Massachusetts marijuana regulators on Thursday slapped one of the country’s biggest marijuana companies with a record-high fine, saying it broke state rules by completing a merger without permission.
Curaleaf Massachusetts Inc. will pay the Cannabis Control Commission $250,000 over charges that it failed to obtain approval for a merger involving its Wakefield-based parent company, Curaleaf Inc., in October. The fine, which lets Curaleaf avoid a suspension or revocation of its licenses, is the largest to date issued by the agency and followed unanimous votes by the five commissioners in favor of the settlement and approving the merger.
Curaleaf had submitted a request for the transaction to be approved — but only in February, months after the deal had already closed. Regulators said the firm’s Massachusetts subsidiary also failed to disclose Curaleaf as the majority owner of its licenses following an April 2018 conversion from a nonprofit entity to a for-profit one.
“I think it’s an appropriate resolution,” commission chairman Steve Hoffman told reporters. “They’ve admitted they were mistaken in . . . not applying for [permission] when they should have.”
Hoffman said the settlement would let both sides avoid the “long, litigious” process of trying to suspend or revoke Curaleaf’s licenses and said he was satisfied “that our regulations are going to be adhered to going forward.”
Commission investigators said Thursday that they had concluded Curaleaf’s failure to seek permission was a “good faith” mistake based on a “misinterpretation” of the regulations.
Officials for Curaleaf — which is pursuing recreational permits in Oxford, Ware, and Provincetown, plus dozens of licenses across 11 other states — noted that the merger did not endanger public safety nor result in changes to the team overseeing the company’s Massachusetts operations. Instead, they said, it was a move by its parent company to merge with a Canadian firm and go public on the Canadian Securities Exchange.
“We have been proudly serving the Massachusetts community for almost 24 months and look forward to working with the Commission to secure approval of our [recreational] licenses,” the company said in a statement.
Curaleaf representatives also said that at the time of the merger in October, the commission had yet to establish a formal process or publish a form that firms could use to request approval of changes in ownership.
Commissioner Shaleen Title objected to that explanation, arguing that the absence of a form did not obviate the agency’s regulations requiring approval before a marijuana license can change hands.
“If there’s no form available, that doesn’t make getting permission optional,” she said.
The large fine comes as the commission is working to tighten its rules and step up enforcement around who controls marijuana licenses in Massachusetts. Under state law, no entity can own or control more than three licenses of any type, but the Boston Globe Spotlight Team reported earlier this year that several large firms had been seeking to skirt those rules by signing onerous management contracts and loan agreements with seemingly independent license applicants.
Curaleaf has also announced its intention to acquire Alternative Therapies Group, which has a hybrid medical-recreational store in Salem and provisional licenses to open two more in northeastern Massachusetts. The Globe reported in April that the company was considering structuring that deal using intermediaries, such that its control of licenses in excess of the state cap would be disguised. The company has insisted the final version of the acquisition will comply with state rules.
Also on Thursday, the commission issued a $50,000 fine to M3 Ventures Inc., which operates dispensaries in Plymouth and Mashpee under the “Triple M” brand. The sanction came after the firm allegedly lied to investigators about its use of banned pesticides. The firm said it was pleased with the resolution.
“While M3 Ventures thought we were appropriately using natural pesticides, based on the information available from the [state Department of Public Health] at the time, we have taken full responsibilities for our actions,” the firm said, adding that it has worked with regulators “to voluntarily take the corrective measures to ensure compliance now and in the future.”
Many Massachusetts marijuana operators believe the state’s pesticides rules are unfairly strict, and could result in crop failures.