CEO of Vermont medical marijuana backer iAnthus Capital resigns amid financial scandal

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Correction: The members of the Vermont Cannabis Trades Association include Champlain Valley Dispensary, Southern Vermont Wellness, Vermont Patients Alliance, Phytocare Vermont and Ceres Natural Remedies. The list of members from the company website was incorrect in an earlier version of this story.

The CEO of the company behind one of Vermont’s five licensed medical marijuana dispensaries has resigned following allegations that he used the company’s resources for personal benefit.

Hadley Ford, CEO of iAnthus Capital, immediately submitted his resignation after a special investigation uncovered $160,000 in personal loans from a managing member of one of the company’s lenders, iAnthus announced on Monday.

iAnthus Capital owns, finances and/or partners with 30 dispensaries in 11 states, and is the major financier behind Grassroots Vermont, a medical marijuana dispensary in Brandon. Hadley Ford’s sister, Alexandra, founded Grassroots Vermont in 2013.

First reported by Marijuana Business Daily, Ford resigned after two previously undisclosed personal loans were discovered. The loans, for $100,000 and $60,000 respectively, were issued by a managing member of Gotham Green Partners, a private equity firm that issued iAnthus millions in convertible notes in 2019.

iAnthus appointed a special committee to investigate the personal loans. The company concluded that this “potential or apparent” conflict of interest had no bearing on their financial relationship with Gotham Green, but Ford’s failure to disclose the loans constituted a breach of company policy.

Out-of-state players in Vermont marijuana

Three of Vermont’s five medical marijuana dispensaries are funded by high-profile, out-of-state investors, the Burlington Free Press reported in January. In addition to Grassroots Vermont, Vermont Patients Alliance in Montpelier and Phytocare Vermont in Bennington are backed by Chicago-based investor Grassroots Cannabis.

More: How Big Marijuana might subvert Vermont’s homespun pot industry

Curaleaf, based in Wakefield, Massachusetts, and one of the biggest marijuana companies in the world, plans to acquire Grassroots Cannabis this spring, adding another degree of separation between the local marijuana industry and the money behind it.

Ford’s Grassroots Vermont has been actively involved in state governmental affairs. Alexandra Ford pressed state legislators in 2016 to reject a proposed residency requirement for license-holders, which was eventually shot down. Grassroots Vermont paid Montpelier lobbyists over $30,000 in 2019, Vermontijuana reported

Other marijuana companies and organizations representing them have recently spent substantial money lobbying the government. Marijuana Policy Project, one of the largest and oldest advocacy groups in the country, spent over $67,000 between February 2019 and April 2020 on lobbying. The Vermont Cannabis Trades Association, whose members include Champlain Valley Dispensary, Southern Vermont Wellness, Vermont Patients Alliance, Phytocare Vermont and Ceres Natural Remedies, spent over $17,000 in that time frame.

After Hadley Ford’s resignation, iAnthus appointed Randy Maslow, the company’s co-founder, interim CEO.

Grassroots Vermont did not respond to requests for comment. In a statement to the Free Press, Ethan Anderson, iAnthus Capital’s senior vice president of marketing,  said the company could not offer additional information beyond their announcement on April 27.

What’s going on with S.54?

Due to the COVID-19 pandemic, the Vermont Legislature has been operating remotely, and the future of S.54, the bill that would tax and regulate recreational cannabis in Vermont and was nearing the finish line before the outbreak, is unclear. The focus right now is on bills that are COVID-19 related, House Speaker Mitzi Johnson told the Free Press, as well as bills that deal with state finances or have June 30 deadlines.

The legislature plans to return in August, and Johnson is hopeful the House will be able to take up a broader range of legislation at that time, including S.54. “For that particular bill, we also need the Governor at the table for negotiations, and his office does not have capacity in the middle of this crisis,” Johnson said.

More: Vermont House passes bill to regulate marijuana sales: What comes next for S.54?

If S.54 goes into effect, dispensaries like Grassroots Vermont will have a head start in the market. The most recent version of the bill will give integrated licenses — or a single license that allows a business to cultivate, wholesale, produce, sell and test marijuana — only to currently licensed dispensaries. All new Vermont marijuana businesses will have to apply for individual licenses.

The dispensaries would not be allowed additional, individual licenses. However, S.54 doesn’t stipulate whether investors in those dispensaries can back additional licensees, meaning those investors could effectively control multiple Vermont marijuana businesses.

In March 2019, iAnthus registered as a principal in Pakalolo LLC, a business with the same address as Grassroots Vermont. Pakalolo is a term for marijuana that originated in Hawaii.

Eli Harrington, a cannabis advocate, consultant and lobbyist, said he doesn’t believe Ford’s resignation will affect the day-to-day for Grassroots Vermont, which he emphasized has a strong community reputation. But it does raise an important question: If something compromises the operations of a Vermont dispensary or their investor — for instance, they go out of business or decide to divest — what happens to their license?

Marijuana licenses in other states have been sold for millions by businesses that initially secured them, Harrington noted, some of which never opened their doors before selling it off.

The most current version of the bill does not address what could happen if a license is suspended or a business is sold. The State of Vermont Marijuana Commission did not return requests for comment.

Free Press staff writer Joel Baird contributed to this report.

Email Isaac Fornarola at ifornarola@freepressmedia.com. Follow him on Twitter: @isaacforn

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