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HEALTH CANADA SAW, DIDN’T NOTICE ILLEGAL CANNTRUST PLANTS

According to internal CannTrust correspondence, during a February inspection, Health Canada representatives entered unlicensed rooms in which the company was growing illegally, five weeks before Health Canada licensed the rooms.
Globe and Mail

  • Health Canada was responding to odour complaints from neighbours of the facilities.
  • CannTrust’s quality-assurance official emailed then-CEO Peter Aceto and then-chair Eric Paul, “Inspectors went through all rooms, including the unlicensed ones, but did not comment on this.”
  • Health Canada did not answer questions from the Globe about whether inspectors had entered or noticed unlicensed rooms, why the illegal practices weren’t identified, and whether they’ve improved their inspections since.

On New Year’s Eve, then-CEO Aceto warned then-chair Eric Paul in a letter that his authority as Chief Executive was being undermined by governance problems and an insubordinate board.
Globe and Mail

  • Aceto complained, “Management often receives conflicting instructions from board members. It is often unclear when and which board members need to be involved in decision-making, and when decisions are made, they are often second-guessed.”
  • In his first comment since his firing, Aceto told the Globe, “I did act[…] The bottom line is this: I knew what needed to be done to fix this company, but the lack of governance and proper executive decision-making authority was extremely concerning to me.”
  • Aceto’s letter was not shared with CannTrust’s board.
    Bloomberg

The Ontario Securities Commission is investigating the CannTrust matter as a “quasi-criminal” case, meaning if charges are laid, they could lead to prison time.
Bloomberg

  • Health Canada’s independent investigation is playing out across “uncharted territory,” lawyer Trina Fraser told the Financial Post. “The potential for people to go to jail certainly exists. The potential for significant fines to be levied certainly exists.”
    Financial Post
  • There is no precedent for the CannTrust case, meaning an investigation might focus on laying charges against individuals, or against the company as a whole. Lawyer Jack Lloyd noted under the Cannabis Act, workers who tended the illicit plants could be charged with illegal cultivation, regardless of whether they knew it was illegal.
  • CannTrust shares fell again as independent auditor KPMG withdrew its reports on the company’s year-end and Q1 results. The move followed CannTrust’s warning the results “relied upon representations made by individuals who are no longer at the company.”
    Bloomberg, MJ Biz Daily