CannTrust Executives Knew of Unlicensed Grow Rooms

CannTrust Executives Knew of Unlicensed Grow Rooms

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It has been less than a month since CannTrust effectively ground to a halt after the July 8th announcement of its non-compliance. Now, new information emerged that only made the licensed producer look worse.

In a revelation that should frankly surprise no one, Bloomberg reports these violations were known to upper management, further outlined by The Globe and Mail. The news only adds another nail into CannTrust’s coffin as its future looks bleaker with every new report.

Meanwhile, the company’s shares continue to drop significantly as it is unable to sell or ship product ever since its voluntary hold, which they announced in an e-mail to clients on July 11th.

But now we know that, not only did the company put patients into a bind, but also betrayed their trust.

 

Deliberate Deception of Health Canada

 

Recent revelations by both Bloomberg and The Globe and Mail show a deliberate attempt by CannTrust executives to keep the grow rooms – and other breaches – a secret. This makes the company’s pledge to take “appropriate actions” seem disingenuous at best.

CannTrust chairman Eric Paul and CEO Peter Aceto knew about the unlicensed grow rooms seven months before they were exposed.

The Globe and Mail explains:

 

“In an e-mail dated Nov. 16, 2018, Graham Lee, CannTrust’s director of quality and compliance, informed Mr. Aceto and other top executives about a Health Canada inspection that had just been completed. It had revealed several compliance breaches but missed the plants growing in unlicensed rooms.”

 

Specifically, Lee said:

 

“‘We dodged some bullets…[Health Canada] did not ask about RG8E/W, which are unlicensed rooms currently full of plants.”

 

Even more damning is the revelation of lost cannabis – also withheld during inspection. In an e-mail, Lee asked about how best to keep these errors a secret from Health Canada:

 

“We have a large number of lost bottles we have not reported. I suspect due to bad counting rather than diversion [into the black market]. I will continue working to eliminate our exposure on all these items, but they remain a liability. Please advise of any actions you would like me to take.”

 

Lee is literally colluding with other members of management on how to hide the error. Needless to say, the lack of accountability or professionalism is astounding.

However, CannTrust is now financially reaping what it has sown.

 

Drop in Value

 

It does not take a business expert to see why CannTrust’s stock value continues to drop. Bloomberg reveals that the LP’s stock value dropped a total of 55% since the scandal was exposed. But The Globe and Mail’s piece really hit the company hard.

According to Bloomberg:

“The company’s shares dropped as much as 20% at the open in Toronto on the Globe and Mail report which cited internal emails showing CannTrust Chairman Eric Paul and Chief Executive Officer Peter Aceto were informed about the breach about seven months before Health Canada raised the issue.”

 

This leaves investors in a difficult position, as they face serious losses if CannTrust loses its license – a possibility that is now closer than ever.

 

WeedAdvisor’s Role in Compliance

 

Although we have covered stories of non-compliance before, CannTrust’s is by far the most in-depth. We now see firsthand how regulatory violations occur and are subsequently covered up.

It is great that Health Canada was still able to catch these activities, but the discoveries come at a cost. As The Globe and Mail says, this situation puts Canada’s marijuana industry into an “unfavourable light” during a time when companies want to expand south of the border.

Given these high stakes, WeedAdvisor wants the CannTrust situation to be the last of its kind. We designed a set of business solutions aimed at enforcing compliance. Through real-time data-tracking, inventory management (which would have detected CannTrust’s lost product), detailed compliance reports (to prove a good faith effort in compliance measures) and more, WeedAdvisor’s programs will save millions in potential fines and lost sales.

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