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Mass. marijuana regulators fine Acreage Holdings $250,000 for attempting to exceed license cap

Cannabis Control Commission also cites two operators for using banned pesticides

Members of the Cannabis Control Commission listen to testimony at a 2019 hearing.
Members of the Cannabis Control Commission listen to testimony at a 2019 hearing.Pat Greenhouse/Globe Staff

National marijuana operator Acreage Holdings has agreed to pay Massachusetts $250,000 to resolve charges that it attempted to control more dispensaries than allowed by law.

The state Cannabis Control Commission at its monthly meeting on Thursday voted unanimously to approve the agreement, which was reached after Acreage pressed ahead with questionable contracts that were the subject of a 2019 Spotlight Team report.

Commission investigators in January warned Acreage that its management services contracts with two seemingly independent marijuana operators — Patient Centric of Martha’s Vineyard, which is seeking recreational pot licenses in West Tisbury and Framingham, and Health Circle, which is working to open marijuana stores in Rockland and Marshfield — gave Acreage so much leverage over the smaller firms it technically controlled them.

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With Acreage already pursuing several dispensary licenses through its directly owned Botanist subsidiary, regulators said, the management deals threatened to put the conglomerate in control of five or more marijuana retailers — well over the legal maximum of three.

But the company asked the commission to process its license applications anyway, while promising to reform any problematic clauses. That attempt didn’t work: The commission in February refused to approve the applications, tabling them pending a staff recommendation on disciplinary action.

The resulting report by commission investigators essentially determined that Acreage, whose board includes former US House speaker John Boehner, should have known its management deals were impermissible under tighter ownership rules imposed in November.

“They deliberately went ahead even though they were warned they were going to be in violation of our cap restrictions,” commission chairman Steve Hoffman told reporters after the agency’s meeting. “It was pretty clear cut.”

Indeed, the new rules were specifically drafted in response to concerns about management and loan deals proffered by Acreage and TILT Holdings.

“When I see a company not being forthright and disclosing a controlling relationship, particularly when it’s the exact scenario described in our regulations, that is a problem,” Commissioner Shaleen Title told reporters.

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Acreage, which was disciplined last year by Ohio regulators over a similar violation, said it has now terminated all its previous management deals in Massachusetts. The firm also hailed the approval of two provisional retail licenses for its Botanist subsidiary, which along with an application from Patient Centric, were allowed to proceed following the resolution of the licensing case.

“We’re looking forward to focusing all of our energies on what we do best, which is deliver great products to the citizens of Massachusetts,” Howard Schacter, the company’s vice president of communications, said in a statement.

The commission on Thursday also levied fines against two other companies that used pesticides on their marijuana crops, which is banned in Massachusetts.

Enforcement officials said during a January 2019 inspection of a Fitchburg marijuana cultivation and processing facility run by Garden Remedies, investigators found a container of the banned product Wood’s Rooting Hormone. Later that year, an employee tipped off the commission that the company — which also operates dispensaries in Marlborough, Newton, and Melrose — had falsified invoices to disguise its purchase of other banned pesticides.

Investigators later found that Garden Remedies had been using the banned pesticide Clonex Rooting Gel since December 2017 and that company executives knew about the falsified records but failed to alert the commission. The company paid $200,000 to resolve related violations.

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In an extensive statement, Garden Remedies chief executive Dr. Karen Munkacy said Thursday that her firm’s use of the chemicals, while common practice in other states, was a mistake. She said that the invoices were falsified by “a former employee acting in a rogue manner” and that the incident had prompted sweeping changes to the firm’s operations.

“We are very sorry this happened, but we have come out of this experience a better company,” Munkacy said.

The commission also fined Healthy Pharms, which is part of national marijuana operator 4Front Ventures and has since been rebranded “Mission,” $350,000 for using banned pesticides. The large sum reflects a long pattern of misconduct, regulators said, with tests of the company’s Georgetown cultivation facility repeatedly coming back positive for pesticides even after the company was first caught using them in 2018.

“Once the company understood the violations, we worked quickly to correct them, and have implemented procedures to prevent them from happening again,” Leo Gontmakher, 4Front’s chief executive, said in a brief statement. “Patients were protected and no one was harmed.”

The end of the agency’s meeting devolved into an acrimonious fight over a proposal from Title, who sought approval of a letter asking the state Legislature to pass a bill directing enforcement fines and donations from larger cannabis firms into a fund supporting the commission’s social equity program.

While Title said the matter was urgent, with state lawmakers scrambling to finalize a budget amid the coronavirus pandemic, Commissioners Britte McBride and Jen Flanagan objected strenuously, saying the proposal had been submitted too soon before Thursday’s meeting to allow for a considered discussion.

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Dan Adams can be reached at daniel.adams@globe.com. Follow him on Twitter @Dan_Adams86.