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CannTrust Weed Cultivation Scandal Prosecution Falls Apart

The Ontario Securities Commission (OSC), Canadian prosecutor, stated Wednesday to a Canadian court they did not expect three of its former executive directors of CannTrust Holdingss to be convicted. On Wednesday the lawyers asked the judge for a retraction of their charges. The judge has asked for the full acquittal of the defense attorneys for Peter Aceto (ex-CannTrust CEO), Eric Paul (ex-chairman), and Mark Litwin (ex-vice chairperson).

“After careful review of the evidence during the trial, we are of the view that as charged, there is no reasonable prospect of conviction,” OSC lawyer Dihim Emami told Victor Giourgas, the judge presiding over the case.

The case involved allegations that Aceto, Paul and Litwin had overseen the illegal cultivation of thousands of kilograms of cannabis for Canada’s regulated market. In July 2019, CannTrust revealed that Health Canada, the country’s national health department and chief federal regulator of the cannabis industry, had determined that the company’s cultivation facility in Pelham, Ontario was found to be non-compliant with some regulations. The company acknowledged the findings and noted that five of the rooms used for cannabis production at the Ontario facility weren’t licensed. This was between October 2018 to March 2019. The rooms could not be licensed as cannabis growers until April 2019 because they were still under construction.

“Our team has focused on building a culture of transparency, trust and excellence in every aspect of our business, including our interactions with the regulator,” Aceto said at the time in a statement from CannTrust. “We have made many changes to make this right with Health Canada. We made errors in judgment, but the lessons we have learned here will serve us well moving forward.”

The OSC alleged that the defendants claimed in corporate disclosures that CannTrust’s cannabis operations were fully compliant with regulations. Paul, Litwin, Aceto and Litwin were all charged by the OSC with non-criminal offenses. This included fraud related to the failure to disclose unlicensed cultivation information to investors. Litwin and Paul were also accused of insider trading in CannTrust stock after they learned about unlicensed cultivation allegations but before these were published. Litwin and Aceto were also charged with false preliminary prospectus making and investment prospectus.

Testimony Reveals Weakness Of Prosecutor’s Case

Graham Lee, an ex-director of quality and compliance for CannTrust was called to testify that Health Canada employees had visited the Ontario plant in November 2018, and April 2019. However, they did not make any recommendations regarding the unlicensed grow areas. Health Canada inspectors then inquired about unlicensed grow rooms during a second visit.

“They asked me if plants had been put into the unlicensed rooms, and they had been told other things earlier in the day…and so I clarified for them that, yes, they had been,” Lee testified.

Lee testified that CannTrust employees had taken photographs as part of an application to Health Canada. This was to hide the true purpose of the additional grow rooms. He also pointed out that employees were not instructed to by higher management.

Cross-examination revealed that defense lawyers presented evidence that an Ontario facility was licensed to cultivate cannabis, but that it did not include any specific room references. Prosecutors were unable to establish that the facility had been used for unlicensed cannabis cultivation after this revelation. 

Scott Fenton, an attorney representing Litwin, presented Lee with an April 5 email he sent to others at CannTrust, in which he wrote, “Please find attached, we are now licensed for all of the remaining outstanding Niagara areas.”

“But you told everybody that you’re now licensed,” Fenton said to Lee.

“Yes,” Lee answered.

“And used the wrong terminology?” Fenton asked.

“Yes,” Lee admitted.

“Were you confused regarding the operation of the Cannabis Act and its regulations?” asked Fenton.

“At times,” Lee replied.

The prosecution told the court on Wednesday that they could not secure convictions due to revelations during the trial. Therefore, the judge was asked to drop all charges against them. Their lawyers requested Giourgas not to fully absolve the CannTrust former executives.

“I am respectfully against dragging this out,” Fenton said. “The prosecution has determined they can’t prove the case. It is time to end it, and it should end today.”

“I can’t tell you how much anxiety there is among the defendants about the end of this matter for the reasons that you can imagine,” added Frank Addario, Aceto’s lawyer.

Emami, the prosecutor asked for additional time because he received the request to acquittal on that same day. The defendants were due back in court on Thursday for the judge’s decision on the motion to acquit.