Harvest, the big marijuana company on the ropes in Pennsylvania, accused of misleading Ohio regulators

Harvest Inc., the beleaguered marijuana producer with big problems in Pennsylvania, has even bigger problems in the Buckeye State.

The company is under investigation by the Ohio Department of Commerce, which has placed all of Harvest’s dispensary licenses on hold, the Cincinnati Enquirer reports.

In documents obtained by the newspaper on Tuesday, officials said Harvest intentionally misled regulators when it claimed its Ohio operations were owned and controlled by an African American woman. By stating that Harvest Grows LLC was majority-owned by a member of an “economically disadvantaged group,” Harvest scored higher than other applicants and was awarded one of 12 potentially lucrative licences to grow cannabis.

Ariane Kirkpatrick, who owns a construction business in Northeast Ohio, was listed on the June 2017 Ohio license application as one of three owners of Harvest Grows with a 51 percent financial interest. The state later found that Kirkpatrick had no control over the management, a financial stake in, or a say in the day-to-day operations of the company and therefore did not satisfy the requirements under the law, according to the Enquirer report.

Ohio notified Harvest that it planned to revoke its large-scale cultivation licence in January. In a court brief obtained by the Enquirer on Tuesday, Harvest said it was working on a “negotiated resolution.”

In the Keystone State, Harvest has run afoul of Department of Health regulators on multiple occasions.

This week, the Department of Health declared it would not renew a permit for a growing facility in Carmichaels, a tiny hamlet in southwestern Pennsylvania. Harvest finalized a “management services agreement” in May to operate that facility, whose permit is owned by the all-but-defunct firm called AgriMed Industries of Pennsylvania. A surprise inspection of the AgriMed facility in June found security lapses at the Harvest-managed facility; marijuana plants were missing, and security cameras were not functional.

The revocation of AgriMed’s marijuana cultivation permit is believed to be the first instance of its kind in the nation. A spokesman for Harvest said the company would appeal the decision.

Harvest also was cited by Pennsylvania for not using minority or women-owned contractors to build dispensaries after it promised in its application to do so.

Early this year, Harvest boasted in a news release that it held Pennsylvania permits that would allow it to operate 21 dispensaries. State law caps the number of dispensaries that any one marijuana company can operate at 15. Harvest collected more dispensary permits than allowed because it registered many of its limited liability corporations under slightly different names. However, each of the LLCs officially is headed by Harvest CEO Steve White.

Pennsylvania regulators have ordered Harvest to prove the LLCs are independent companies and have demanded all emails and financial records from the companies.

In an emailed statement, a Harvest spokesman said:

Harvest objects to the unfair characterization by the Ohio Department of Commerce (DoC) of both the nature and intent of our business relationship with Ms. Kirkpatrick. Harvest is committed to increasing diversity in ownership in our industry, and we know that access to capital can sometimes be a challenge.

We did not require a capital investment from Ms. Kirkpatrick for our agreement, but rather relied on her expertise and sweat equity as a significant initial financial contribution would have prevented Ms. Kirkpatrick from having a meaningful position with the company.

Ms. Kirkpatrick is an important contributor to our company and continues to remain the majority owner of Harvest Grows. We’ve worked closely with the Department of Commerce to modify our agreements to more accurately reflect Ms. Kirkpatrick’s ownership and control of Harvest Grows and expect to finalize an agreement with the DoC to resolve this issue in the coming weeks.

We look forward to Ms. Kirkpatrick leading our efforts to bring premium cannabis products to the patients of Ohio.