Cultivate Holdings, the Leicester-based marijuana company that in November opened one of the first two recreational shops in Massachusetts, will pay the state $75,000 to settle charges that it sold hundreds of improperly labeled pot products to consumers.
This is the first time the state Cannabis Control Commission has fined a marijuana company.
During an unannounced inspection on Jan. 30, commission investigators discovered that Cultivate had failed to update the labels on about 3,000 marijuana products it transferred from its medical marijuana operation into the state’s “seed-to-sale” inventory tracking system for recreational products.
The state’s recreational marijuana rules require all products to carry prominent warnings that they contain THC, the primary psychoactive compound in cannabis, and that they are not safe for children. The rules also require labeling information about the serving size of the product, directions for using it, and an identification number indicating the batch of marijuana it was made from.
Commission investigators said Cultivate sold more than 880 products to recreational customers that were missing the required information before the agency caught the problem and slapped the company with a cease-and-desist order in early February.
At a commission meeting Thursday, officials said the company quarantined the products and later negotiated a $75,000 payment to the state’s marijuana regulation fund to avoid a possible suspension of its license over the violation.
“Our objective is to fix the situation and ensure it won’t happen again,” commission chairman Steve Hoffman told reporters after the meeting. “I thought the negotiated settlement is a really efficient way of getting there. . . . I am convinced that they understand the mistakes they’ve made and the violations that occurred — and they understand that they cannot happen again and we will not tolerate them happening again.”
Hoffman vowed that the commission would continue conducting unannounced inspections of licensed marijuana facilities.
Commissioners Britte McBride and Shaleen Title additionally criticized Cultivate for initially posting a sign explaining the violation in its back office, instead of prominently in the main area of its store as required.
Staffers at the agency suggested the size of the settlement reflected their “significant concern” over Cultivate’s apparent attempt to hide the information, which was discovered during a second inspection on Feb. 4.
Commissioner Jennifer Flanagan said she hoped the fine would send a signal to the Massachusetts marijuana industry.
“I really hope that it sends a message to other companies that we’re not going to have a tolerance for things that are mislabeled,” Flanagan said during the meeting. We have our regulations for a reason. There’s a public health piece to this. . . . It’s a nonstarter for me.”
Cultivate spokeswoman Francy Wade said in a brief statement that the company had “rapidly resolved” the issues.
“Processes have been put in place to ensure these labeling and inventory issues aren’t repeated,” Wade wrote.
Also on Thursday, the commission approved the acquisition by Georgia-based Surterra Wellness of local marijuana company New England Treatment Access, or NETA, which runs hybrid medical-recreational stores in Northampton and Brookline plus a cultivation and processing facility in Franklin.
The private transaction, for an undisclosed sum widely believed to be in the hundreds of millions of dollars, involved a large web of holding companies.
The agency spent months reviewing the deal, saying the time was needed to subject Surterra executives to extensive background checks and ensure the firm did not quietly control other Massachusetts marijuana companies in excess of a cap on license ownership.
“We wanted to make sure we were thorough and dug as deeply as we could,” Hoffman told reporters. “I have confidence in the process. We did a very diligent job here.”
Staffers at the commission who reviewed the deal uncovered several regulatory violations by Surterra in Florida, where the company operates medical marijuana facilities, but concluded they did disqualify the firm from acquiring NETA’s licenses.
Amanda Rositano, NETA’s director of operational compliance, said the deal won’t be finalized until selectboard members in Brookline sign off on the change. A vote there is scheduled for Tuesday.
“We’re feeling great,” Rositano said. “This is a big important step in this process for us. . . . We’ve been pleased with the diligence that the commission put into this and we’re pleased that it has been approved.”
The commission also voted unanimously to seek an outside vendor to help evaluate future proposed acquisitions and changes in ownership, saying the agency has limited bandwidth to unpack the often-complex transactions.