Article originally published on July 23. Last update on July 26.
CannTrust is the latest licensed producer to be found breaking the law by growing cannabis in unlicensed rooms. Because of that, CannTrust is facing a situation where they could lose their license, be fined up to a million dollars, cease existing as a company, have employees sent to prison, or all of the above.
You can bet that CannTrust executives are praying for only the fine because although that would be bad, losing their license would be catastrophic and would be an existential threat for the company going forward.
This article traces the CannTrust timeline in reverse chronological order.
A major shakeup in CannTrust’s senior leadership occurs as the Board of Directors terminate with cause CEO Peter Aceto and demand the resignation of chair Eric Paul, who did.
Effective immediately, Robert Marcovitch will be CannTrust’s interim CEO, who is stepping down from his role as chairman of the special committee. In other words, the man who was leading the special committee that was supposed to be independently investigating CannTrust’s illegal growing scandal will now be taking over as interim CEO!
Mark Dawber has taken over as chairman of the special committee.
As newly-christened interim CEO Robert Marcovitch said in a press release:
“Our first priority is to complete the remaining items of our investigation and bring the Company’s operations into full regulatory compliance. Implementing the necessary changes is essential to the interests of our medical patients, customers, shareholders and employees.”
CannTrust’s share prices drop to its lowest point ever after a Globe and Mail story alleges that company chairman Eric Paul and CEO Peter Aceto knew about the illegal weed being grown in an unlicensed room since November 2018.
The story was published in the Globe and Mail late Tuesday (July 23), when CannTrust’s stock price closed at $3.43 CAD. By the end of July 24, it was $2.68- a drop of 21.8 percent!
CannTrust CEO Peter Aceto has been removed from CannaChiefs Media “2019 TOP 50 Most Influential Canna Chief” Honors over the scandal.
“The negligence demonstrated by CannTrust’s non-compliance will negatively impact the Canadian legal cannabis market.
Product shortages and high prices are already driving consumers back to the black market, we feel that the captain at the helm needs to be held accountable; therefore, after careful consideration we have opted to remove CEO Peter Aceto from the 2019 Top 50 Most Influential Canna Chiefs listing.”
CannTrust officially confirms that it responded to Health Canada finding 12,700 kg of illegally grown cannabis at an unlicensed greenhouse on July 17, which was one day before the July 18 deadline imposed by Health Canada, as reported by the Canadian Press.
CannTrust also provides update on the special committee created on July 11 to investigate the company’s non-compliance, and we learn who is on the committee. According to the company press release, “The Special Committee is comprised of Robert Marcovitch (chairman), Shawna Page, Mark Dawber, FCPA, and John Kaden, Esq., each of whom is independent of management of the Company. “
Special committee chairman Robert Markovitch said:
“We are determined to identify the root causes for all non-compliance issues, to take appropriate actions to address and remediate any issues with the Company’s compliance culture and to restore trust in the Company.”
BNN Bloomberg reports “at least two Canadian cannabis producers have been approached by bankers to gauge interest in acquiring CannTrust”, but this is in the very early stages and according to sources, it’s nowhere close to a deal.
Agrima Botanicals becomes the first licensed producer to have their cannabis licenses revoked by Health Canada, as reported by CBC.
Although not directly related to the CannTrust saga, Agrima’s case can serve as a warning sign that CannTrust could meet the same fate.
CannTrust announces it is placing a voluntary hold on all sale and shipping of its cannabis.
In addition, CannTrust creates a Special Committee to investigate the company’s non-compliance, “comprised of independent members of the Board of Directors “, according to a company press release.
Law firm Kaplan Fox files a class action lawsuit against CannTrust “on behalf… of all persons and entities who purchased the publicly traded common stock of CannTrust on the New York Stock Exchange”.
New York law firm Bragar Eagel and Squire, a New York-based law firm that specializes in securities litigation, announced that it has begun investigating the company for the violation of federal securities law and other unlawful business practices
CannTrust receives a notice of non-compliance over cannabis grown in five unlicensed rooms between October 2018 to March 2019.
As reported by CTV, this is the “majority” of the company’s inventory, meaning cannabis shortages are all but guaranteed, and it’s significantly more than the 9,400 kg of cannabis the company grew in the last financial quarter.
Health Canada audits CannTrust’s greenhouse facility in Pelham, Ontario.
Former CannTrust employee Ryan Lalonde alerts a local newspaper and Health Canada of the company’s illegal activities. As he told the Voice:
“I’m not into criminal stuff. We were literally hanging up poly walls to hide thousands of plants from Health Canada so we could snap a picture and then send that to them.”
Featured image courtesy of Galit Rodan at Bloomberg..