in increasing wholesale revenue and overall revenue growth, which are positive indicators of the company's expanding market presence and operational efficiency.
Balance Sheet Summary:
• Total Assets increased from $196.1M to $208.5M, showing overall growth.
•Current Assets grew to $53.1M from $51.4M, with significant liquidity in cash ($10.2M).
•Non-Current Assets rose to $155.5M from $144.7M, driven by investments in property, equipment, and intangibles.
•Total Liabilities increased to $120.9M from $107.2M, reflecting higher short-term and long-term obligations but manageable within the asset growth.
Stockholders’ Equity remains strong at $68.6M despite a slight decrease from $69.9M.
Positives:
1. Asset Growth: Significant increase to $208.5M.
2. Inventory Increase: Reflects higher production capacity.
3. Investment in Infrastructure: Increased property and equipment investment to $94M.
4. Intangible Assets Growth: Indicates value creation and potential acquisitions.
5. Stable Financing: Consistent mezzanine financing at $19M.
Revenue Growth:
o Q2: Up from $36.5M (2023) to $40.4M (2024).
o 6 Months: Up from $70.9M (2023) to $78.4M (2024).
Gross Profit Increase:
o Q2: Up from $16.4M to $16.9M
o 6 Months: Up from $31.8M to $33.4M
Operating Income:
o Q2: Positive at $956K despite higher operating expenses.
o 6 Months: Positive at $3M
Interest Expense Reduction:
o Q2: Down from $2.6M to $1.7M
o 6 Months: Down from $5.1M to $3.4M
Positives:
1. Revenue and Gross Profit Growth: Consistent increase in revenue and gross profit.
2. Positive Operating Income: Indicates effective cost management.
3. Reduced Interest Expenses: Lower financial costs improve net loss figures.
Statements of Cash Flows Summary:
• Positive Cash Flow from Operations: $6.4M in 2024, showing strong core operations.
• Investing in Growth: Continued investment in property, equipment, and business acquisitions.
• Effective Financing: Positive net cash from financing activities at $3M.
Positives:
1. Operational Cash Generation: Strong positive cash flow from operations.
2. Strategic Investments: Significant investments in assets and growth initiatives.
3. Effective Financing Strategy: Positive financing activities support growth.
MariMed Inc. demonstrates robust growth in assets, revenue, and operational efficiency, with strategic investments and effective financing supporting its positive trajectory.
Giovanni
6 months ago
Mold scandal in Massachusetts leads to $200,000 fine for marijuana MSO
author profile pictureBy Chris Roberts, Reporter
June 12, 2024 - Updated June 12, 2024
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Image of a petri dish swab at a cannabis lab
(Photo by Matthew Staver for MJBizDaily/Emerald)
(This story was updated at 12:45 p.m. ET Wednesday to include comments from Holistic Industries.)
Massachusetts regulators last month fined marijuana multistate operator Holistic Industries $200,000 after a mold outbreak in which the company allegedly “knowingly” sold contaminated cannabis.
According to an April 15 stipulated settlement between the company and the Massachusetts Cannabis Control Commission (CCC) approved May 9, the agency alleged Holistic knew about a mold outbreak at its cultivation facility in the town of Monson since at least November 2020.
According to CCC documents, rather than immediately fix the problem, the company sought out permissive lab testing that allowed the tainted marijuana to pass inspection and be sold, leading to “numerous patient and consumer complaints” that Holistic cannabis “smelled and tasted like mold.”
CCC spokesperson Tara Smith confirmed the company paid the fine, but she offered no further comment.
“We had issues with mold in our Monson facility in 2020/2021 and determined the safety of our plants was not compromised,” Jamie Ware, interim head counsel at Holistic Industries, told MJBizDaily in a statement emailed Wednesday.
“To be clear, no product was ever sold or in the hands of consumers that did not pass testing from a state-approved facility.”
In public comments at the CCC meeting on May 9, before the settlement was approved, Commissioner Kimberly Roy praised the employee whistleblowers for alerting officials to the problem and pushed for the creation of a dedicated “whistleblower hotline.”
“We want to thank these employees for being brave enough to speak up,” Roy said.
“We want to make sure consumers and patients are safe, but also our workers.”
Big fine, increased scrutiny
According to the settlement, the CCC determined that Holistic violated four state regulations, including jeopardizing “the welfare of the public.”
Despite increased scrutiny in recent years about the relationship between marijuana operators and independent testing labs, the situation came to light only after employees contacted regulators in fall 2021, according to the CCC.
Employees claimed company leadership knew about the problem, but moldy product was “pushed through anyway,” according to the settlement agreement.
Speaking for Holistic, Ware said via email that “even though all products passed all testing requirements during that time, we decided to completely renovate the facility at significant expense to ensure we could provide the best quality, safest products with no future issues.”
“During that time, we also consulted with top environmental science experts and OSHA (Occupational Safety and Health Administration) and were assured that any issues within the facility did not pose a human health hazard.”
Gaming the system?
Critics say the situation highlights several ongoing problems, including lax oversight that allows unscrupulous operators to use labs that provide desirable results, including inflated THC potency.
Seeking lab results that allow contaminated product to enter the market creates potential for health and safety crises that affect both workers and consumers.
“I think it’s fairly serious. The ease with which the system was gamed is really concerning here,” said Jeff Rawson, the Cambridge, Massachusetts-based founder of the Institute of Cannabis Science, a consumer-advocacy and watchdog group that’s been sounding the alarm over lax testing and safety standards.
“It’s fraud, and it’s also an unlawful occupation hazard.
“You are not allowed to employ people in a workplace that’s full of mold.”
Such problems aren’t limited to Holistic, according to Rawson, who has performed random testing of off-the-shelf cannabis products in Massachusetts and found about 10% of those selected failed his own testing for mold.
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‘Knowingly’ sought PCR testing
As part of its settlement with the state, Holistic “neither admits nor denies” any allegations, including:
Mold “was present” throughout Holistic’s 56,000-square-foot cultivation facility, including grow rooms, processing tables, “office spaces, drains, HVAC systems and structural elements.”
Holistic “knowingly” requested polymerase chain reaction (PCR) testing rather than plate assay testing “to ensure the maximum volume of product would reach the market.”
Holistic did not begin remediating the mold outbreak until April 2021, despite knowing about the problem the previous winter.
The company did not cease production during the mold outbreak, nor the remediation efforts.
As part of the settlement, Holistic must, for six months, submit product for testing to a third-party lab agreed to by both the state and the company.
Employee whistleblowers
Holistic’s alleged mold problem became public knowledge in 2021, thanks to employee whistleblowers who leaked word of the situation to local media as well as state regulators.
That year, an independent investigation found “significant” mold contamination “throughout the facility” in Monson, according to a report anonymously leaked to the Daily Hampshire Gazette and other media outlets.
At the time, Jamie Ware, a senior vice president at Holistic, blamed a December 2020 power outage for a “high-humidity event” and said the company found mold in June 2021 after a “pervasive smell” appeared.
Large, privately held MSO
Headquartered in Washington, D.C., Holistic Industries also operates cultivation facilities in Maryland, Massachusetts, Michigan, Oregon, Pennsylvania and West Virginia.
The company operates 15 adult-use stores and medical marijuana dispensaries under its Liberty brand in California, Maryland, Massachusetts, Michigan and Pennsylvania.
In news releases, Holistic describes itself as “among the largest” privately held MSOs in the country.
The company also scored a marketing coup when it secured the rights to sell cannabis using the name and likeness of Grateful Dead front man Jerry Garcia.
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Massachusetts and safety
The alleged mold outbreak in Monson is one of several incidents to involve employee and consumer safety in the Massachusetts cannabis industry.
In January 2022, a 27-year-old cultivation worker employed by Florida-based MSO Trulieve Cannabis Corp. died after collapsing at the company’s former grow operation in Holyoke.
As part of its settlement in that matter, Trulieve paid a $14,502 fine and agreed to fund a study about the hazards of ground cannabis dust.
Chris Roberts can be reached at chris.roberts@mjbizdaily.com.
Giovanni
8 months ago
Is it unexpected that a patient needing a lung transplant dies waiting?
How long can you wait for a lung transplant?
The average person waits around two years for a single lung transplant, and as long as three years for two lungs. People who are unable to wait that long may be considered for lung transplant from a living donor.
What organ transplant has the lowest success rate?
Lung transplant patients have the lowest 5- and 10-year survival rates, according to UNOS. “The lungs are a very difficult organ to transplant because they're exposed to the environment constantly as we breathe,” explained Dr. Steves Ring, Professor of Cardiovascular and Thoracic Surgery. Dr.Apr 26, 2017
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Pediatr Transplant
. 2015 May;19(3):294-300. doi: 10.1111/petr.12390. Epub 2014 Nov 19.
Lung transplant waitlist mortality: height as a predictor of poor outcomes
Britton C Keeshan 1, Joseph W Rossano, Nicole Beck, Rachel Hammond, James Kreindler, Thomas L Spray, Stephanie Fuller, Samuel Goldfarb
Affiliations expand
PMID: 25406495 DOI: 10.1111/petr.12390
Abstract
The LAS was designed to minimize pretransplant mortality while maximizing post-transplant outcome. Recipients <12 are not allocated lungs based on LAS. Waitlist mortality has decreased for those >12, but not <12, suggesting this population may be disadvantaged. To identify predictors of waitlist mortality, a retrospective analysis of the UNOS database was performed since implementation of the LAS. There were 16,973 patients listed for lung transplant in the United States; 12,070 (71.1%) were transplanted, and 2498 (14.7%) patients died or were removed from the wait list. Significantly more pediatric patients died or were removed compared with adults (22.0% vs. 14.4%, p < 0.01). In multivariate analysis, in addition to higher LAS at time of listing (adj. HR1.058, 1.055-1.060), shorter height (1.008, 1.006-1.010), male gender (1.210, 1.110-1.319), and requiring ECMO (1.613, 1.202-2.163) were associated with pretransplant mortality. Post-transplant survival was not affected by height. The current age cutoff may impose limitations within the current lung allocation system in the United States. Height is an independent predictor of waitlist mortality and may be a valuable factor for the development of a comprehensive lung allocation system.
Keywords: lung transplant; mortality; organ allocation; outcomes; pediatrics; waitlist.
© 2014 John Wiley & Sons A/S. Published by John Wiley & Sons Ltd.
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Comment in
Pursuing distributive justice in pediatric lung transplantation.
Mallory GB.
Pediatr Transplant. 2015 May;19(3):249-51. doi: 10.1111/petr.12434.
PMID: 25808911 No abstract available.
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Stephens NA, Chartan CA, Gazzaneo MC, Thomas JA, Das S, Mallory GB Jr, Melicoff E, Vogel AM, Parker A, Hermes E, Heinle JS, McKenzie ED, Coleman RD.
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Outcomes of Patients on the Lung Transplantation Waitlist in Korea: A Korean Network for Organ Sharing Data Analysis.
Yeo HJ, Oh DK, Yu WS, Choi SM, Jeon K, Ha M, Lee JG, Cho WH, Kim YT.
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Publication types
Research Support, U.S. Gov't, P.H.S.
MeSH terms
Adolescent
Body Height*
Body Weight
Child
Child, Preschool
Databases, Factual
Female
Humans
Infant
Infant, Newborn
Kaplan-Meier Estimate
Lung Diseases / mortality*
Lung Diseases / surgery*
Lung Transplantation*
Male
Multivariate Analysis
Retrospective Studies
Risk
Tissue and Organ Procurement
Treatment Outcome
United States
Waiting Lists*
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