(Toronto) A former director of quality and compliance at CannTrust Holdings says growing cannabis in unlicensed rooms was discussed “very openly” within the company.
Graham Lee told court in the Ontario Court of Justice at the Toronto courthouse that the activity was neither hidden nor denied and had been discussed on several occasions, even with members of the management team.
His remarks come as three former executives of the cannabis company face a series of securities breaches. The charges relate to unauthorized cultivation that allegedly took place in Niagara, Ontario at facilities owned by CannTrust, now called Phoena Holdings.
Peter Aceto, Eric Paul and Mark Litwin pleaded not guilty to fraud and authorizing the commission of an offence.
MM. Litwin and Paul also face insider trading charges, and Messrs. Litwin and Aceto are accused of fabricating a false prospectus and a false preliminary prospectus.
Mr. Aceto, who served as CannTrust’s managing director until he was terminated for just cause in 2019, knew about the crops and the duo discussed it during a 2018 meeting at the office of Mr. Aceto at CannTrust headquarters, Mr. Lee said.
At the time of the meeting, seedlings were already being grown in a room where it was not permitted and there were plans to place other seedlings in another room without a license.
Mr. Lee testified that Mr. Aceto told him to go ahead with the plan because the company had “set an internal precedent” by already planting in unlicensed rooms.
Frank Addario, Mr. Aceto’s lawyer, has previously pointed out that his client was hired because of his financial acumen and background – Mr. Aceto was previously president and CEO of ING Direct Canada – and that the company was subject to financial inspections and audits which revealed no significant issues.
“Evidence will show that Peter Aceto conducted himself lawfully and with integrity during his time at CannTrust,” said Mr.e Addario in an email.
The lawyers of Messrs. Paul and Litwin, former president and vice president of CannTrust, also maintained that their clients were innocent. After the unlicensed cultivation was revealed, Mr. Paul was ordered to resign and Mr. Litwin resigned in March 2021.
Mr. Lee’s court appearance on Monday also involved Health Canada, whose officials inspected the facility, including one of the unauthorized rooms. Mr. Lee recalls that staff were told not to lie to inspectors and to answer questions honestly from Health Canada employees.
When the inspectors left, Mr. Lee wrote an email to other staff saying, “very high level, we’ve dodged some bullets, but we’re also considering a major regulatory review” because Health Canada might have noticed the proliferation of unlicensed rooms.
However, Mr. Lee grew more and more uncomfortable. As these events unfolded, he wrote emails to CannTrust senior management outlining areas of concern, including unlicensed cultivation.
His goal was to “create a paper trail” to “protect me”, he said.
He added that he wanted proof of what was going on “because I felt like my reputation would have been tarnished pretty quickly”.