Long time readers will recall a marijuana company called Medmen (MMEN.C) hit the public markets earlier this year with a resounding thud. The reasons the company didn’t enjoy investors clamouring for their stock on opening day are many, including:
- The company share structure gave 99.3% of all voting power to the co-founders of the company
- The same co-founders received exorbitant compensation packages of US $1.5 million per year, that pay them far more than any other cannabis executives we’re aware of
- The same co-founders received US$10m in ‘redeemable units’ that vested at the open
- The same co-founders received long term incentive plan units that vest over 24 months, payable at the end of every month for many many millions more.
And that’s before we even got to the Golden Parachute clause.
That’ll mean Bierman and/or Modlin get three times their salary, five times their bonuses, and a $250k lump sum payment on the first of the following month – and they benefit from this policy for a further three years after they’re terminated.
We wrote that story May 28, 2018. Eleven days later, the company appeared to agree the situation as it stood, put their executives out of sync with the needs of shareholders, and, to their credit, acted to correct it.
MedMen news release, June 8th, 2018:
The grant of units for Medmen Enterprises Inc.’s co-founders under its long-term incentive plan (LTIP) will now vest upon achievement of certain share price goals.
Co-founder and chief executive officer Adam Bierman, and co-founder and president Andrew Modlin will receive their LTIP units of MM Enterprises USA LLC according to the following schedule.
One-third of the total units will vest when the price of Medmen’s subordinated voting shares reaches $10 in the open market, another one-third will vest when the share price reaches $15, and the final one-third will vest when the share price reaches $20. The price will be determined as a five-day volume-weighted average price in any exchange where Medmen shares are traded.
This modification to the grants under the LTIP was made to provide greater economic alignment with Medmen’s shareholders.
Previously, the LTIP bonuses went to the executives if the stock hit $2b in market cap, or about $10. Now the company had agreed that was egregious and had punted 2/3 of that bonus structure down the road, to where it may never be paid.
This, clearly, is better for investors, and an admission if I’ve ever seen one that our stories and statements about that bonus package had merit.
You’re welcome, MedMen.
We were pretty happy at that because alignment with shareholders is the goal of the exercise. We still think the compensation and golden parachute deal are ridiculous, but it’s our right and our duty as journalists to say so, and it’s the company’s right to take liberties such as those if they believe shareholders will accept it.
But those same execs that attempted to persuade investors they were really all on the same side apparently held a bit of a grudge against us for forcing their hand.
Enter MedMen’s lawyers at Raines Feldman LLP, out of California, who sent a letter out July 27, 2018, that elicited laughs around EG HQ.
The [pdf-embedder url=”https://equity.guru/wp-content/uploads/2018/08/2018.07.25-Letter-to-C.-Parry.pdf” title=”2018.07.25 Letter to C. Parry”]
We are litigation counsel for MedMen Enterprises, Inc. (“MedMen”). It has come to our attention that you and your team, through your website, equity.guru, are actively and intentionally seeking to defraud the public by engaging in fraudulent and deceptive conduct. We are investigating your past and ongoing actions.
Oh. Defrauding the public? That’s quite the accusation, in fact one might even consider it slanderous.
Still, if it’s backed up by evidence, we’d want to deal with it immediately, as our company has been built on actively fighting against fraud and poor management and stock market weirdness, even to the point of writing negative stories about our own clients when warranted.
Sadly, the crack investigative team at Raines Feldman LLP forgot to include any references to what was wrong with our MedMen stories, but for a single reference to a headline they didn’t like.
But they’re pretty sure there’s a bunch out there:
Since MedMen was first listed on the Canadian Securities Exchange, equity.guru has published a number of false and misleading articles about MedMen. While we support your right to free speech and to provide your opinions, it is imperative that you do so while accurately stating the facts underlying such beliefs. This you have not done.
We’re very happy to hear that Raines Feldman ‘supports our right to free speech.’ In fact, we’ve set up a GoFundMe account so MedMen’s lawyers can actively provide that support, which we’ll be very happy to receive and put toward more investigative news articles concerning companies on the stock market that we believe put investors last. It’s very charitable of Raines Feldman to make such an offer, but we gladly accept and appreciate their support for our work.
Let’s get to that crazy headline:
Most recently, you published an article titled “As MedMen (MMEN.C) CEO buys new home, company is taking tips away from its employees.”
The title of the article itself (and the image underneath) is misleading – suggesting that MedMen’s CEO is stealing employees’ tips to line his own pockets.
I think you guys are having issues with comprehension here. My headline clearly stated what it stated, that “As MedMen CEO buys new home, company is taking tips away from its employees.” All of that was factual.
The MedMen CEO did buy a new home, which was announced in the LA Times:
MedMen co-founder Andrew Modlin hashes out deal for modern home in WeHo
Andrew Modlin, co-founder of cannabis company MedMen, has paid $3.895 million for a contemporary-style home in West Hollywood, records show.
The modern two-story sits a few blocks away from one of MedMen’s flagship L.A. dispensaries, which opened earlier this year after recreational weed was legalized in January.
Within 4,075 square feet of interiors marked by clean lines and indoor-outdoor living spaces, there are four bedrooms, five bathrooms and a spacious open floor plan. Walls of glass brighten the common spaces, which include a pair of dining areas and a kitchen with a butcher-block island.
I loves me a butcher-block island, I do. The pictures look lovely.
And the company did indeed take tips away from its employees retroactively, without their knowledge or permission, and we’ve since learned that happened because MedMen had screwed up on the HR side.
And you, counsel for the plaintiff, just admitted as much:
In fact, MedMen’s practice of withholding federal and state tax, including on employee tips, is required by U.S. federal and state law. The article, including the citation to California law, is clearly an attempt to mislead the public.
As you say, it is required by US federal and state law to withhold taxes on tips, but MedMen FAILED TO DO THIS for months, and later decided to claw back their employees money in a lump sum to make up for the fact, seemingly without concern for whether those employees could take such a hit all at one time.
Would Raines Feldman LLP like us to change our story to focus on MedMen’s failure to follow tax law? Because it’s no more complimentary than the original story and, in fact, illustrates company executives acted, either out of negligence or incompetence, contrary to federal and state regulations.
The original article, which we’ve since adjusted with new information revealed by MedMen’s lawyers (and a new headline because the last one was confusing you apparently), wondered aloud why MedMen would do such a thing, and noted that voicemails left to the company went unanswered.
Moreover, the article contains a number of patently false statements, including statements that the policy was implemented without any explanation. This is simply not true.
It’s absolutely true that the policy came unannounced, and we have several MedMen employees on record saying so, including assistant managers who called head office to complain and received no reply, causing them to look to the media for help out of frustration.
I mean, if the employees HAD been told why their money was being taken, they wouldn’t have contacted us in the first place, would they?
Equity Guru’s contentions are so flatly wrong that one can only conclude that this article, and others like it, constitute a deliberate attempt to mislead the public. Such conduct is not protected by the First Amendment. See, e.g., Kasky v. Nike, Inc., 27 Cal. 4th 939 (2002).
Others like it? Oh, if we got something wrong, we’ll be happy to admit it. Please let us know what we got wrong. We’ll wait.
The numerous false and misleading statements, in this article and others before it, not only undermine the ability of MedMen to operate its business, but they impugn the character and integrity of the individuals leading the company.
Okay, so the false and misleading statements are ‘numerous’? You’re going to want to give us some examples because we can’t retract something we don’t know about.
These false statements give rise to claims by MedMen against you and equity.guru for, among other things, defamation and unfair competition pursuant to section 17200 of the California Business & Professions Code. Not only do the falsehoods support claims by MedMen, they also form the basis of claims by Messrs. Bierman and Modlin for defamation and invasion of privacy – false light.
Again, which false statements?
Invasion of privacy? For quoting an LA Times story? Go bark at Modlin’s realtor on that one, counselor.
We demand that you immediately issue a retraction of the false allegations contained in your articles, including, but not limited, to “As MedMen (MMEN.C) CEO buys new home, company is taking tips away from its employees” published on July 13, 2018; as well as the prior false and misleading articles published on your website, including (a) “MedMen (MMEN.C) goes public Tuesday, but three executives will make most of the money on the deal” published on May 28, 2018; (b) “Green Organic Dutchman (TGOD.T) & MedMen (MMEN.C) have big days, but only one is smiling” published on May 29, 2018; (c) “Turning it around: The lesson Lifestyle Delivery Systems (LDS.C) has for MedMen (MMEN.C)” published on May 30, 2018; and (d) “It’s happening again: FSD Pharma (HUGE.C) is an insider loaded, overvalued, restrictive mess” published on May 31, 2018.
This is getting a little humourous now…
WHICH FALSE ALLEGATIONS?
The retraction should state: “Upon further investigation, equity.guru retracts the false and misleading statements in its articles stating or implying that MedMen’s policies and practices are designed solely to enrich its executives at the expense of MedMen’s investors and/or employees.”
Whoa, you guys are now in the business of writing retractions for journalists? Okay, we’ll write one for you:
Dear Equity.Guru, we’re sorry for accusing you of fraud without grounds, but our clients are pissed that you cost them their bonuses.
Also, where did we say the company’s policies were ‘solely’ to enrich it’s executives?
We said that three executives get most of the money – and they do. But the company also serves to sell marijuana in dispensaries it manages and occasionally owns, presumably for a profit, though none has been seen yet.
And it must be published in as prominent a manner as the false stories previously published by equity.guru.
Though none of our stories are false to our knowledge, we’re fine with the whole prominence thing. You can expect any and all future communications with us to get similar front page status.
Should you fail to issue the retractions correcting, and cease publishing, your false statements, we intend to enforce the rights of MedMen and its executives to the fullest extent of the law, including, seeking punitive damages for your wrongful conduct. We will continue to monitor your publications regarding MedMen and hold you accountable to the facts.
We deny with full and loud voice that anything we’ve written has been false, intentionally or otherwise, and since you haven’t pointed out any false statements, and didn’t give any date that you want such retractions made by, we’re going to assume this is a SLAPP attempt.
You’ve objected to the tone of one headline (which we’ve adjusted because, who cares) and felt that it might ‘suggest’ something we didn’t actually state, but you’ve complained about no actual defined falsehoods in any story otherwise.
And as I’m sure you’re aware, as a studied legal professional, ‘it’s just, like, the vibe, man,” is not the legal definition of slander, fraud, libel, invasion of privacy, unfair competition, vagrancy, bestiality, excessive bootlicking, or any other phrase you can pull out of your old American Law 101 textbooks.
No sane, competent, well-meaning professional would expect any media outlet to retract stories for falsehoods without doing the minimal amount of work in outlining what those falsehoods are.
So have at it, Miles. Get your crack legal team onto the case.
You are further directed not to destroy any documents and/or communications in connection with the above‐referenced articles, including any documents consulted, reviewed, or referenced, and all electronically stored information (“ESI”) associated with the documents. This demand applies not only to hard copy documents, but also emails, text messages, Facebook posts, tweets, DMs via any social media platform, encrypted messaging services, voicemails, and any other form of communication. We request that this demand to preserve all such evidence take place immediately. Failure to comply with this request could result in MedMen seeking sanctions, attorneys’ fees, costs, and all other available remedies should this dispute proceed to litigation.
Okay, cool. Likewise, your client is further directed not to destroy any documents and/or communications in connection with your claim that they did, indeed, tell store employees why their paycheques were being docked before our story was published on July 13, 2018 at 11:47am Pacific time.
In addition, we will require the preservation of all documents and communication discussing the decision to adjust the long term incentive compensation packages of your client/s, which we believe will show the single motivating factor of the decision to make that change was our investigative work and the resonance those facts received from investors.
We, in turn, will keep secured copies of all of our documentation and communication and eagerly look forward to presenting them to a court to demonstrate our legitimacy as journalists, the triple confirmed sourcing of our stories, screenshots from your employees, and text messages that laid out that your client pays their ‘premium budtenders’ minimum wage, and that a number of employees walked out when they saw the company was clawing back their tips.
— Chris Parry