Alex Halperin

A high-profile Colorado marijuana start-up misled prospective investors and promoted an investment structure that may have violated state laws, according to internal company documents and emails leaked to WeedWeek. The company, Ebbu, subsequently rewarded its investors when it sold its assets in a cash-and-stock deal worth roughly $250 million.

Publicly available court filings and press accounts suggest fundraising irregularities at Ebbu, but these apparently never attracted scrutiny from Colorado regulators or law enforcement. The situation raises questions about how effectively the state enforces its marijuana investment laws. Ebbu’s story shows why money of unknown origin — akin to “dark money” in politics — could be a significant problem in the fast-growing and federally illegal marijuana industry. 

The documents also shine light on the early days of a bellwether cannabis start-up. Ebbu, which had a portfolio of U.S. patent applications, was the “poster child” for the value of cannabis-related intellectual property, a senior attorney told Bloomberg Law this summer.

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Soon after its founding in 2013, Ebbu generated buzz with its plan to release "Feelings," a line of marijuana products that would produce specific mood states: Energy, Chill, Create, Giggle and Bliss. Pot delivers a notoriously unpredictable high that can make users sleepy, chatty, horny or paranoid, among other sensations. A marijuana product that induces a specific high on demand is considered by some to be the industry’s holy grail. Over the years, many companies have made similar promises about their products, though there’s scant data to back them up. 

Ebbu co-founder Michael “Dooma” Wendschuh, who led Ebbu’s fundraising efforts for its first two and a half years, said the production techniques necessary to produce the Feelings products were well-established in the perfume industry. A few months after Ebbu’s founding, Dooma said the company also had a chemist who, for six years, had been studying how cannabis affects the brain. 

The company hired several Ph.D. scientists and bought some very expensive lab equipment.  Dooma was interviewed in major media outlets like Fortune, The New Yorker and Fox Business, further boosting Ebbu's credibility. 

In an industry obsessed with respectability, it surely helped Ebbu’s fundraising that both founders were clean-cut guys with experience in the mainstream economy. Dooma is a Princeton grad who co-wrote the blockbuster video game "Assassin’s Creed." Ebbu CEO Jon Cooper was the equivalent of student body president at the University of Colorado, Boulder, before beginning a business career with stints in finance and tech. 

Now in their early forties, Cooper and Dooma became friends early in their careers when both lived in Los Angeles. Cooper moved back to his native Colorado and they reunited there to start Ebbu, months after Colorado voted to legalize recreational marijuana in 2012. (Neither Cooper nor Dooma responded to emailed questions for this story.) 

Ebbu never released the Feelings product line. But in October 2018, one of Canada’s largest marijuana companies, Canopy Growth Corporation, acquired Ebbu’s assets in a deal reportedly valued at C$327 million (US$250 million). Cooper is now a Canopy executive, according to his LinkedIn profile. (Spokespeople for Canopy and Constellation Brands, an American liquor company which is a big Canopy investor, did not respond to requests for comment.)

Like many U.S. marijuana companies, in Ebbu’s early years, it struggled to raise money. Dooma eventually raised about $10 million for Ebbu, but Colorado law, he later told an interviewer, made it “a tremendous challenge, almost impossible.” 

Since its first-in-the-nation market for legal recreational marijuana opened in 2014, Colorado has required all direct and indirect investors in legal — i.e., licensed — pot companies to go through a criminal background check, which includes fingerprinting and financial disclosures. It is intended to ensure organized crime doesn’t profit from the industry.

The process is invasive and time consuming, but perhaps more importantly, lots of people with the money and the inclination to invest in pot start-ups had jobs, custody battles and other life situations that could be adversely affected by association with a stigmatized and federally illegal industry. Colorado does not publicly disclose the names of all investors in licensed marijuana companies, but even so, keeping their involvement confidential was — and remains — a priority for some would-be cannabis investors. 

In a February 2018 court filing, Dooma acknowledged that Ebbu tried to help investors back the company “without publicly revealing their identities,” and said similar practices are common in Colorado’s marijuana industry. To Dooma’s knowledge, Ebbu’s policy of helping investors to mask themselves “was not intended to avoid compliance with any state or federal laws,” the court filing said. 

WeedWeek previously documented a September 2013 transaction in which an individual who appeared to invest $140,000 in Ebbu was not disclosed to Colorado regulators, as Colorado law required. The transaction looked like this: On September 13, 2013, an individual, “E.,” transferred $140,000 to Dooma via a document called a “Custodian Agreement.” One week later, Dooma invested $140,000 in Ebbu. 

In court filings, Dooma identified himself as the investor and didn’t mention E. According to Dooma, it was the first investment Ebbu received. “This financial and security structure was fully vetted with Ebbu’s counsel,” Dooma said in a March 2018 lawsuit.  

Under penalty of perjury, Colorado marijuana license applications and renewal applications require companies to identify “all investments and funds used to start and/or finance” the business. As WeedWeek has previously reported, documents Dooma filed in court suggest Cooper facilitated the $140,000 transfer from E. to Dooma. But when Cooper signed Ebbu’s license and license renewal applications, he did not identify E. to Colorado regulators. Last year, a spokesperson for Cooper said E. had never “invested or loaned money to Ebbu,” and Cooper didn't respond to questions about the apparent financial relationship between E. and Ebbu. 

In an email to Cooper sent weeks before the $140,000 transaction, which Dooma later filed in court, Dooma describes a similar deal structure: “Basically the agreement would say that the person who is paying for the investment will give the money to the person who is actually investing,” he wrote. Dooma also raised the possibility of a “template agreement,” which could be used for multiple similar investments.

“I totally agree with ... a template agreement,” Cooper responded. The $140,000 “Custodian Agreement” signed by E. and Dooma a few weeks later appears to have performed this function. 

The transaction occurred at the very beginning of Colorado’s experiment with marijuana legalization, a confusing time of rapidly shifting regulations. It wasn’t clear to me from the material available whether Ebbu’s failure to identify E. to Colorado regulators on its subsequent license applications was an attempt to skirt the law or a misunderstanding of it. 

Newly leaked emails appear to show that, several months after Dooma’s $140,000 investment, Ebbu’s attorney said he would not participate in deals structured like this, but Ebbu continued to promote the investment structure.

The new leak consisted of about 200 pages of internal documents and emails from the company’s first year; they mostly involve raising capital. In emails, Cooper and Dooma talk up the company’s potential to dominate the industry,  though Ebbu didn’t yet have a permanent headquarters to develop and produce the Feelings products. The documents also shed new light on three-plus years of ongoing litigation, which followed Cooper’s firing of Dooma in early January 2016.

In a leaked email dated two months after the initial $140,000 investment, Cooper appears to indicate that the company’s lawyer, Christian Sederberg, founding partner of powerhouse cannabis law firm Vicente Sederberg, could not endorse this investment structure.

Under the subject line “RE: ‘how to invest in ebbu’ presentation,” Cooper wrote to Dooma:

“Is [a prospective investor] expecting to talk to Christian about gifting? I am happy to arrange a call -- but I think we have to tell [the investor] before the call:   

"1.	Christian is happy to talk about a the [sic] current laws and regs, and about an [investment] structure... 

"2.	Christian will not discuss 'gifting' as that is something that needs to happen outside of the company and without our knowledge…” 

In response, Dooma told Cooper to set up the call. He didn’t address gifting or the lawyer’s view of it. (Sederberg declined to comment citing rules governing Colorado lawyers.)

Despite its lawyer’s counsel, Ebbu still promoted the “gifting” structure as an option for investors. In a January 2014 email, Dooma wrote to a prospect, with Cooper cc’d:   

“GIFTING: It is possible to ‘gift’ funds to a Colorado resident who would purchase equity on your behalf.” 

Dooma attached two slide presentations to the email. It’s not certain which slides he included, but a slide Dooma filed in court illustrates a “gift scenario”: 

The slide appears to model — without explicitly saying so — how an investor (“you” in the slide) could remain unknown to Colorado regulators, as E. apparently did. In a court filing, Dooma said the slide was part of a presentation “developed by Ebbu and distributed by at [sic] Jon Cooper’s request to any prospective [investor] concerned about reputational issues”  associated with [investing in] a marijuana company. 

In an email to WeedWeek, Franklin Snyder, a Texas A&M University law professor who teaches a course on marijuana law, policy and business, wrote the “gift transaction” structure seems to have no reason “for independent existence apart from the secret investment.”

“It appears to be a sham transaction designed solely to cover up,” the source of the funds,  Snyder wrote. “The investor is the real (or ‘beneficial’) owner of the interest, and not disclosing that fact would make all of the license applications false statements to government officials.” 

Any “agreement of the parties to make false statements could amount to conspiracy,” Snyder added. ”So there may be serious potential criminal violations.” (Snyder is not licensed to practice law in Colorado, and his assessment is based solely on documents provided to him by WeedWeek.)

The above slide “would scare the bejeezus out of me if it were my client!” Snyder wrote. “I’m trying to fathom who could possibly think it was a good idea to even write it down, let alone distribute it.” 

Another slide Dooma filed in court depicted three of six proposed investment structures involving a “gift”: 

Cooper didn't answer whether Ebbu had raised any money from "gifting" transactions. In December 2018, he told me he was not aware of any investigations into Ebbu by any regulators, which he meant as evidence of Ebbu’s good corporate citizenship. 

It’s a reasonable argument — or would be if Colorado were effectively enforcing its marijuana investment laws. Despite numerous queries by WeedWeek over at least a year and a half, past and present state officials have refused to discuss investment law enforcement. 

Colorado’s Marijuana Enforcement Division, known as “The MED,” regulates more than 1,500 cannabis companies. Despite the reputational concerns held by many cannabis investors, The MED refuses to acknowledge the possibility of dark money finding its way into marijuana companies. 

The issue made it into the news this week when an unsealed federal indictment alleged associates of Rudy Giuliani, President Donald Trump's personal lawyer, "took steps to hide" the identity of a foreign investor in a  Nevada recreational marijuana business they hoped to start, part of a complex campaign finance scheme. In response, Nevada Gov. Steve Sisolak(D) immediately pledged to step up marijuana enforcement. 

In Colorado, the MED has “overlapping and reinforcing” measures to maintain financial compliance, a spokesperson said, including at the time of licensing, annual license renewals and during any change of ownership. The agency wouldn’t make anyone available to discuss scenarios such as the potential compliance gap at Ebbu. Citing statute, the spokesperson declined to comment on Ebbu. (After Dooma’s departure, Cooper pivoted Ebbu to focus on cannabis research and voluntarily surrendered its MED licenses in March 2018, about seven months before the Canopy acquisition.)

While several states have struggled to govern their new marijuana industries, Colorado’s market has generally been considered among the better regulated. “We had regulations that work,” former Governor John Hickenlooper (D), who oversaw the first years of regulation, told a reporter in April. “To a certain extent, the largest challenges have passed.” 

Andrew Freedman, who served as Colorado’s first director of cannabis coordination from 2014 to 2017 before founding cannabis consulting firm Freedman & Koski, declined to respond to a list of detailed questions. 

In May 2019, Colorado Gov. Jared Polis (D), who co-founded the cannabis caucus while representing Boulder in Congress, signed an industry-supported bill to loosen the state’s investing rules. Starting this November, public companies will be able to invest in Colorado marijuana companies.

Last year, Hickenlooper shut down a similar bill, calling it “premature” in his veto letter. “We have significant concerns about this broader access to capital markets, particularly as it relates to...keep[ing] criminal enterprises out of the regulated marketplace,” he wrote.

Polis’ office did not respond to multiple requests for comment. Ean Seeb, a cannabis entrepreneur whom Polis’ appointed his special advisor on cannabis also did not respond to requests for comment.  

With almost no apparent coordination or assistance from Washington, D.C., other states are openly struggling to regulate this new industry. Notably, a July 2019 audit in California found the state cannabis regulator is too short-staffed to conduct investigations. 

Cooper fired Dooma in early 2016 for reasons Cooper has never publicly discussed. In court filings, Dooma accused Cooper of orchestrating a “coup” at Ebbu. Dooma alleges Cooper paid a consultant named Daniel Clemens $240,000 to investigate Dooma and find a reason to fire him so Cooper could take over over the company. (Cooper has denied participating in any “unlawful conspiracy” against Dooma.) In a court filing, Clemens said he witnessed Dooma make “serious factual errors and materially misleading statements” to investors independent of Cooper.

A suit filed by Dooma against Cooper has been confidentially settled, but a suit Dooma filed against Clemens is still in play. A central question of the litigation is whether Dooma provided incorrect information to prospective investors to make Ebbu seem more attractive. “I’ve told people what they need to hear to get their money in,” Dooma said in a meeting with Cooper, which Dooma recorded days before Cooper fired him. Dooma later retracted his admissions in a February 2018 court filing, and provided several examples where he alleges Cooper misled investors. 

In February 2019, Clemens filed a lawsuit against Cooper alleging that Cooper engaged in “fraudulent schemes at Ebbu and actions in violation of state and federal securities laws...and that Cooper had conspired with [Dooma] to circumvent Colorado laws.” (Cooper has denied violating any state or federal securities laws, according to the lawsuit. Clemens did not respond to requests for comment.) 

The newly leaked documents indicate Dooma provided inaccurate information about Ebbu to investors, and did so with Cooper’s knowledge.  

According to Colorado records, Ebbu first applied for a license in May 2014 and received it in December 2014. But in an October 2013 email to a potential investor, Dooma, with Cooper cc’d, wrote Ebbu is “fully licensed and duly accredited.” 

The following April, Cooper wrote to Dooma: “fyi -- what have you told him about the license? It could be a problem if he shows up for his apt and we don’t have a license… or even an application in”.

In June 2014, a week after Ebbu applied for a license, Dooma wrote to Cooper: “Fyi when I spoke with [an individual] yesterday I told him we had a license…”  In the leaked documents, at least one investor whom Dooma prematurely told Ebbu had a license indicated he would invest. “We’ll be doing something with Ebbu,” the investor wrote.

Ebbu’s pitch to investors was that its Feelings products would be superior to conventional marijuana products because they would be more predictable. In November 2013 Dooma wrote he was “99.99%!” confident Ebbu could create the five Feelings. “The science is proven. We know how to do it,” he wrote. “We’ve created a precursor to the ‘high energy’ feeling on borrowed machinery.”

It’s not clear how close Ebbu came to developing the Feelings product, but in leaked emails Dooma appears intent on showing  prospective investors a “prototype” even if it was not actually the company’s product.

In January 2014, Dooma emailed Cooper: “See if [an individual] can join the meeting to provide product samples. If he cannot or will not, please go to the Clinic [a Colorado marijuana dispensary] and pick up a nice CO2 oil and remove it from its container and put it in a tupperware or something and just tell everyone it’s our prototype.” 

In December 2015, not long before Dooma was fired, a senior Ebbu scientist wrote to him after a meeting with a prospective investor: “I was put on the spot when you were acting like we had prototypes for Feelings at this moment…I emailed you previously to ask you please not to say this and I was disappointed that you never replied.” (In 2016, a spokesman for Dooma told me Ebbu had prototypes of the Feelings in the second quarter of 2015.)

After he left Ebbu, Dooma started raising money for a new company, with another idea for a “change the world” marijuana product: a THC-powered beer brewed from the cannabis plant. Province Brands’ Instagram is packed with pictures of the huge, elaborate brewery it is building in southern Ontario. The company says it will unveil its first products next year. 

After Dooma’s departure, Cooper redirected Ebbu to focus on cannabis research rather than product development. When Canopy acquired Ebbu’s assets in October 2018, the press release didn't mention the Feelings product line or Dooma, who no longer had a financial stake in Ebbu. The release described Ebbu as a “hemp research” company. 

After the deal closed, Cooper wrote to WeedWeek, “We are not aware of any investors that are disappointed with their investments in Ebbu.”   

Alex Halperin is the editor and publisher of WeedWeek.

Subscribe to WeedWeek's free newsletters: WeedWeek, WeedWeek California and WeedWeek Canada!

Leaked documents raise big questions about who owns the marijuana industry

The Ebbu Files

Donnell Alexander

Cannabis Security: The Hardest Easy Job You'll Ever Have

In California, security work can look like a shortcut into the cannabis industry. Despite popular belief, one doesn’t even need to have a bouncer’s tough aura to work the door at dispensary. It can pay $25-an-hour in a modest-wage municipality like Fresno. Or, it can pay twice as much -- though it won’t feel like it – in San Francisco. 

Since the state requires all open dispensaries to employ security, these public-facing positions  will have openings for as long as brick-and-mortar dispensaries remain viable . But the opportunities don’t end there. Workers who are dependable, trustworthy, and willing to hang around a spell may find themselves escorting cash or product in an armored vehicle, or watching over a manufacturing site, either in person or on video far from the scene.  

Since 2015, WeedWeek has been the best way to keep up with the Green Rush. WeedWeek's audience includes many of the most influential figures in cannabis because we are editorially independent: Advertisers have no influence on  our editorial content.

We publish three free newsletters: 1) WeedWeek by founder Alex Halperin 2) WeedWeek California by Donnell Alexander and 3) WeedWeek Canada by Jesse Staniforth, as well as the WeedWeek Podcast and original reporting. The original WeedWeek newsletter has 11,000 subscribers. 

Tips, comments and complaints about this newsletter to Jesse jesse@weedweek.net.

To advertise contact john@weedweek.net and ellen@weedweek.net.  
*

“When you say security, you’re talking about a range of personnel,” said Elvis McGovern, founder of EL Rey Engineering - which specializes in custom security work for the Cannabis Industry. 

State and local laws and industry standards are new enough that job seekers who don’t have drug dealing offenses can get to work quickly. Too quickly, in too many instances.

“As a private patrol officer I can bring someone off the street and give them eight hours of training” before putting them to work, Sacramento-area consultant Matt Carroll said. Carroll, who comes from a law enforcement background, said state rules call for 40 training hours, but private security companies sometimes throw their newbies into the mixture after only one workday of preparation. 

Are cannabis dispensaries, cultivation sites, manufacturers, distributors and lab testers actually getting that government-mandated training? 

Carroll divides candidates for this kind of cannabis work into three types: The wanna-bes, gonna-bes, and has-beens. The first two tend to be young and enthusiastic but have holes in their resumes wide enough to drive through. 

In the quickly evolving and cash-intensive cannabis industry, security personnel can see action quickly. And that makes the experienced has-beens the most desirable applicants.

You may have heard about Oregon Senator Jeff Merkley (D) accompanying an Oregon operator as he carried a $70,000 tax payment, in a duffle bag. Carroll shared the story of having to escort much more money. “I carried $1.4M into City Hall. I wasn’t feeling really good about it, but one of my clients was representing a number of companies.”

That kind of guard work, a mix of vigilance and chill, is right in the wheelhouse of a specific swath of aspirational and unemployed American. “The silver lining of 20 years of war is we have a plethora of veterans coming out of war zones with immense experience in convoy operations,” Carroll said. He said veteran applicants of this sort should emphasize “Intermodal Security” experience on their linked LinkedIn pages and cover letters.

Distribution companies, which work with large amounts of cash and product, are especially in need of these veterans. However, Carroll said the industry has a problem with distribution and cultivation operations  “allowing unscreened employees learning vault locations and “untold volumes of information” before quitting.

In the year and a half since REC went legal, the security job has changed. The out-of-the-shadows-and-into-the-public-record transition has put increased pressure on security guards. Dispensaries are the cannabis enterprises most often cased by burglars. In addition, to that vigilance, the work often requires constant interaction with the public.

Wannabe security guards who don’t have transport experience can find their niche by coming across as someone who’ll stick around. Dispensaries are plagued by high turnover.  

“The hardest thing is to find someone who wants to do it,” McGovern, of El Rey said. “A lot of people use cannabis as a stepping stone ,” quickly flipping low-level gigs into better ones.

Manufacturers, on the other hand, offer up prepped product. 

“You could steal a thousand vape cartridges under your arm,” according to Carroll. Even lab tests sites are targeted for theft, despite their relative lack of goods and money on site. Some poorly-informed heisters simply track cannabis vehicles. 

As with all things cannabis, the rules get a little funky as one moves between legal states and Canada: Local municipalities differ in gun requirements. (For example, in California  In-house guards can’t carry guns.) The unifying element of regulation is that businesses all over California are subject to losing their licenses if they fail public safety testing, of which security is part.

And yet Carroll, who still teaches new security guards twice a month at his school in Sacramento, still sees companies operating with toothless, “scarecrow” security teams and simply not showing sufficient vigilance. He shared a story of one company which nearly got an official ding when an anti-pot activist spotted a child on the property of a dispensary and reported it.

“As an emerging industry, there’s still a lot of skeptics and critics that are going to be monitoring,” Carroll says.

Turned out that the kid in question belonged to an Amazon deliverer. Regardless, the dispensary security guard overlooking the child’s presence nearly cost the operator mightily.  

While IT companies still handle the vast majority of high-end security work -- robot camera installation and operation and such -- that focused person with an associate’s degree and a record unblemished by drug and theft convictions can play a significant role in the life of an industry unlike any other.   

It's the hardest easy job you'll ever have

Cannabis Security

Jesse Staniforth

Canadian Pot Companies Face Talent Shortage

Canada’s coming legalization of extracts and edibles is putting a new strain on a cannabis jobs market where it’s already difficult to find skilled workers.

Extracted cannabis oil is necessary to produce vape pens and edibles. But with products set to become available as soon as December, cannabis companies are struggling to find skilled extractors. In turn, the extractors want to hire experienced expert technicians, analysts, and testers. But companies are struggling to fill those positions.

"The challenge that I'm seeing in the industry right now is there's a very small pool of candidates who would have already worked in cannabis extraction roles," said Cannabis at Work CEO Alison McMahon. "Especially if we're talking about highly educated, masters degree or PhD level people."

Though McMahon noted there's a whole pool of people who've done unlicensed extraction work, most companies want to hire workers with professional-level training.

"The challenge there is finding people who have the right transferable skill sets from these other industries and fit with the overall culture of the cannabis industry."

The shortage of expert skills across the sector is widely acknowledged—and the issue isn't just in extraction. Every technical corner of the Canadian cannabis industry is desperate to draw experienced talent from a talent pool that's barely begun to fill.

The root of the problem is simple enough. Before 2014, virtually no one in Canada or the U. S. was licensed to commercially cultivate medical cannabis. But even after a few dozen licensed producers emerged on the scene, the legal medical cannabis industry employed a tiny fraction of the Canadian workforce. Producers often had to learn as they went, with no one who could legally teach them. There were few cultivators who knew how to grow quality MED at commercial scale. If you needed an expert, you needed to become one.

Of course, North America had plenty of cannabis experts. Unlicensed growers, working in concert with MED users, activists, and compassion clubs helped developed all kinds of products and experimented with production and extraction approaches to best meet the needs of the medical-cannabis market. 

By the time grey-market dispensaries had proven they could operate openly in cities from St. John's to Victoria, plenty of Canadians were becoming experts on cannabis cultivation, production, and genetics. They were learning the best ways to produce extracts, and the best approaches to produce edibles to meet a variety of medical needs. Some of these experts might even be able to get hired by a licensed company—as long as they don't have a record for cannabis cultivation, which would prevent them from getting mandatory security clearance. But that's not where challenges end.

"The challenge for individuals who have worked in the black market and gained their experience there is it can be a challenge in cultural fit into the highly regulated environment,” of the legal industry, McMahon said.

Though many unlicensed producers proudly grow organically and eschew substances they believe harmful to cannabis consumers, they do so without the burden of regulation. In the strictly controlled environment of a licensed producer, workers spend their days filling out paperwork and making sure there are no documentation gaps, while updating enterprise-resource planning (ERP) and seed-to-sale systems.

"While it's obviously growing cannabis at its core," McMahon said, "the operational requirements and the regulatory requirements around that are not always the best fit for individuals whose true passion is really to grow plants, and who in the past haven't necessarily had to deal with the burden of all the regulatory and compliance side."

Regulatory compliance is not optional for new hires, said Lifford Cannabis CEO Lisa Campbell. 

"Most new hires need to start from scratch, including [learning] a huge list of cannabis acronyms," she said. "I'm not looking to babysit my employees. They need to be already knowledgeable—not just about cannabis, but also the regulations, both federally and province-by-province. It’s really sink or swim in the cannabis industry, so it requires the highest caliber of employee."

But Campbell believes there are many legacy-market experts who could thrive in the legal production side. 

"Nothing beats actually knowing about cannabis," she said. "That being said, there are very few professional certifications to show someone is a qualified cannabis worker. There are many myths about cannabis, so it’s important to find someone who has expert knowledge with the skills to match. Some people are very knowledgeable about cannabis, but the industry is in start up mode which requires a work ethic well beyond most nine-to-five jobs."

Cannabis Management Resources partner Sarah Seale agreed, noting what she called "the extreme demands" of the cannabis industry. "Sometimes the right person is in place but the stress levels are so high it leads to a six-to-eight month burnout period," Seale said.

For Seale, the question of hiring gets complicated by the perspectives different workplaces bring to the task.

"Each company has their own definition of what 'top-tier talent' means, and unfortunately the viewpoint can be quite narrow," she said. The average company hopes to find an experienced executive who'll need only a short time to get up to speed and begin working magic right out of the gate. Many companies have learned quickly, Seale said, that "considering the nature and duration of the cannabis industry specifically, it's hard to find experience and in-depth knowledge of cannabis itself."

Passion matters enormously. Dan Sutton, CEO of BC-based LP Tantalus Labs, has heard complaints of staffing shortages for some time, but says he has experienced little of it first hand. Companies that frame their brand around enthusiasm for cannabis, Sutton said, don't have to look far to find employees as passionate as they are.

"I think it's feasible to find humans who nerd out on process and systems and security and the different functions of the cannabis business without being quite as committed to the plant," Sutton said. "However, it certainly makes for a more interesting working environment when you can all get together on your lunch break and talk about interesting new genetics or talk about some funny phenomenon that you noticed in one of the production runs."

For bigger companies that aren't focused on deep cannabis nerdery, Sutton said—suggesting infrastructure and tech-oriented firms, and those chiefly producing bulk cannabinoids—hiring is a different challenge. 

"You're trying to get people to self-select for a different personality type, maybe just a growth of business or their own personal financial gain," Sutton said, adding the risk is without passion, drive alone can carry a worker very quickly to burnout.

McMahon says similar talent shortages first emerged following Canada’s legalization of MED at the turn of the millennium and became rampant only a few years ago, as the need for experienced growers outweighed the available licensed-producer workforce. 

"All of a sudden people needed cultivation talent," McMahon recalled, "and there's only a limited number of people who worked in the 30 some licensed producers at that time doing that. I think this is just the new version of that challenge as the regulations are evolving. Time will help solve that and create a bigger talent pool."

"As the financial market starts to desire more cost-efficiency and perhaps management consultants come in and create efficiencies on those larger teams," Sutton said, "then perhaps we'll see new entrants into the labor market from those firms, and I think we'll see a lot broader access to the expertise [of those currently employed]."

But until then, Lifford’s Campbell thinks the next shift needs to be one that helps bring the talent of legacy experience into the licensed market.

"There are enough people in the cannabis industry who know nothing about cannabis. It’s time for the existing industry to cross over. or else legal cannabis will never beat out the illicit market."

Skilled individuals are out there, but the 9 to 5 life isn't for all of them

Last year former Speaker of the House John Boehner joined the board of Acreage Holdings, one of the country’s largest multi-state cannabis companies (MSOs), and became the most prominent face of the legal marijuana industry in Washington D.C. Boehner "helped legitimize our industry more than perhaps anything had before it,” Acreage CEO Kevin Murphy recently told WeedWeek. 

Boehner, who served as speaker from 2011 to 2015, is an unlikely pot lobbyist. While in office, he declared himself “unalterably opposed” to legalization. His “evolution” on the subject coincided with his receipt of an Acreage stock package currently worth about $12M (based on information in Canadian regulatory filings) and potentially worth $20M if a planned acquisition of Acreage closes.

It’s worth asking what Boehner’s influence might mean for the industry’s future. Many cannabis companies claim to care about the plant’s medicinal properties or rectifying injustices of the war on drugs. Boehner’s career, however, suggests he will advance the interests of the industry’s largest shareholders, which now include him.

Since 2015, WeedWeek has been the best way to keep up with the Green Rush. WeedWeek's audience includes many of the most influential figures in cannabis because we are editorially independent: Advertisers have no influence on our journalism.

We publish three free newsletters: 1) WeedWeek by founder Alex Halperin 2) WeedWeek California by Donnell Alexander and 3) WeedWeek Canada by Jesse Staniforth, as well as the WeedWeek Podcast. The original WeedWeek newsletter has more than 11,000 subscribers. Alex can be reached at alex@weedweek.net.

To advertise contact john@weedweek.net and ellen@weedweek.net.
*

Boehner grew up near Cincinnati, the son of a bar owner, and he started working at the family establishment before he was 10. The second of 12 siblings, he was the first person in his family to graduate from college. Before Congress, he worked as a salesman and then executive at a plastics distribution company. Opposition to organized labor, environmental regulations and anything else that might depress profits were the animating issues of his political career. 

Boehner was first elected to Congress in 1990, and he rose quickly. He became a key lieutenant on Newt Gingrich’s Contract with America and when Republicans took the House in 1994 Boehner became the fourth ranking member of the caucus. 

Boehner is a lifelong cigarette smoker and the next year he attracted attention for distributing checks from tobacco lobbyists to lawmakers on the House floor. Boehner later said he regretted the incident, but I couldn’t find any indication the money was returned. (Acreage didn’t respond to the question.)

Since joining the industry, Boehner has said conversations with veterans have changed his mind about the benefits, real and potential, of medical marijuana. While he may be right, he lacks the credibility to deliver the message. 

During his 26 years in Congress Boehner accepted more money from the tobacco industry than any other lawmaker according to data from the Center for Responsive Politics. In 2016, Boehner joined the board of Reynolds American, maker of his beloved Camels. (He left when the company was acquired.)

Another reason to doubt Boehner’s commitment to public health: As speaker his caucus repeatedly voted to repeal the Affordable Care Act (Obamacare) without proposing an alternative. Today, 20 million Americans have health insurance because of the law.   

For an industry obsessed with the stigma around its product, it doesn’t help that Boehner says he has never tried cannabis. Despite his eight figure stock package, he won’t take a puff. It would be difficult to personify the stigma more fully.  

On policy the Speaker's views and voting record were in line with his very conservative caucus. But Boehner cultivated an affable dealmaker persona, which can matter more than a voting record when retired lawmakers peddle their influence.

On several occasions, Boehner leveraged his perceived centrism to dignify right wing conspiracies and misinformation.

Probably the most consequential of these came in early 2011 when Donald Trump was riding the racist “birther” theory to political prominence. On ‘Meet the Press,’ Boehner said he believed President Obama was an American citizen, but added, "It's not my job to tell the American people what to think."

As the senior most Republican in the country, Boehner had the opportunity to reject the pernicious libel. Instead he welcomed it into the GOP tent.

Boehner similarly declined to lead on climate change, Like many prominent Republicans, he embraced the cop-out that as a non-scientist he wasn’t qualified to discuss the issue.  

Boehner is still not a scientist. But now that it is his job to tell the American people what to think, he’s decided to weigh in on the health benefits of cannabis, a subject he knows nothing about.

More than a year after Boehner joined Acreage, his effectiveness as a cannabis industry advocate remains an open question. In June the Democrat-controlled House voted to support the States Act, which would protect state-legal cannabis businesses, a major step towards reform, which reportedly has support from President Trump. As far as is known, however, Boehner has not won the essential support from his friend Senate Majority Leader Mitch McConnell.

Boehner has been more successful in making Acreage look like the most attractive American partner for Ontario-based cannabis giant Canopy Growth. In April, Canopy announced plans to acquire Acreage for US$3.4 Billion once American law allows. (Depending on how it’s worded, enacting the STATES Act could enable the deal, according to Acreage.)

Then-Canopy CEO Bruce Linton said the presence of Boehner, former Massachusetts Governor Bill Weld (R), and former conservative Canadian Prime Minister Brian Mulroney on its board boosted Acreage’s credibility. “They have reputations they can’t risk — and we need that,” Linton said. 

(Acreage’s tactics for growing its market share are reportedly under investigation in Massachusetts and Ohio. An Acreage spokesman says the company operates in “strict compliance with any and all state regulations.”)

Since joining the industry, Boehner has said ordinary marijuana users don’t pose a threat and should not be imprisoned. But he has expressed no regrets about his failure to change the law when he was in a position to do so. Though possessed of the smarts, charm and tenacity to retire second in line to the presidency, he appears not to understand the unique circumstances which enable a federally illegal industry to pay him so handsomely. 

Here’s the transcript of a TV interview Boehner recently gave to Axios:

Axios:	So when you were a politician, you said you were unalterably opposed to legalization. One thing I want to ask is what harm has been done by the fact that we didn't legalize it back then?

Boehner: Well I don't know if there's any harm that's been done, but the American people's views on this began to change. Frankly, my views on this began to change.

Axios:  So you say you don't think that there was much harm done, I mean there was people getting arrested, there were people getting thrown in jail, and that counts doesn't it?

Boehner: Well yeah, but that was under a different set of rules, at a different time.

Axios:  Do you think there's something unfair about the idea that African Americans were disproportionately incarcerated as the result of these laws, and yet, the minute that the laws get loosened, it seems to be white Americans who benefit.

Boehner: Well yeah, the states are the ones issuing the licenses. Although the industry, by enlarge believes, that these people are being treated fairly.

Axios:  And they should not have any obstacles in terms of entering this industry.

Boehner:  No. I mean they've been released. They've done their time or they've changed the rules and they were released. They should have access to it like anybody else. But again, we're in the early stages. Once there's legalization of some sort, on the side of the federal government, tens of billions of dollars roll into this industry overnight.

Axios: Where does that leave a formerly incarcerated African American trying to make their own way into this business? How can they compete?

Boehner:  It's tough competing in any business. I would say the biggest challenge on the minority side, would be access to capital. If you don't have the capital it's hard to get into the business. And if you don't have enough capital, it's hard to stay in the business. I do think that may be a challenge.

During Mitt Romney’s 2012 Presidential campaign, the Republican party fixated on a similar idea. In a speech President Obama said “If you’ve got a business-- you didn’t build that.” He meant successful businesses depended on things they didn’t pay for, like roads and telecommunications infrastructure. Republicans, including Boehner, distorted the meaning into an attack on entrepreneurs, and made it the theme of their convention. 

Today a company Boehner didn’t build has made him rich. Within cannabis, that company is an outlier. It has built value by raising capital and acquiring licenses, not producing great products and delighting customers. The other people and companies who built this industry, the ones who have suffered and sacrificed for it, might want to ask themselves if Boehner speaks for them.   

Seeing Green: Is John Boehner Good for Weed?

Kevin Murphy, CEO of Acreage Holdings is on top of the cannabis world.

For several years, Acreage accumulated dozens of cannabis business licenses across 20 legal U.S. states, one of the industry’s most expansive footprints. Then in April Canadian giant Canopy Growth agreed to acquire Acreage for $3.4 billion once U.S. legal conditions permit. The world’s largest weed company had endorsed Murphy’s blueprint for conquering the U.S. market. 

Even before it closes, the deal anointed Acreage the unofficial leader among the increasingly powerful group of multi-state operators (MSO). And if the acquisition closes as anticipated, Murphy’s personal holdings in Canopy will be worth roughly $500M, according to my analysis of regulatory filings. 

Before the Canopy deal became public, Acreage was best known for putting former Republican Speaker of the House John Boehner to its board of directors. Today the company appears poised to have enormous influence over the industry. 

Murphy sat down with WeedWeek on June 27 in San Francisco to discuss the Canopy deal, how the market will shake out, and whether former prohibitionist Boehner owes anyone an apology.

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Murphy, 57, is soft-spoken and very fit. After playing linebacker at Holy Cross and one season in the United States Football League, he began a career in finance, working at several large firms before moving into hedge funds. 

In 2011, Murphy made his first cannabis investment in a Maine medical dispensary. Three years later he started the investment vehicle High Street Capital Partners, which invested in and leant money to license holders, largely in the northeast, an industry backwater. 

The company changed its name to Acreage Holdings in 2018 and began to “roll-up” its existing investments. It raised $119M in venture capital, then believed to be the largest private cannabis investment to date. The cash infusion fueled Acreage’s acquisition strategy and prepared it to go public in Canada, which it did in November 2018. 

A striking aspect of Acreage’s strategy -- and that of several rival MSOs -- is its relative lack of sales to date. The larger legal states have forced companies to adapt to complex and costly regulations, taxes and a stubbornly persistent illegal market which can often match legal operators on quality and undersell them on price.

Rather than swimming upstream with hundreds of other brands, Acreage prioritized building a broad portfolio of licenses. Canopy evidently found the geographic diversity more valuable than sales volume or a prominent brand. In 2018, Acreage generated C$21.1M in revenue, less than 1% of Canopy’s $3.4 Billion offer.

Now that Acreage has a foothold in most major U.S. markets, Murphy anticipates the differentiator between the larger players will be in the choices they offer consumers.

Late last year, Acreage acquired Form Factory, a California manufacturer and distributor that it believes will enable it to bring produce popular products to a much larger public. "If we discover for instance a brand in California," Murphy said, "We might approach that brand and say, 'Would you like to sell your goods in 19 other states?" And it will sell those products alongside in-house brands.

It doesn’t sit well with everyone that success in cannabis today can come at such a far remove from the plant and the movement to legalize it. 

“I have no objection to mainstream investors and businesspeople making profit in the legal cannabis industry,” Steve DeAngelo founder of Oakland-based mega-dispensary Harborside wrote in an email. “What I have a problem with is these companies using their financial and political power to game the system to their advantage.”

Today, Harborside trades alongside Acreage on Canadian Securities Exchange, but they took very different routes to the public markets. DeAngelo was a legalization activist for decades when it was a risky, unprofitable life, before he opened Harborside in 2006. Then between 2012 and 2016 Harborside fought and won a four year lawsuit against the federal government.  

Few if any cannabis activists have become capitalists as successfully as DeAngelo. And there’s some resentment at relative newcomers like Acreage which have prospered.

“I'm sorry they feel that way,” Murphy said. But “I'm not going to apologize for some of the success that we've had."    

(DeAngelo is especially opposed to large companies who oppose legal home growing, presumably because they fear it cuts into earnings. Despite reports to the contrary, Murphy says he’s comfortable with home growing for personal use.)

The rise of Acreage and other MSOs shows the industry shedding some of the pieties that have propelled legalization so far. Nothing showed the trend as succinctly as Acreage’s appointment last year of former Republican Speaker of the House John Boehner to its board of directors.

As the industry’s figurehead in Washington D.C., Boehner presents some difficulties. He has never tried marijuana, and while in office he declared himself “unalterably opposed” to legalization. Since leaving office, Boehner says his position has “evolved.” 

Acreage gave Boehner a stock package currently worth about $12M, which will jump to $20M when the Canopy acquisition closes according to media reports.  

Boehner is also one of the very few industry advocates who doesn’t pay lip service to equity, the idea that the minority communities who were disproportionately punished during the war on drugs should benefit from the proceeds of legalization. 

And Boehner was in a position to do something about it. "I don't have any regrets at all," Boehner told NPR this March. "I was opposed to the use of it. The whole criminal justice part of this, frankly, it never crossed my mind."

"Does John [Boehner]owe anyone anything? I can't speak for John," Murphy said when I asked if the Speaker owed an apology to people who have suffered because of the war on drugs. 

Murphy called Boehner’s arrival on the scene a “turning point” that “helped legitimize our industry more than perhaps anything had before it.”

By contrast, Murphy said “It sickens me,” that people have been imprisoned for what Acreage does. The company is hiring a director of corporate social responsibility, an area where Murphy acknowledged it has fallen short thus far.

Boehner’s presence  on the board did apparently help Acreage land the Canopy deal. Having someone of his stature “Means they’re going to be strict on governance, because they have reputations they can’t risk — and we need that,” Canopy CEO Bruce Linton told MarketWatch in May.

Several weeks earlier the Boston Globe had reported Acreage is "using complex corporate structures to acquire or manage store licenses" in excess of the three recreational retail licenses which the state permits a company to own or control. 

Acreage’s plans, and that of another company “are not just pushing the limits built into the state law, but may be busting them entirely,” according to the Globe story. “Their early moves also threaten the state’s promise to not just legalize recreational marijuana but to make the marketplace for the drug a fair one in which diversity of ownership is prized and small players have a chance.” 

Massachusetts regulators have reportedly opened an investigation into the matter. 

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