Dear Mr. Satterfield:
It is hard to know where to start on something as weird as this. But it may help to start with the most recent absurdity.
Here are two excerpts from Kubby’s Facebook page which were forwarded to me.
Steve Kubby “CBIS UP IN SMOKE - "The Parties herein agree that as material consideration for this Agreed Judgment, that the Purchase Agreement is rescinded nunc pro tunc to its purported effective date, has no effect as if it never existed; and based on this settlement and compromise, the Parties are placed into their original posi...tions as if said Purchase Agreement had never been executed...”
What really happened is that – after Kubby was fired as CEO for cause – the people who had previously controlled the public company, Gulf Onshore, and gave us control when Kubby was CEO – sued him – with the approval of Cannabis Science management -- for cancellation and/or return of the shares issued to his (private) company Cannex.
They got a summary judgment against Kubby. This was his “victory”. Obviously, this has no bearing whatsoever on the continued operation of Cannabis Science, nor does it change Dr. Melamede’s management of the company. In fact, the Gulf Onshore people are very supportive of Dr. Melamede. Any differences with them ended when they realized that we are fortunate to have Dr. Melamede and that he too was victimized by Kubby.
Steve Kubby “WHAT WE WON - Cannabis Science has been telling investors they plan to develop my whole cannabis extract lozenge, claiming, "The lozenge is a part of the assets and know-how acquired through Cannex." They made that claim in this article released yesterday, even though they failed to make any payment for the rights. N...ow we can tell our investors that we own the lozenge and CSI owns nothing.”
Meanwhile back in the real world: Dr. Melamede is one of the world’s foremost authorities on cannabinoids, and does not need anything from Steve Kubby. Cannabis Science has long since moved past anything that Kubby ever thought of.
In any case, “lozenges” are clearly not patentable as a delivery device, and there are numerous cannabis lozenges already being sold in medical marijuana dispensaries in California and elsewhere.
Consequently, for FDA purposes Cannabis Science is working on several extraction processes and delivery systems for cannabis-based medicines. As we have emphasized, our focus is on developing products to deal with PTSD and chronic pain for disabled vets. That may mean nothing to Kubby, but fortunately nothing that we are doing is dependent on anything from Kubby.
We are also working with the patients in Colorado – through our recently acquired dispensary – to determine what they prefer, because Dr. Melamede really means it when we say we are a patient oriented company. For Kubby to say that “CSI owns nothing” is a blatant lie, to put it bluntly.
If you have any more questions please do not hesitate to call me.
Thanks again.
Richard Cowan
CFO Cannabis Science Inc.
Below is a copy of what I posted on my old website, MarijuanaNews.com after we fired Kubby.
Someone Is Lying: Kubby Fired By Cannabis Science; Accuses Melamede and Cowan of Theft, Etc. Are You A Thief If You Don’t Agree With Me?
July 11, 2009
by Richard Cowan
Cowan@MarijuanaNews.com
The Kubby/CSI dispute involves some very complicated issues, but my decision to vote to remove him as CEO was based on a few very simple points:
First, when someone tells me that if I disagree with him I am therefore a thief, then I really must disagree with him.
Second, when agreeing with him would require me to falsely accuse two people of theft, and I do not believe the accusations to be true, I would have no choice. It is a question of morality, and simple decency.
Besides, I have been slimed before, and there is too much “collateral damage” to the stakeholders, including those who need cannabinoid medicine.
Third, when one of the persons being targeted is a leading figure in cannabinoid science, and therefore the company’s most valuable employee, and if he were driven from the company under circumstances that would make it almost impossible to replace him with anyone who was not desperate, it is a question of good business.
The point is that Cannabis Science Inc. can be rebuilt by Dr. Melamede, but it cannot be rebuilt by Kubby.
Fourth, when I become the target of absurd extortionate threats, I have to conclude that the person making those threats and accusations really should not be running a public company.
Finally, when the person accusing others of theft is using company funds for his own purposes and is ignoring the basic practices of corporate governance and doing actual harm to the company, we really must act.
Below you will find a very abbreviated history, and some of the recent emails between Kubby and me.
After you read them, I think you will understand why I acted as I did, but if you still think that I have looted Kubby’s billions, please tell everyone that I spent it all on sex. That would do wonders for my reputation.
RC
History:
In the Spring of last year, Steve Kubby called me and said that some wealthy friends of his had expressed interest in the pharmaceutical cannabis business, and he was sure he could raise a significant amount of money for such a venture in a short time.
I had been acting as Kubby’s “campaign manager” in his unsuccessful bid for the Libertarian Party presidential nomination, so he asked me if I would serve as the Chief Financial Officer, because – many years ago – I had had experience in corporate finance, and he wanted someone he could “trust” in that position. (You will soon see the irony in that, but it seemed logical because I had been defending him through all of his legal difficulties, since his arrest in 1999, and had nominated him for the LP Vice Presidential candidacy in 2000.)
I agreed, but Kubby was only able to raise $50,000 from a wealthy neighbor, and that was all that he was ever able to raise, with some dubious exceptions, which we will hear about soon.
Kubby was, nonetheless, able to recruit Dr. Robert J. Melamede as the company’s “Chief Science Officer”. Dr Melamede is one of the world’s most respected authorities on cannabinoid medicine, so that was something of a coup. A friend of Dr. Melamede also introduced us – by telephone – to a fellow in Vancouver, Raymond Dabney, who could arrange a “merger” with a public company, which might make it easier for us to raise money. We knew that Dabney had had some problems with the SEC, but we did not consider them serious enough to prevent us from doing business with him. He was the victim of some bad legal advice, but it makes him an easy target.
I went to Vancouver and negotiated a deal, but the stock market crash killed it before we could raise any financing. We put together another deal, but everything that could go wrong did, and no one was able to raise any money.
Needless to say, I was not getting paid, and I was also feeling my age (I am now 69), and I kept telling Kubby that I did not want to continue as CFO. He asked me to stay on in just a nominal capacity, because he wanted to have someone he could “trust.” During all this time, my stress was greatly aggravated by the problem that Kubby simply could not grasp the nature of public companies, and he said that he did not want to deal with corporate finance. In other words, I realized that I had made a serious error.
Inasmuch as we had been unable to raise cash to pay for essential corporate services, Dabney proposed that we use a provision in the SEC rules that would allow us to issue shares for them. The Board – including Kubby – approved the proposal unanimously. I am not an expert on securities laws and/or SEC regs, but the deal was vetted by the company’s lawyer and the shares were issued.
I have found Dabney to be both competent and honest, and he has always insisted that everything be done in a legal and honorable way. However, he and Kubby have never gotten along well.
In the meantime, Kubby had moved into a large house in the Oakland hills, and was having trouble paying the rent ($3,000 per month). The company’s bills were also mounting, and Kubby was complaining about stress and urging Dabney to sell stock at any price, so he would not be evicted. (Kubby sent that email to all of the company’s employees, and that began a series of increasingly bizarre messages.)
Finally, on June 25th, I insisted that my resignation as CFO finally be accepted.
Excerpt:
“I have been saying for some time that I do not feel qualified to serve in this capacity, and my inability to produce results speaks for itself. Although my health problems are not "life-threatening", it is clear to me that I do not have the stamina to do the job properly.”
Here is Kubby’s response on the same day:
“Richard,
I regretfully accept your resignation, but only because this appears to be affecting your health. The last thing we want is for your health to suffer.
As for your, "inability to produce results," I must remind you that the ultimate responsibility for these decisions rests with me. You advised me, but I was the one who committed us to a program that has not produced the results we all anticipated.
I do think you should continue as a Director of CSI.
On behalf of the entire Team, please accept our profound appreciation for the work that you've done on our behalf.
Best wishes,”
Steve
Then just a week later, on July 2, I received the following email:
from Steve Kubby <steve@kubby.com>
to Richard Cowan <richardccowan@gmail.com>
date Thu, Jul 2, 2009 at 6:38 PM
subject Confidential
Full text:
“Richard,
You know me well enough to know that I never bluff and I never back down.
I want you to send me ALL the stock certificates and CFO files you are holding by Monday, July 6th, or I will file charges against you for stock fraud, embezzlement, and bank fraud.”
Steve
Here is part of my response:
July 3, 2009
“Dear Steve,
Let peace begin with me.
First, you say that I know you “well enough to know”.
No, I do not know you at all, because this threat does not come from the Steve Kubby that I have been defending and/or promoting for the last ten years. What a fool I have been!
May I remind you that I had been trying to resign as CFO for many months, and you kept begging me to stay because you wanted someone there whom you trusted. Ironic, eh?
In fact, nothing would make me happier than to be able to walk away from this deal, but – speaking of ironic – you have made it almost impossible for me to do so, because I have a fiduciary responsibility as a result of the position you wanted me to take and your actions that threaten the shareholders.
Second, you say you want me to send you “ALL the stock certificates.”
I will be happy to send you the CSI certificate for CANNEX. I do not have a cert in your name, and you have absolutely no right to demand any other certs, but I will also send Bob and Raymond theirs. Heretofore, no one has requested them, but I am happy to get rid of them.
Third, regarding the “CFO files”, may I remind you that we have done all of our transactions electronically, and you should have virtually all of these “files”.
They all exist in “Googleland”, and you can find them on your own .There really are no physical “CFO files”.
Fourth, you threaten that you will “file charges: against me for stock fraud, embezzlement, and bank fraud.”
Well, if I had committed those felonies, how would that be cured by my sending you certificates that are not yours and electronic copies of files that you should already have? Actually, you are threatening me with arrest for not making you an accessory-after-the-fact in crimes that – fortunately – I have not committed.
Stock fraud? I have done nothing that has not been vetted by the lawyers and approved by the Board, and nothing that I have done is dishonest.
Embezzlement? I have taken NO money from any source, directly or indirectly related to CSI, or on its behalf, and I have not been paid anything in such a long time that I have forgotten when the last time was.
Bank fraud? What bank did I defraud? I have had no transactions with any bank on behalf of CSI other than helping you open the WF account.
My purpose in going through all the above is NOT to defend myself, but rather in hopes that you will reflect on the absurdity of it all.
Unfortunately, your actions over the last few days have given us such grave concerns about your health.
Do you really think that Bob, Raymond and I are involved in some sort of vast criminal conspiracy, and plotting against you at the same time? Can’t you see how irrational that is?
When you first started this deal you asked me to help you and you said that you would have money in a “week” – or something like that. Now you are saying that Raymond’s plans have failed, but the only deal that you have come close to doing (since Gordon’s $50K) is the now uncertain “C” deal, which would be possible only with the public company that Raymond provided.
The serious flaws with the “C” contract you signed without Board approval were confirmed by “C”, but your only response was to announce that you were consulting an attorney about voiding the… deal with the very people who had pointed out those problems. Everyone on that call was astonished by that statement in that context.
Also, I assume that you are prepared to proceed without Dr. Melamede, since you say you do not trust him. And after all this, why should he trust you?
If you prevail, you will have to have a new Board. Who would want to sit on your Board after what has happened? How are you going to raise money after wrecking the company?
What is your plan for going forward with the company?
R”
As you can see, I raised a number of substantive points asking his plans for how he would go forward, but his response, “No middle ground”, demanded that I again explain a deal approved by him and the lawyers, and ended with this:
Excerpt:
Dick,
“There is no middle ground, now that the fraud is so obvious. Either you wake up and recognize the fraud and join the effort to expose it, or I can only conclude that you are a willing co-conspirator with Bob and Raymond.”
In other words, if I did not agree with him that Dr. Melamede is a thief, then I must also be a thief. Except of course, he had already accused me of being a thief the day before, so I did not feel that there was any point in trying again.
That is the sum total of the basis of his accusations against me. As it happens, I have the greatest confidence in Dr. Melamede’s integrity, while I have learned the hard way about Kubby.
Don’t Point Your Finger When Your Hand Is In the Cookie Jar:
We had also learned that he had proceeded with the “C” deal mentioned above, without Board approval, and he had blocked my access to the Company’s bank account without Board approval, so he could take in $20,000 without Board knowledge or approval, and had paid himself $3,000, without Board approval, while leaving vitally important company obligations unpaid.
We have also learned that Kubby used promises of Company shares to borrow money from Company employees and at least one other person without Board approval.
The total amount of money involved was not great, but the way he was doing it endangered the company and put the Directors in an impossible position.
Consequently, because his behavior had become so irresponsible that the Board had to remove him as CEO, he resigned as a Director and then sent his libelous accusations to the media, claiming to be acting from noble motives.
There is one more illustrative point. A month or so ago, Dr. Melamede, who is not a wealthy man, loaned Kubby $2,000 to pay his rent, and Kubby has repaid him only with venom.
That reminds me of Mark Twain’s famous line: “A dog won’t bite the hand that feeds him, and that is the principle difference between a man and a dog.” .
Now I hope that you will understand why I voted as I did.
RC
RC
