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November 25, 2022

Equity.Guru

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CannTrust (TRST.T) executives should go to jail: Emails show deliberate criminality

There’s a difference between incompetence and criminality.

Incompetence is “What? That’s weed? I thought those were tomato seeds!”

Criminality is “1) RG8 is not licenced but has plants in it; 2) RG9 is not licenced but we are intending to put plants in it on Monday; 3) PA2A-E are not licenced but we have moved the encapsulation equipment into them and will begin running it next week.”

That’s part of an email trail exposed yesterday in the Globe and Mail, where Graham Lee, CannTrust (TRST.T) Director of Quality and Compliance, informed CEO Peter Aceto, Chairman Eric Paul, and other executives that Health Canada inspectors had not detected they were growing and selling illegal weed as part of a specific corporate directive.

Like an episode of the Trailer Park Boys, CannTrust put up fake walls, shifted plants from room to room, and talked their way out of issues rather than just following the rules.

There was no botched paperwork here, no misinformed employees, no ‘rogue individual’ tarnishing an otherwise perfect ship, despite the company having already fired ‘an individual’ they felt was responsible.

Rather, there was a hare-brained Marx Brothers-like scheme going on, and it ran for months.

This was an operation rife with problems, described by its own execs as indicative of a “company not in control,” and yet those problems were seemingly entirely of their own design, considered issues to be massaged through Health Canada rather than corrected, and were not only allowed to continue but approved of at the highest levels.

Globe and Mail:

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

The e-mail outlines a number of “current risks,” including plants growing in unlicensed rooms, the storage of cannabis in unlicensed rooms and the “large number of lost bottles [of cannabis] we have not reported.”

That went to the CEO, CFO, and others. It was forwarded to the Chairman later in the day, but the big boss did not lash out at his people for their actions, nor sound like it was new information.

Rather, he advised on the appropriate spin with regulators.

“We need to clearly point out that we have been diligent in submitting the applications for each new area and they have been slow in responding. We are supporting the legislation and we need their cooperation. Politely as always.”

For mine, this is a conspiracy to engage in criminal behaviour, and should be dealt with by the RCMP.

The police have spent the last several weeks putting concrete blocks in front of commercial premises selling weed without a license, and has been charging individuals for doing so. If an individual would be considered a trafficker for doing what CannTrust is doing, so should an organized group.

But nothing they’ve seen comes close to the staggering size and organization behind CannTrust’s decision to ignore regulations, risk investor dollars, and go completely off the reservation, growing over 12k kilograms of illegal weed, and send it out to customers.

This is the equivalent of a Molson plant brewing 12k cases of tequila-flavoured kerosene and sending it to liquor stores.

Lost bottles of product? Shuffling weed around between rooms? Hanging fake walls?

This is the sort of bullshit you’d expect from a Hell’s Angels grow. 

It’ll suck if investors lose their money as a result of this debacle, but I warned a few days ago that trying to play the bounce on this deal was a dangerous game.

If Health Canada takes this as the affront it damn well is, if they notice how bad it makes them look, and how crappy it makes the system they oversee look, and what damage it may do to the share price of every TRST competitor – if they realize their previous actions haven’t brought about the industry-policing-itself answer they were apparently hoping for, TRST simply MUST lose its license.

And if it does, investors will get CREAMED.

What’s up. You’re getting creamed.

The entire top line of CannTrust’s executive team should have already been fired. The board of directors should be looking at strategic alternatives and the break-up of the business. Health Canada should shut the whole fucking operation down, and leave a skeleton crew in charge to keep plants alive until a new owner can be sourced.

Bonify the joint. Care and maintenance. Ensure everyone involved are never again placed in a position of trust, and commence the lawsuits suing them personally for damages.

And to every other LP out there who has had similar ideas that its better to ask forgiveness than permission… You best believe that after this embarrassment, Health Canada are coming for you.

And hell’s coming with them.

— Chris Parry

FULL DISCLOSURE: No dog in the fight, but pretty fucking pissed off for the damage this is doing to every responsible cannabis company out there.

 

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2 thoughts on “CannTrust (TRST.T) executives should go to jail: Emails show deliberate criminality”

  1. Thank you for your coverage of CannTrust. I’m a bag holder, hoping for a turnaround that HC will allow despite the criminal conspiracy that is their entire boardroom. If a buyout comes from Cronos I will be happy that at a minimum industry will continue. I think and would like your opinion though on the destruction of assets, that HC would not destroy cannabis that meets standards, and allow the company to retain it as assets to spur the solvency and correct financial condition needed for a buyout. A firesale for the wealth of a business is what is needed to punish the “bad” people only, and spare the “good”. I know you take exception to this theory.

    Throwing the baby out with the bath water is an insult to common sense, as is destroying a multi-million dollar company for the sake of teaching an industry you regulate. No institutional investors = no cash for growth, expensive cannabis d/t regulators = no buyers, no buyers = no industry to regulate.

    I do agree though that the board should be arrested, indicted, and do jail time. I also think their careers in the industry should be over and done with. I also think to restore trust you must have a board and growers you trust take over the grow side of the business. License to grow is only granted if the entire company is removed from the control of the current owner and management, that much is obvious. If that happens I think you will start to see some healing, and the message will be loud and clear to everyone in a boardroom: YOU WILL GO TO JAIL, AND YOUR CAREER, REPUTATION, AND COMPANY WILL BE TAKEN FROM YOU. That is my fondest wish for every cannabis executive to have… the fear of a godlike Health Canada put into them. And now even the lowliest employee can do it… awesome. Cheers whistleblowers!

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