Wednesday, March 08, 2017 11:24:47 PM
Israeli/Canadian Oil & Gas Corp Steals Medical Marijuana Clinics & 250,000 Patients Medical Records
Published on March 7, 2017
President at THCF Medical Clinics / Presto Quality Care
By Angela Bacca for The Huffington Post
https://www.linkedin.com/pulse/israelicanadian-oil-gas-corp-steals-medical-marijuana-paul-stanford?trk=v-feed&lipi=urn%3Ali%3Apage%3Ad_flagship3_feed%3BFgqSi01yl5A121FXAj7gNw%3D%3D
After a lifetime of cannabis activism, since he was 18 in 1978, Paul Stanford has been working to legalize marijuana in his home state of Oregon and take his cannabis business public. For over 20 years, he has hosted Cannabis Common Sense, a well-known cable access TV program that served as a launching pad to his multi-million dollar multi-state business, The Hemp and Cannabis Foundation (THCF) Clinics. The clinics were the first to open in most states with legalized medical cannabis and connected doctors with patients in need of state-legal recommendations. Since 2001, the clinics amassed around 250,000 personal patient files and medical records. The private patient files are now at the center of an international business controversy that may leave Stanford penniless.
In 2012, Stanford succeeded at placing The Oregon Cannabis Tax Act (OCTA, aka Measure 80) on the ballot, but it failed with 46.6 percent of the vote. OCTA was considered more liberal than the legalization laws approved in the same November 2012 vote in Colorado and Washington, and would have allocated two percent of net tax revenues to promote industrial hemp farming. Stanford is recognized internationally as a pioneer working for legalization of marijuana and industrial hemp. In 2014, he again sought to put a slightly revised version of OCTA on Oregon's ballot.
In April 2014, just three months before the signatures would need to be received by the state, an opportunity arose for additional funding for OCTA's 2014 initiative. Canadian venture capitalists interested in Stanford’s clinic business-- and the lucrative American cannabis industry in general-- presented Stanford with an offer to fund the signature drive in exchange for agreeing to work together to take his company public. Stanford would secure 55 percent of the shares of the new partnership for his employees and himself in an effort to protect his life’s work and their jobs.
Ultimately, the money for the initiative did come, but not enough and not in time to secure the needed signatures. A competing measure, Measure 91, made it to the 2014 Oregon ballot and passed, legalizing recreational marijuana in the state.
Despite not making the ballot, the new partnership forged ahead. For the next two years, the team at Orange Capital in Vancouver worked with Stanford to prepare to take his company public.
In mid 2016, the Canadians, through an unscheduled court Ex Parte motion, assumed total control of Stanford’s entire company-- even procuring a restraining order to bar him from interacting with his own businesses. His family, partner and longtime employees were fired, and of particular importance, a legal battle is now brewing over the clinics’ patient records, which may already be in commercial use in Canada. The Canadians, whose capital is largely generated through oil and gas exploration, are currently suing for full and permanent control of Stanford’s companies and are easily out lawyering him in court. Stanford maintains he was never paid a dime for his company’s assets and instead was continually lied to about important business decisions. Stanford also says the company has continued to use his credit cards and accounts, leaving him without income and to deal with their debt collection agents and to personally pay company bills for the clinic's rental cars, phones and more.
Just who rightfully owns Stanford’s companies is now a matter for courts to decide. In the balance hang over a quarter-million private personal patient records from multiple US states that may or may not already be in use by publicly traded Canadian companies. And Stanford’s saga may be a beacon of what's to come in the domestic market as public financing pushes the industry towards conglomeration, profit incentives and a market of FDA-approved pharmaceutical cannabis based products.
The Activist Meets Activist Investors
Paul Stanford has always been both a businessman and political activist, at times a controversial one, but his main goal has always been pushing the public towards total acceptance of the cannabis plant for all of its uses; medical, industrial and recreational.
Stanford says his primary motivation for engaging with the venture capitalists was to fund OCTA. In April 2014, three months before the filing deadline, he made a deal with Orange Capital to fund his initiative and take the clinic business public.
“I had people coming to me for years saying they wanted to invest in my company and I said no, I don’t need investment in my company. I have grown it from absolutely nothing, with no money invested. We went from nothing in 2001 to a gross revenue of US$5 million in 2009. But we needed money to put our legalization initiative on the 2014 ballot.”
Orange Capital was a hedge fund operating in both Canada and New York founded by Daniel Lewis, who is well-known as an “activist investor”. According to Investopedia, activist investors are “individuals or groups that purchase large numbers of a public company’s shares and/or tried to obtain seats on the company’s board with the goal of affecting major change in the company.” In particular, Orange Capital dealt in oil and gas exploration, specifically publicly traded Canadian companies amid the nation’s recent boom in oil production.
Stanford and Orange Capital worked together to draft a business plan for expansion and audit the current businesses in preparation of an initial public offering (IPO). At first, in 2014 Stanford was promised that his company's stock would go public on the OTC exchange, an American-based stock market for small and medium sized businesses. In 2015, Talal Yassin of Vancouver, British Columbia and Orange Capital convinced Stanford to instead focus on listing his business on the Toronto Stock Exchange (TSX). In addition to the clinics, the group planned to purchase farm land in both Oregon and Washington state and secure recreational dispensary licenses. Stanford was told that the deal would reap millions.
But then, the money for the farms didn’t show up in the promised quantities or on time. Stanford began using the revenues at the clinics to front the funding promised by Orange Capital to maintain expanded gardens in both states.
In July 2015, Yassin and Orange Capital brought in Adira Energy Ltd., an oil and gas exploration company traded on the TSX Venture Exchange (TSXV) and formally announced intent to merge Stanford’s companies, under the new corporate umbrella of Stanford Medical Agricultural and Applied Retail Technologies of British Columbia (SMAART BC). Adira made it clear from the beginning that Stanford’s database was of particular importance to the deal.
Adira Energy is a “junior” Canadian oil and gas exploration company and a smaller addition to the investment portfolio of billionaire George Soros. Soros purchased about 5 percent of Adira in 2012. That same year, Adira announced they had discovered significant oil reserves off the coast of Israel, generating excitement that has yet to pan out.
At the time Stanford met them, Orange Capital was being run in Vancouver by Martin Bajic and Talal Yassin, and billing themselves as a global investment firm specializing in start-ups and pre-IPO companies with its own private funding which they say ranges from $500,000 to $5 million and up to $50 million. Their focus has primarily been in mining and the oil and gas exploration sector. In the third quarter of 2014, Orange Capital’s assets amounted to $1.3 billion. By the second quarter of 2016 they were worth just $5.5 million. Orange had bet big on a turnaround of Bellatrix, a Canadian oil and gas exploration company. Orange Capital ultimately closed in February 2016.
In addition to the partnership with Adira, Scott Walters was brought in to be the new CEO of SMAART BC, a decision that had never been popular with Stanford. Stanford believes that when Walters was brought on, his shares were being diluted without Stanford himself ever signing a contract or being given the opportunity to form a board of directors. Stanford never received a satisfactory contract and never formally signed one.
Shortly after announcing the merger, the deal between Orange Capital, Adira Energy and Paul Stanford began to sour, but the Canadians were not leaving the deal without the patient database.
Money, It’s a Gas
In 2001, the Canadian government legalized medical marijuana under the Marihuana Medical Access Program (MMAP), which allowed patients with certain qualifying conditions to access and possess cannabis. Like Washington, Oregon and California, which had passed medical cannabis legislation in the late 1990s, commercial cultivation was not facilitated. Instead, patients who received a medical recommendation from a licensed physician chose designated growers, or DGs (aka “caregivers” in the USA), who provided the patients with the medicine they needed and sold their excess to retail dispensaries, which operated informally. Much of the North American west coast operated or still operates (for now) under similar cannabis schemes.
These caregiver and dispensary networks functionally allowed the patchwork of smaller-sized farmers and breeders to provide a genetically diverse stock of cannabis medicines to the market and for the consumers to experiment with and report the effects back to budtenders, who would pass the information back up the chain to breeders. These systems led to the current knowledge about more obscure cannabinoids like cannabidiol (CBD), cannabigerol (CBG), tetrahydrocannabivarin (THCV) and the “raw” cannabinoids found in unheated cannabis.
Yet, these farms and dispensaries have existed in legal gray areas since their inception. With a lack of regulation, pesticide and mold-laced products have made it to market. More importantly, in the United States, a lack of access to banking has created a volatile playing field worth billions but so unpredictable it is hard for small businesses to stay afloat amid the ever-changing tides.
But in the United States, the real turning point was the election of Barack Obama, who sailed to victory in 2008 with the support of the marijuana industry and cannabis activists, who saw in Obama a potential ally.
In 2009, Obama’s attorney general Eric Holder released the Ogden Memo, officially setting off the marijuana “Green Rush”. As the federal government pledged to look the other way in legal states, Wall Street investors began salivating over the money that would be generated from the coming marijuana boom. There was always just one major problem-- cannabis would and still remains a Schedule I Controlled Substance, meaning it has no accepted medical use in the United States and is considered a highly addictive and dangerous drug. The federal classification has prevented many direct investments in cannabis companies.
In 2010, California’s Proposition 19, which would have made it the first state to legalize the recreational use of marijuana, was narrowly defeated due to infighting from pro-cannabis industry workers, growers and activists. In November 2012, though Stanford's Oregon vote lost narrowly, both Colorado and Washington succeeded at legalizing marijuana. The headlines about the industry’s profitability have shown no signs of slowing since the first day of Colorado’s sales to the public on January 1, 2014.
In 2014, Canada passed sweeping reforms of its national medical marijuana program, the Medical Marihuana Purposes Regulations (MMPR). The legislation established a system where larger-scale licensed producers, or LPs, provided exact-prescribed amounts of dried ground cannabis flowers via the federal mail. There are about 40 distinct LP licenses, but a handful are conglomerates. Initially, the regulations removed the DG system in favor of mailed cannabis from the new LPs, but a successful court battle upheld the citizens’ rights to grow or designate a grower. Currently, there are hundreds of technically illegal dispensaries operating in Toronto and Vancouver which are constantly under attack by law enforcement and even some LPs.
In 2015, prime minister Justin Trudeau campaigned heavily on full legalization of marijuana and upon his victory has set a timetable of 2018 to realize the regulations. With fully-legal medical marijuana already in Canada and a guarantee of an opening of the much larger adult-use market, Canadian marijuana investment has boomed.
Although marijuana banking presented a financing nightmare for the American industry, a few groups were able to publicly list penny stocks for marijuana businesses that didn’t specifically deal in buying or selling the plant itself. There are few publicly traded companies dealing with the plant, and those that are listed have yet to generate the excitement of the Canadian stocks. In Canada, LPs are already being publicly traded and are so popular they have temporarily halted trading on the Toronto Stock Exchange (TSX).
The TSX is largely dominated by the real estate and oil and gas exploration industries. With fully legal marijuana promising to be the next multi-billion dollar industry in Canada, naturally the same investors are turning their dollars to the booming cannabis market. The largest LP, Canopy Growth Corporation (formerly Tweed) is listed as “WEED” on the TSX and in early February 2016 was worth $1.2 billion. With the purchase of another LP, Mettrum, Canopy Growth is officially the largest cannabis business in the entire world. Aphria Inc, another LP, is in the process of being graduated from the TSXV to the TSX by this May.
Canopy Growth has yet to turn a profit.
While the Canadian cannabis business is booming, LPs have turned their focus towards establishing dominant market shares in the United States as well. Where Canada has a total population of nearly 35 million, in California alone, which legalized marijuana in 2016, there are nearly 40 million people and a massive already-established market. A company commanding hold on both the American and Canadian markets could generate billions.
Scott Walters has been a key advisor or chief executive to some of the publicly traded cannabis businesses in Canada. Before that, he worked in investment banking and hedge fund management for two decades.
“I spent 20 years with people where everything was about the next buck, the next deal, the next fuck,” Walters told Sharp Magazine in 2015. “You wouldn’t have liked me. I didn’t like me.”
Today, Walters is running Stanford’s company and has likely licensed out use of Stanford’s patient database to Canadian cannabis software and analytic company, Ample Organics. They work closely with the largest Canadian LPs. Stanford says that THCF Medical Clinics' patient data is currently on Ample Organics' Canadian-based computers, and Ample Organics says that Walters is their representative in Oregon.
Walters is also the current director of Supreme, another Canadian LP and the co-founder of a clinic business similar to Stanford’s, Canabo. Walters also sat or sits on various boards, such as Thelon Capital, which is traded on the TSX Venture Exchange as “THC”. He works closely with major LP’s such as Canopy Growth and Aphria through his clinics, which recommend their patients to the LP’s.
“The components of this new marketplace have such a number of facets,” Walters stated in a press release in his role at Thelon Capital. “Our focus is to provide financing, particularly royalty deals, as well as technologies and expertise. The market is likely well beyond the experience of many recent entrants who appear to be struggling with this complex opportunity.”
Walters acknowledges his clinic business is not the most profitable. He joked to Sharp Magazine that he “make[s] money every time someone pees in a cup… so I serve a lot of coffee.” But the point of Walters’ clinics isn’t to turn a profit, it is to generate data about effects and symptom relief in medical patients for pharmaceutical research and development. The larger the volume of patient data, the more valuable it is to clients.
“It is incredibly valuable information,” Canopy Growth (formerly Tweed) executive vice president Mark Zekulin also told Sharp. “If it can finally let us understand not just anecdotally why a particular strain might work for insomnia while another might work for chronic pain, you can start to form the basis for a Phase I clinical trial.”
Walters told Sharp he is currently the only one creating this data for the Canadian LPs.
While medical markets have historically been supplied by small and mid-sized farms, as more sick people around the world move from synthetic pharmaceutical drugs toward natural alternatives, the race is on to create government-approved cannabis drugs that can be prescribed and publicly traded.
GW Pharmaceuticals, a publicly traded British company (GWPH), has standardized an orally consumed tincture of cannabis, or cannabis flowers infused into alcohol by soaking. Despite their product being botanically based (the most effective form of medical cannabis) it was permitted by the US Food and Drug Administration to begin the FDA-approval process and is currently in clinical trials for Sativex (Nabiximols) and Epidiolex.
Although cannabis tinctures are easy to make at home, they are currently impossible to be prescribed and profited from.
With GW Pharmaceuticals opening the door to the for-profit publicly-traded cannabis pharmaceutical market, the race is on in North America to produce similar drugs.
Ample Organics was contacted about Stanford’s database, and, although they did not confirm directly they are specifically using the patient data amassed by Stanford’s clinics, they did confirm the only American state they currently have and are generating data for is Oregon and that it is managed by their local contact, Scott Walters of MoreCo Farms.
Scott Walters and MoreCo Farms now manage Stanford’s businesses and claim exclusive ownership of the patient database, along with Adira CFO, Alan Rootenberg. Rootenberg is the main representative of the plaintiff in the current court battle against Stanford and has been a longtime executive of Adira and many other similar funds in the oil and gas exploration industry.
The formal business address of MoreCo Farms is the Clinton Street transit station in southeast Portland, which is not a valid business address. Profiles were established on social media for Oregon’s MoreCo Farms in December 2015, just months before the deal with Stanford would be formally called off, suggesting Walters intent was to take and manage the database when he entered the deal with Stanford and Orange Capital in the first place.
If one calls the clinics today, Stanford’s voice is still on the company’s voice mail greeting, giving many the impression that Stanford is still working there. The business still operates in the same building, but Stanford isn’t even allowed in the front doors.
The Art of the Deal
The original deal in April 2014 was that if Orange Capital brought the money to put OCTA on the ballot, Stanford would agree to work with them to take his companies public on the American OTC exchange. Stanford was promised $400,000 to secure OCTA's qualifying signatures and was told to begin hiring organizers and petitioners to move the effort forward. As time went on, the money still hadn’t come and the recent hires were expecting payment.
With less than a month to secure the needed signatures, a little known offshore fund in Belize, Bayview Equities, wired a $550,000 loan to Orange Capital, then they wired Stanford’s clinics' business $400,000 to fund the initiative. The two representatives of Orange Capital each took two $25,000 finder’s fees. An additional $125,000 went to an accounting firm hired by Orange Capital to manage the deal and a law firm Martin Bajic and Talal Yassin took another $40,000 over the coming months to pay themselves for working on taking the company public. In the end, the initiative received about $350,000, which came too little and too late. OCTA didn’t make the ballot and Stanford was left to deal with the debts.
Stanford then says that Yassin threatened to sue him for control of his businesses if he didn’t go forward with the public offering. They went forward with plans to go public.
In November 2014, another initiative that succeeded at making the ballot, Measure 91, passed and legalized cannabis in Oregon. Stanford says that despite his initiative not making the ballot, he was in full support of Measure 91 and planned his business expansion around it.
The companies were restructured under SMAART BC. SMAART BC is the full owner of SMAART Nevada, which owns the companies Stanford had incorporated domestically; Presto Quality Care (formerly THCF Clinics) now the Empower Clinics, The Hemp and Cannabis Company (THCC, the cultivation and product side) and the THCF Access Points (dispensaries that would capitalize on the name recognition of the nonprofit clinics). The investors signed a promissory note to pay the non-profit, THCF, for its properties in December 2015, but, as of late February 2017, they haven't paid anything at all.
THCF Clinics had originally been part of an Oregon non-profit corporation, The Hemp & Cannabis Foundation. Effective January 1, 2012, the clinics were separated from THCF and renamed Presto Quality Care. THCF still exists as a non-profit medical marijuana caregiver for Oregon patients.
With Oregon’s legal cannabis boom on the horizon, Orange Capital and Stanford devised a business plan that, in 2015, would expand the businesses into cultivation and dispensaries. THCC would be used to purchase properties across the Pacific Northwest to grow cannabis for legal markets. In early 2015, the business plan was approved and Stanford was told to go ahead and find the land and start planting; $300,000 would be wired immediately into the SMAART accounts to begin establishing the gardens. Future plans included establishing gardens in South America, specifically Uruguay.
As the growing season stretched into the summer, Stanford spent long hours on the road managing the gardens and was forced to loan more money from his clinics to support the farm projects. Again, he was waiting for the money he was promised to fund the projects. Martin Bajic even directed Stanford to run up his personal credit card debt to fund the farms. Eventually, $50,000 was wired mid-summer, followed by two more $50,000 wire transfers. Stanford was then told the promised $300,000 was in Canadian, not American dollars, although at the current exchange rate the value of the Canadian dollars was closer to $230,000, well above the US$150,000 that was actually received.
By the fall, it was clear the gardens’ harvests would not reap the profits the company had planned for, largely due to the lack of the promised funding. Walters, who had recently been brought in as part of the deal with Adira Energy, told Stanford they were “no longer interested in funding his hobby” and that they were done with the gardens and any of the responsibility that came with them (even as, hidden from Stanford, Walters set up his own MoreCo Farms cannabis cultivation business).
In November 2015, Stanford went on a previously scheduled speaking engagement trip in South America. Stanford, who is a speaker at many international cannabis conferences, from Spain to Japan, went on a 3 week trip and spoke at ExpoHaze in Argentina, ExpoWeed in Chile and ExpoCannabis in Uruguay. On Stanford's first day traveling to South America, an agent of the Canadians filed erroneous paperwork that gave control of his company to them. Stanford says the paperwork, among many other errors, uses a series of 0’s for his tax identification and other business identification numbers.
While traveling in South America, Orange Capital and Adira repeatedly asked Stanford to sign Scott Walters’s contract, securing his position. Before Stanford returned from the trip, a bookkeeper told others in the office that the Canadians had admitted that they were planning on firing Stanford and other key employees upon acquiring the business. These events forced Stanford to demand more information from the Canadians.
Stanford, upon reviewing Walter’s contract, was shocked to find it reference the board of directors, articles of incorporation and the bylaws of the organization, although Stanford was continually told the documents did not yet exist and Stanford himself had never been given a contract or been allowed to assemble a board.
Stanford refused to sign Walter’s contract and still never has. To date, if a shareholder or board of directors meeting has been held, Stanford has not been made aware of it. Besides the business loans for the initiative and gardens, Stanford still hasn’t been paid a dime.
In March 2016, Stanford tired of the stonewalling on his requests for corporate documents, brought his lawyer into their business discussions and the rift seemed imminent.
Stanford says that, without his knowledge, the shares of SMAART BC were secretly diluted upon the company's establishment in April 2015. The Canadians hid this for over a year and today are continuing to dilute his and other employee's shares in their companies. Despite being told that he was the majority owner, Stanford and another clinic manager and shareholder have never been notified of any shareholder’s meetings, nor been invited to one, and never notified of, nor told of any Board of Directors' meeting.
Stanford is currently defending himself in Multnomah County County Court in Portland, Oregon for control of his companies. On June 9, 2016, in a 15 minute unscheduled, Ex Parte motion hearing that Stanford was not even present at, the Canadians obtained a Temporary Restraining Order (TRO) barring Stanford from running his businesses, allowing them to seize control. On March 10, 2017, the initial hearing continues in Courtroom 528 for the Canadians' motion for a preliminary injunction to continue to ban Stanford from his businesses, and another Canadian motion seeking a court ruling finding Stanford in contempt of violating their TRO.
The Canadians have also filed eviction proceedings to throw elderly residents at THCF's nonprofit medical marijuana garden out of their home. That first hearing is scheduled for February 28, 2017. Stanford says that since 2001, THCF has grown and given away over 6,000 pounds of medical marijuana for free to sick and dying patients.
Stanford has long been one of the world's leading proponents of hemp for fuel to replace petroleum. Stanford says, “Marijuana prohibition was never really about drugs. That's a smokescreen, pardon the pun. Cannabis is the oldest and most productive crop, sown for at least 12,000 years. It makes more fuel, fiber, food and medicine than any other crop. Marijuana prohibition was implemented based upon anti-Hispanic racist lies propagated by the petrochemical pharmaceutical military industrial transnational crony corporate elite fascist ruling class sons-of-a-bitches.” It seems more than ironic that some of these same industries are now trying to take Stanford out.
Doug McVay and Lisa “Mamakind” Kirkman contributed to the reporting of this article. Scott Walters was contacted for comment and did not respond.
Published on March 7, 2017
President at THCF Medical Clinics / Presto Quality Care
By Angela Bacca for The Huffington Post
https://www.linkedin.com/pulse/israelicanadian-oil-gas-corp-steals-medical-marijuana-paul-stanford?trk=v-feed&lipi=urn%3Ali%3Apage%3Ad_flagship3_feed%3BFgqSi01yl5A121FXAj7gNw%3D%3D
After a lifetime of cannabis activism, since he was 18 in 1978, Paul Stanford has been working to legalize marijuana in his home state of Oregon and take his cannabis business public. For over 20 years, he has hosted Cannabis Common Sense, a well-known cable access TV program that served as a launching pad to his multi-million dollar multi-state business, The Hemp and Cannabis Foundation (THCF) Clinics. The clinics were the first to open in most states with legalized medical cannabis and connected doctors with patients in need of state-legal recommendations. Since 2001, the clinics amassed around 250,000 personal patient files and medical records. The private patient files are now at the center of an international business controversy that may leave Stanford penniless.
In 2012, Stanford succeeded at placing The Oregon Cannabis Tax Act (OCTA, aka Measure 80) on the ballot, but it failed with 46.6 percent of the vote. OCTA was considered more liberal than the legalization laws approved in the same November 2012 vote in Colorado and Washington, and would have allocated two percent of net tax revenues to promote industrial hemp farming. Stanford is recognized internationally as a pioneer working for legalization of marijuana and industrial hemp. In 2014, he again sought to put a slightly revised version of OCTA on Oregon's ballot.
In April 2014, just three months before the signatures would need to be received by the state, an opportunity arose for additional funding for OCTA's 2014 initiative. Canadian venture capitalists interested in Stanford’s clinic business-- and the lucrative American cannabis industry in general-- presented Stanford with an offer to fund the signature drive in exchange for agreeing to work together to take his company public. Stanford would secure 55 percent of the shares of the new partnership for his employees and himself in an effort to protect his life’s work and their jobs.
Ultimately, the money for the initiative did come, but not enough and not in time to secure the needed signatures. A competing measure, Measure 91, made it to the 2014 Oregon ballot and passed, legalizing recreational marijuana in the state.
Despite not making the ballot, the new partnership forged ahead. For the next two years, the team at Orange Capital in Vancouver worked with Stanford to prepare to take his company public.
In mid 2016, the Canadians, through an unscheduled court Ex Parte motion, assumed total control of Stanford’s entire company-- even procuring a restraining order to bar him from interacting with his own businesses. His family, partner and longtime employees were fired, and of particular importance, a legal battle is now brewing over the clinics’ patient records, which may already be in commercial use in Canada. The Canadians, whose capital is largely generated through oil and gas exploration, are currently suing for full and permanent control of Stanford’s companies and are easily out lawyering him in court. Stanford maintains he was never paid a dime for his company’s assets and instead was continually lied to about important business decisions. Stanford also says the company has continued to use his credit cards and accounts, leaving him without income and to deal with their debt collection agents and to personally pay company bills for the clinic's rental cars, phones and more.
Just who rightfully owns Stanford’s companies is now a matter for courts to decide. In the balance hang over a quarter-million private personal patient records from multiple US states that may or may not already be in use by publicly traded Canadian companies. And Stanford’s saga may be a beacon of what's to come in the domestic market as public financing pushes the industry towards conglomeration, profit incentives and a market of FDA-approved pharmaceutical cannabis based products.
The Activist Meets Activist Investors
Paul Stanford has always been both a businessman and political activist, at times a controversial one, but his main goal has always been pushing the public towards total acceptance of the cannabis plant for all of its uses; medical, industrial and recreational.
Stanford says his primary motivation for engaging with the venture capitalists was to fund OCTA. In April 2014, three months before the filing deadline, he made a deal with Orange Capital to fund his initiative and take the clinic business public.
“I had people coming to me for years saying they wanted to invest in my company and I said no, I don’t need investment in my company. I have grown it from absolutely nothing, with no money invested. We went from nothing in 2001 to a gross revenue of US$5 million in 2009. But we needed money to put our legalization initiative on the 2014 ballot.”
Orange Capital was a hedge fund operating in both Canada and New York founded by Daniel Lewis, who is well-known as an “activist investor”. According to Investopedia, activist investors are “individuals or groups that purchase large numbers of a public company’s shares and/or tried to obtain seats on the company’s board with the goal of affecting major change in the company.” In particular, Orange Capital dealt in oil and gas exploration, specifically publicly traded Canadian companies amid the nation’s recent boom in oil production.
Stanford and Orange Capital worked together to draft a business plan for expansion and audit the current businesses in preparation of an initial public offering (IPO). At first, in 2014 Stanford was promised that his company's stock would go public on the OTC exchange, an American-based stock market for small and medium sized businesses. In 2015, Talal Yassin of Vancouver, British Columbia and Orange Capital convinced Stanford to instead focus on listing his business on the Toronto Stock Exchange (TSX). In addition to the clinics, the group planned to purchase farm land in both Oregon and Washington state and secure recreational dispensary licenses. Stanford was told that the deal would reap millions.
But then, the money for the farms didn’t show up in the promised quantities or on time. Stanford began using the revenues at the clinics to front the funding promised by Orange Capital to maintain expanded gardens in both states.
In July 2015, Yassin and Orange Capital brought in Adira Energy Ltd., an oil and gas exploration company traded on the TSX Venture Exchange (TSXV) and formally announced intent to merge Stanford’s companies, under the new corporate umbrella of Stanford Medical Agricultural and Applied Retail Technologies of British Columbia (SMAART BC). Adira made it clear from the beginning that Stanford’s database was of particular importance to the deal.
Adira Energy is a “junior” Canadian oil and gas exploration company and a smaller addition to the investment portfolio of billionaire George Soros. Soros purchased about 5 percent of Adira in 2012. That same year, Adira announced they had discovered significant oil reserves off the coast of Israel, generating excitement that has yet to pan out.
At the time Stanford met them, Orange Capital was being run in Vancouver by Martin Bajic and Talal Yassin, and billing themselves as a global investment firm specializing in start-ups and pre-IPO companies with its own private funding which they say ranges from $500,000 to $5 million and up to $50 million. Their focus has primarily been in mining and the oil and gas exploration sector. In the third quarter of 2014, Orange Capital’s assets amounted to $1.3 billion. By the second quarter of 2016 they were worth just $5.5 million. Orange had bet big on a turnaround of Bellatrix, a Canadian oil and gas exploration company. Orange Capital ultimately closed in February 2016.
In addition to the partnership with Adira, Scott Walters was brought in to be the new CEO of SMAART BC, a decision that had never been popular with Stanford. Stanford believes that when Walters was brought on, his shares were being diluted without Stanford himself ever signing a contract or being given the opportunity to form a board of directors. Stanford never received a satisfactory contract and never formally signed one.
Shortly after announcing the merger, the deal between Orange Capital, Adira Energy and Paul Stanford began to sour, but the Canadians were not leaving the deal without the patient database.
Money, It’s a Gas
In 2001, the Canadian government legalized medical marijuana under the Marihuana Medical Access Program (MMAP), which allowed patients with certain qualifying conditions to access and possess cannabis. Like Washington, Oregon and California, which had passed medical cannabis legislation in the late 1990s, commercial cultivation was not facilitated. Instead, patients who received a medical recommendation from a licensed physician chose designated growers, or DGs (aka “caregivers” in the USA), who provided the patients with the medicine they needed and sold their excess to retail dispensaries, which operated informally. Much of the North American west coast operated or still operates (for now) under similar cannabis schemes.
These caregiver and dispensary networks functionally allowed the patchwork of smaller-sized farmers and breeders to provide a genetically diverse stock of cannabis medicines to the market and for the consumers to experiment with and report the effects back to budtenders, who would pass the information back up the chain to breeders. These systems led to the current knowledge about more obscure cannabinoids like cannabidiol (CBD), cannabigerol (CBG), tetrahydrocannabivarin (THCV) and the “raw” cannabinoids found in unheated cannabis.
Yet, these farms and dispensaries have existed in legal gray areas since their inception. With a lack of regulation, pesticide and mold-laced products have made it to market. More importantly, in the United States, a lack of access to banking has created a volatile playing field worth billions but so unpredictable it is hard for small businesses to stay afloat amid the ever-changing tides.
But in the United States, the real turning point was the election of Barack Obama, who sailed to victory in 2008 with the support of the marijuana industry and cannabis activists, who saw in Obama a potential ally.
In 2009, Obama’s attorney general Eric Holder released the Ogden Memo, officially setting off the marijuana “Green Rush”. As the federal government pledged to look the other way in legal states, Wall Street investors began salivating over the money that would be generated from the coming marijuana boom. There was always just one major problem-- cannabis would and still remains a Schedule I Controlled Substance, meaning it has no accepted medical use in the United States and is considered a highly addictive and dangerous drug. The federal classification has prevented many direct investments in cannabis companies.
In 2010, California’s Proposition 19, which would have made it the first state to legalize the recreational use of marijuana, was narrowly defeated due to infighting from pro-cannabis industry workers, growers and activists. In November 2012, though Stanford's Oregon vote lost narrowly, both Colorado and Washington succeeded at legalizing marijuana. The headlines about the industry’s profitability have shown no signs of slowing since the first day of Colorado’s sales to the public on January 1, 2014.
In 2014, Canada passed sweeping reforms of its national medical marijuana program, the Medical Marihuana Purposes Regulations (MMPR). The legislation established a system where larger-scale licensed producers, or LPs, provided exact-prescribed amounts of dried ground cannabis flowers via the federal mail. There are about 40 distinct LP licenses, but a handful are conglomerates. Initially, the regulations removed the DG system in favor of mailed cannabis from the new LPs, but a successful court battle upheld the citizens’ rights to grow or designate a grower. Currently, there are hundreds of technically illegal dispensaries operating in Toronto and Vancouver which are constantly under attack by law enforcement and even some LPs.
In 2015, prime minister Justin Trudeau campaigned heavily on full legalization of marijuana and upon his victory has set a timetable of 2018 to realize the regulations. With fully-legal medical marijuana already in Canada and a guarantee of an opening of the much larger adult-use market, Canadian marijuana investment has boomed.
Although marijuana banking presented a financing nightmare for the American industry, a few groups were able to publicly list penny stocks for marijuana businesses that didn’t specifically deal in buying or selling the plant itself. There are few publicly traded companies dealing with the plant, and those that are listed have yet to generate the excitement of the Canadian stocks. In Canada, LPs are already being publicly traded and are so popular they have temporarily halted trading on the Toronto Stock Exchange (TSX).
The TSX is largely dominated by the real estate and oil and gas exploration industries. With fully legal marijuana promising to be the next multi-billion dollar industry in Canada, naturally the same investors are turning their dollars to the booming cannabis market. The largest LP, Canopy Growth Corporation (formerly Tweed) is listed as “WEED” on the TSX and in early February 2016 was worth $1.2 billion. With the purchase of another LP, Mettrum, Canopy Growth is officially the largest cannabis business in the entire world. Aphria Inc, another LP, is in the process of being graduated from the TSXV to the TSX by this May.
Canopy Growth has yet to turn a profit.
While the Canadian cannabis business is booming, LPs have turned their focus towards establishing dominant market shares in the United States as well. Where Canada has a total population of nearly 35 million, in California alone, which legalized marijuana in 2016, there are nearly 40 million people and a massive already-established market. A company commanding hold on both the American and Canadian markets could generate billions.
Scott Walters has been a key advisor or chief executive to some of the publicly traded cannabis businesses in Canada. Before that, he worked in investment banking and hedge fund management for two decades.
“I spent 20 years with people where everything was about the next buck, the next deal, the next fuck,” Walters told Sharp Magazine in 2015. “You wouldn’t have liked me. I didn’t like me.”
Today, Walters is running Stanford’s company and has likely licensed out use of Stanford’s patient database to Canadian cannabis software and analytic company, Ample Organics. They work closely with the largest Canadian LPs. Stanford says that THCF Medical Clinics' patient data is currently on Ample Organics' Canadian-based computers, and Ample Organics says that Walters is their representative in Oregon.
Walters is also the current director of Supreme, another Canadian LP and the co-founder of a clinic business similar to Stanford’s, Canabo. Walters also sat or sits on various boards, such as Thelon Capital, which is traded on the TSX Venture Exchange as “THC”. He works closely with major LP’s such as Canopy Growth and Aphria through his clinics, which recommend their patients to the LP’s.
“The components of this new marketplace have such a number of facets,” Walters stated in a press release in his role at Thelon Capital. “Our focus is to provide financing, particularly royalty deals, as well as technologies and expertise. The market is likely well beyond the experience of many recent entrants who appear to be struggling with this complex opportunity.”
Walters acknowledges his clinic business is not the most profitable. He joked to Sharp Magazine that he “make[s] money every time someone pees in a cup… so I serve a lot of coffee.” But the point of Walters’ clinics isn’t to turn a profit, it is to generate data about effects and symptom relief in medical patients for pharmaceutical research and development. The larger the volume of patient data, the more valuable it is to clients.
“It is incredibly valuable information,” Canopy Growth (formerly Tweed) executive vice president Mark Zekulin also told Sharp. “If it can finally let us understand not just anecdotally why a particular strain might work for insomnia while another might work for chronic pain, you can start to form the basis for a Phase I clinical trial.”
Walters told Sharp he is currently the only one creating this data for the Canadian LPs.
While medical markets have historically been supplied by small and mid-sized farms, as more sick people around the world move from synthetic pharmaceutical drugs toward natural alternatives, the race is on to create government-approved cannabis drugs that can be prescribed and publicly traded.
GW Pharmaceuticals, a publicly traded British company (GWPH), has standardized an orally consumed tincture of cannabis, or cannabis flowers infused into alcohol by soaking. Despite their product being botanically based (the most effective form of medical cannabis) it was permitted by the US Food and Drug Administration to begin the FDA-approval process and is currently in clinical trials for Sativex (Nabiximols) and Epidiolex.
Although cannabis tinctures are easy to make at home, they are currently impossible to be prescribed and profited from.
With GW Pharmaceuticals opening the door to the for-profit publicly-traded cannabis pharmaceutical market, the race is on in North America to produce similar drugs.
Ample Organics was contacted about Stanford’s database, and, although they did not confirm directly they are specifically using the patient data amassed by Stanford’s clinics, they did confirm the only American state they currently have and are generating data for is Oregon and that it is managed by their local contact, Scott Walters of MoreCo Farms.
Scott Walters and MoreCo Farms now manage Stanford’s businesses and claim exclusive ownership of the patient database, along with Adira CFO, Alan Rootenberg. Rootenberg is the main representative of the plaintiff in the current court battle against Stanford and has been a longtime executive of Adira and many other similar funds in the oil and gas exploration industry.
The formal business address of MoreCo Farms is the Clinton Street transit station in southeast Portland, which is not a valid business address. Profiles were established on social media for Oregon’s MoreCo Farms in December 2015, just months before the deal with Stanford would be formally called off, suggesting Walters intent was to take and manage the database when he entered the deal with Stanford and Orange Capital in the first place.
If one calls the clinics today, Stanford’s voice is still on the company’s voice mail greeting, giving many the impression that Stanford is still working there. The business still operates in the same building, but Stanford isn’t even allowed in the front doors.
The Art of the Deal
The original deal in April 2014 was that if Orange Capital brought the money to put OCTA on the ballot, Stanford would agree to work with them to take his companies public on the American OTC exchange. Stanford was promised $400,000 to secure OCTA's qualifying signatures and was told to begin hiring organizers and petitioners to move the effort forward. As time went on, the money still hadn’t come and the recent hires were expecting payment.
With less than a month to secure the needed signatures, a little known offshore fund in Belize, Bayview Equities, wired a $550,000 loan to Orange Capital, then they wired Stanford’s clinics' business $400,000 to fund the initiative. The two representatives of Orange Capital each took two $25,000 finder’s fees. An additional $125,000 went to an accounting firm hired by Orange Capital to manage the deal and a law firm Martin Bajic and Talal Yassin took another $40,000 over the coming months to pay themselves for working on taking the company public. In the end, the initiative received about $350,000, which came too little and too late. OCTA didn’t make the ballot and Stanford was left to deal with the debts.
Stanford then says that Yassin threatened to sue him for control of his businesses if he didn’t go forward with the public offering. They went forward with plans to go public.
In November 2014, another initiative that succeeded at making the ballot, Measure 91, passed and legalized cannabis in Oregon. Stanford says that despite his initiative not making the ballot, he was in full support of Measure 91 and planned his business expansion around it.
The companies were restructured under SMAART BC. SMAART BC is the full owner of SMAART Nevada, which owns the companies Stanford had incorporated domestically; Presto Quality Care (formerly THCF Clinics) now the Empower Clinics, The Hemp and Cannabis Company (THCC, the cultivation and product side) and the THCF Access Points (dispensaries that would capitalize on the name recognition of the nonprofit clinics). The investors signed a promissory note to pay the non-profit, THCF, for its properties in December 2015, but, as of late February 2017, they haven't paid anything at all.
THCF Clinics had originally been part of an Oregon non-profit corporation, The Hemp & Cannabis Foundation. Effective January 1, 2012, the clinics were separated from THCF and renamed Presto Quality Care. THCF still exists as a non-profit medical marijuana caregiver for Oregon patients.
With Oregon’s legal cannabis boom on the horizon, Orange Capital and Stanford devised a business plan that, in 2015, would expand the businesses into cultivation and dispensaries. THCC would be used to purchase properties across the Pacific Northwest to grow cannabis for legal markets. In early 2015, the business plan was approved and Stanford was told to go ahead and find the land and start planting; $300,000 would be wired immediately into the SMAART accounts to begin establishing the gardens. Future plans included establishing gardens in South America, specifically Uruguay.
As the growing season stretched into the summer, Stanford spent long hours on the road managing the gardens and was forced to loan more money from his clinics to support the farm projects. Again, he was waiting for the money he was promised to fund the projects. Martin Bajic even directed Stanford to run up his personal credit card debt to fund the farms. Eventually, $50,000 was wired mid-summer, followed by two more $50,000 wire transfers. Stanford was then told the promised $300,000 was in Canadian, not American dollars, although at the current exchange rate the value of the Canadian dollars was closer to $230,000, well above the US$150,000 that was actually received.
By the fall, it was clear the gardens’ harvests would not reap the profits the company had planned for, largely due to the lack of the promised funding. Walters, who had recently been brought in as part of the deal with Adira Energy, told Stanford they were “no longer interested in funding his hobby” and that they were done with the gardens and any of the responsibility that came with them (even as, hidden from Stanford, Walters set up his own MoreCo Farms cannabis cultivation business).
In November 2015, Stanford went on a previously scheduled speaking engagement trip in South America. Stanford, who is a speaker at many international cannabis conferences, from Spain to Japan, went on a 3 week trip and spoke at ExpoHaze in Argentina, ExpoWeed in Chile and ExpoCannabis in Uruguay. On Stanford's first day traveling to South America, an agent of the Canadians filed erroneous paperwork that gave control of his company to them. Stanford says the paperwork, among many other errors, uses a series of 0’s for his tax identification and other business identification numbers.
While traveling in South America, Orange Capital and Adira repeatedly asked Stanford to sign Scott Walters’s contract, securing his position. Before Stanford returned from the trip, a bookkeeper told others in the office that the Canadians had admitted that they were planning on firing Stanford and other key employees upon acquiring the business. These events forced Stanford to demand more information from the Canadians.
Stanford, upon reviewing Walter’s contract, was shocked to find it reference the board of directors, articles of incorporation and the bylaws of the organization, although Stanford was continually told the documents did not yet exist and Stanford himself had never been given a contract or been allowed to assemble a board.
Stanford refused to sign Walter’s contract and still never has. To date, if a shareholder or board of directors meeting has been held, Stanford has not been made aware of it. Besides the business loans for the initiative and gardens, Stanford still hasn’t been paid a dime.
In March 2016, Stanford tired of the stonewalling on his requests for corporate documents, brought his lawyer into their business discussions and the rift seemed imminent.
Stanford says that, without his knowledge, the shares of SMAART BC were secretly diluted upon the company's establishment in April 2015. The Canadians hid this for over a year and today are continuing to dilute his and other employee's shares in their companies. Despite being told that he was the majority owner, Stanford and another clinic manager and shareholder have never been notified of any shareholder’s meetings, nor been invited to one, and never notified of, nor told of any Board of Directors' meeting.
Stanford is currently defending himself in Multnomah County County Court in Portland, Oregon for control of his companies. On June 9, 2016, in a 15 minute unscheduled, Ex Parte motion hearing that Stanford was not even present at, the Canadians obtained a Temporary Restraining Order (TRO) barring Stanford from running his businesses, allowing them to seize control. On March 10, 2017, the initial hearing continues in Courtroom 528 for the Canadians' motion for a preliminary injunction to continue to ban Stanford from his businesses, and another Canadian motion seeking a court ruling finding Stanford in contempt of violating their TRO.
The Canadians have also filed eviction proceedings to throw elderly residents at THCF's nonprofit medical marijuana garden out of their home. That first hearing is scheduled for February 28, 2017. Stanford says that since 2001, THCF has grown and given away over 6,000 pounds of medical marijuana for free to sick and dying patients.
Stanford has long been one of the world's leading proponents of hemp for fuel to replace petroleum. Stanford says, “Marijuana prohibition was never really about drugs. That's a smokescreen, pardon the pun. Cannabis is the oldest and most productive crop, sown for at least 12,000 years. It makes more fuel, fiber, food and medicine than any other crop. Marijuana prohibition was implemented based upon anti-Hispanic racist lies propagated by the petrochemical pharmaceutical military industrial transnational crony corporate elite fascist ruling class sons-of-a-bitches.” It seems more than ironic that some of these same industries are now trying to take Stanford out.
Doug McVay and Lisa “Mamakind” Kirkman contributed to the reporting of this article. Scott Walters was contacted for comment and did not respond.
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