Former worker stated FBI, DCC declined to behave on the knowledge offered.
As California continues to grapple with the issue of its hashish being smuggled as far-off as New York Metropolis, one longtime West Coast trade insider says authorities have declined to behave on details about his former employer, a marijuana govt he stated shipped a minimum of $2 million value of authorized hashish out of state in a roughly 10-month interval from 2021 to 2022.
The would-be whistleblower, George Engers, is a former chief working officer at Prime Shelf, which holds energetic supply, manufacturing, and distribution licenses in California and does enterprise in Sacramento as Cannazon. Engers, together with former Prime Shelf common supply supervisor Garrett Webb, has filed swimsuit in opposition to Prime Shelf and several other of its associates for whistleblower retaliation, wrongful termination, fraud, breach of contract, and extra.
Engers and Webb reported roughly $2.1 million in unlawful hashish diversion and counterfeiting by Prime Shelf and firm management to each state and federal authorities, however they are saying that nothing is being completed in regards to the scenario, regardless of their having offered documentation and testimony to again up their claims.
Now, the 2 have pinned their hopes on a civil swimsuit in opposition to the corporate and its associates, which they are saying underscores how damaged the California marijuana trade is.
Engers v Prime Shelf lawsuit
One of many defendants, Quan Le, is the “elusive mastermind behind the scenes,” with straw males named on the precise enterprise permits held by Prime Shelf, Engers advised Inexperienced Market Report in an interview.
Engers and Webb additionally tried alerting two main manufacturers doing enterprise with Prime Shelf – Jeeter and STIIIZY – however stated officers at these corporations enabled the criminality as a substitute of chopping off the diversion.
Case Closed
Engers stated he offered the California Division of Hashish Management and the Federal Bureau of Investigation with 36 invoices from Prime Shelf and two different licensed corporations, Norcal Medication Man and Harvard Ventures, for which Engers stated Le was putting massive orders with distributors equivalent to STIIIZY and Jeeter. Webb additionally stated he gave counterfeit Jeeter merchandise made by Le to authorities, and Engers additionally offered pictures and quick movies as proof.
The FBI, nevertheless, advised Engers that the “case had been closed,” and an FBI agent advised him the DCC additionally closed its investigation into Prime Shelf, he stated.
A DCC spokesman responded to an inquiry from Inexperienced Market Report, “The DCC doesn’t touch upon investigations,” and declined to remark additional.
The FBI didn’t reply to a request for remark.
“It felt just like the enforcement arm of the DCC is just targeted on combating illicit operators who evade paying into the system, with little consideration paid to license holders concerned in racketeering,” Engers stated.
Engers stated the takeaway is that absolutely licensed hashish corporations breaking state guidelines are actually apparently simpler and safer to run – and with much less authorized threat – than unlicensed unlawful marijuana companies.
‘Counterfeiting Merchandise and Embezzling Cash’
Engers and Webb started working with Le in 2021, in response to the lawsuit, when Le employed Engers away from Sacramento-based hashish retail chain Kolas with the promise of a 21% possession stake in a brand new startup, which was Prime Shelf. Engers even took a pay reduce, from $150,000 to $54,000, to hitch Cannazon as COO, in response to the swimsuit, and Webb was one among Engers’ first hires.
Earlier than Kolas, Engers started his hashish profession in 2014, and hung out in administration at different licensed hashish corporations, together with Sparc, Eaze, and Move Kana.
At first, issues have been going effectively at Prime Shelf, however issues began to go sideways in January 2022.
That was when Engers seen massive money withdrawals from the account that he sometimes used for payroll – however he was denied entry to the enterprise financial institution accounts, and later concluded that Le and his spouse, Cyndi Nguyen (additionally a defendant within the swimsuit), have been embezzling cash from their very own enterprise.
A number of months prior, in November, Engers stated Le advised him a few new plan to position bulk orders with suppliers on behalf of a number of different retailers to make higher use of their buying energy.
“Initially, it labored, and we have been in a position to place massive orders. Nonetheless, over time, a few of these distributors began getting suspicious because the orders grew and the intervals between them have been too frequent,” Engers stated.
Because the distributors’ suspicions grew, so did his personal. There have been too many issues that didn’t add up, equivalent to how Le allegedly couldn’t present the state license numbers or different fundamental data on different retailers for whom he stated he was putting massive bulk orders, Engers stated.
Issues started to actually collapse in the summertime of 2022 when Le approached Webb and requested him to attempt a few pre-rolls to be able to see “how these examine to the actual factor,” Engers recounted.
Each Webb and Engers believed that Le was counterfeiting Jeeter merchandise, and Engers stated he discovered a full pallet of Jeeter items that had been stripped of their labels to be used on the counterfeited merchandise.
“Garrett (Webb) ultimately advised me about this and talked about that he didn’t smoke them as a result of he didn’t really feel he might belief the product in it. We have been beforehand advised that (Le) would repurpose merchandise that failed testing for mildew or arsenic,” Engers stated.
Regardless of all this – and the shortcoming of STIIIZY and Jeeter representatives to substantiate the validity of enterprise licenses on whose behalf Le stated he was making massive purchases – these two distributors continued promoting in bulk to Le, Engers stated.
The questionable invoices that Engers offered to each authorities and Inexperienced Market Report started in October 2021 and continued by August 2022. Webb and Engers have been terminated in October 2022, in response to the lawsuit.
A lot of the invoices that Engers stated have been suspicious have been for orders within the tens of 1000’s of {dollars}, however some – primarily orders positioned for Norcal Medication Man – have been within the six figures. And most of the orders have been for a lot extra product than Cannazon was promoting, Engers stated.
As an example, Cannazon alone would promote solely about 20,000 models per 12 months of Jeeter and STIIIZY merchandise mixed. However in response to the 29 suspect invoices, Le ordered 66,300 product models from Jeeter between October 2021 and August 2022, and one other 89,000 product models from STIIIZY in the identical timeframe.
Engers stated there’s no means Cannazon or the opposite retailers Le was supposedly ordering for might have bought that a lot in such a short while, which he stated makes it extra apparent that diversion to the illicit market was going down.
NCMM – Bill #29536_REDACTED
Enabling Diversion?
In February 2022, Engers traded textual content messages with Michael Kim, a gross sales govt at STIIIZY who had tried to confirm independently that Le was making purchases for a Los Angeles supply operation – however the license holder advised Kim the operation wasn’t affiliated with Le.
However Kim did nothing with that info, Engers asserted. Engers alleged that the reasoning was easy: The 2 corporations and their gross sales reps have been making sizable income from Le’s orders.
“Quan’s substantial orders, reaching as excessive as $300,000 (money on supply), have been certainly a windfall for STIIIZY and Jeeter,” Engers stated. “It grew to become obvious that the distributors have been conscious of potential regulatory points and have been offering hints and recommendation on the best way to modify the orders for believable deniability in case of any authorized repercussions.”
Citation – SO-35000 (1)
In late summer time 2022, in response to the lawsuit, Le “transferred one other (Jeeter) cargo that (Webb) couldn’t guarantee was genuine, prompting him to blow the whistle,” in response to the lawsuit.
“Garrett notified Jeeter … by way of e-mail informing them of the counterfeits and out-of-state shipments of the large orders,” Engers stated. “The Jeeter rep ignored the problem in an emailed response, so I replied with a corroborating assertion. Garrett was terminated a pair days after.”
Engers additionally had taken steps to take away each himself and Webb from any gross sales accounts between Prime Shelf and Jeeter.
On Sept. 16 final 12 months, Engers reached out to a Jeeter gross sales consultant, Noah Brewster, and copied two different Jeeter employees on the e-mail, in addition to Webb.
“It has come to our consideration that the Possession at Norcal Medication Man, Harvard Ventures, and Prime Shelf (Crystal and Quan) have been conducting criminality w/ regards to those extraordinarily massive orders being positioned by the enterprise. As you might be conscious, I eliminated myself from that account a pair weeks in the past after I came upon what was taking place. Apparently the product was moved throughout State traces together with counterfeit merchandise they manufactured. We don’t condone any of this exercise and are cooperating with the investigations,” Engers wrote in an e-mail thread shared with Inexperienced Market Report.
Webb wrote individually to Jeeter reps on the identical day, “The possession is actively counterfeiting Jeeter merchandise, and are transferring METRC compliant merchandise throughout state traces. I’m not okay with this criminality and taking motion to distance myself from it.”
Brewster wrote again to Webb that day, “This e-mail is coming as a little bit of a shock, I believe I converse for the opposite members of the Jeeter crew after I say we’re slightly confused as to what you imply right here!?”
After that, Le and his associates started a smear marketing campaign in opposition to Engers and Webb, the lawsuit maintains, together with allegations of theft and different misdeeds that justified each of their firings.
Fingerpointing All Round
An legal professional for Prime Shelf and the opposite defendants within the wrongful termination swimsuit stated all of them categorically deny any wrongdoing and “sit up for proving the falsity of (Engers’ and Webb’s) claims,” however declined to remark additional as a result of pending litigation.
In an emailed assertion, Jeeter father or mother firm DreamFields stated allegations made within the lawsuit about its firm are “unsubstantiated and false.”
“DreamFields has a zero-tolerance coverage for unethical or unlawful actions, and we do the whole lot in our management to align ourselves with hashish professionals that comply and respect the regulation,” the corporate wrote. “Earlier than conducting any type of enterprise, DreamFields validates every potential accomplice’s respective licenses and permits, which incorporates verifying the energetic standing of such potential accomplice’s sellers permits, enterprise licenses and all licenses issued by California’s (DCC).”
STIIIZY additionally weighed in by way of emailed assertion, and wrote, “That is the primary we’re studying about this lawsuit and the allegations in opposition to Cannazon for diversion. Our firm has a confirmed observe report of assembly and exceeding necessities set forth by California regulators, working in full cooperation with DCC, and all authorities companies the place we function. We’re assured STIIIZY might be absolved of any affiliation within the illicit exercise between these two companions.”
Reached by telephone in late April, the proprietor of Norcal Medication Man, John Essential, additionally denied any wrongdoing, and stated he’d reduce ties with Quan Le months in the past.
“This man labored for me earlier than, however it’s been 4 months, and I by no means did any enterprise with him in transferring something or diverting something or doing something unlawful,” Essential stated, including that Le is “not a foul man” and that Le advised him he’d fired Engers for theft.
Nothing to See Right here
Engers’ and Webb’s lawsuit is scheduled for a listening to in Sacramento County Superior Court docket on Sept. 1.
However to Engers, the actual concern is an absence of any investigation or penalty by authorities for what he says is an simply provable and egregious shattering of state and federal legal guidelines. Engers stated it will be easy for the DCC to confirm his claims in regards to the invoices and orders by checking their standing within the state track-and -race program, Metrc.
“I reported all of the criminality to the DCC and offered them with proof together with invoices from STIIIZY and Jeeter, pictures of counterfeit provides, and data on the best way to corroborate my allegations. I acquired a generic acknowledgement of my criticism and a telephone name asking if there was anything I’d like so as to add,” Engers stated. “Regardless of ready for months, I didn’t obtain any response or info from the DCC. I reached out quite a few instances, however the analyst refused to reply.”
To at the present time, Prime Shelf stays licensed and operational, Engers stated.
On high of that, Engers stated orders positioned for Prime Shelf have continued displaying up in his private e-mail, which had been related to the wholesale platform LeafLink when he was employed by Le. Engers stated Le apparently forgot to take away his e-mail from the community.
Engers shared the extra three invoices he’d acquired – between December 2022 and February 2023 – for 7,675 models of Jeeter pre-rolls, vape cartridges, and dwell resin with a complete worth of $116,000.
“Regardless of reporting the violations and offering proof, the enterprise remained unaffected with an energetic license,” Engers stated.
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