Global Ganja Report

Small producers have long been wary of the cannabis industry coming under domination by multi-state operators with the worst practices of corporate America. But the revelations of Russian oligarch money in the coffers of leading MSO Curaleaf appear to vindicate even the most cynical observers. These follow a slew of controversies concerning product safety and labor rights at the company.

Based in the Boston suburb of Wakefield, adult-use cannabis giant Curaleaf seems to exemplify the industry’s trajectory — from a local operation for medicinal users, to globe-spanning titan winning unsavory headlines with a string of scandals.

Forgotten humble origins
Eileen Konieczny, a nurse by trade and now living in Southern California, says she is the forgotten figure who was present at the creation of Curaleaf.

“I put together a team to go after a license in Connecticut in 2013,” she says. “I was listed on the application as ‘chief medical officer.’”

Konieczny says she played an “instrumental role” in getting the Constitution State’s medical marijuana law passed the previous year through her advocacy work. She later joined with the Connecticut Cannabis Business Alliance to help shepherd through the regulations and get an industry established in the state.

Curaleaf began as a cultivation and processing facility in Simsbury, a small town in Hartford County. But Konieczny’s involvement didn’t last long — and she cites a tension between her idealistic ethic and the mandates of business survival.

“Once we won the license, I got squeezed out within six months,” she tells Project CBD. “I have always thought they fired me because of my altruistic vision.”

In December 2014, Konieczny filed suit in federal court in New Haven claiming she had been wrongfully ousted from the company she helped found. Konieczny demanded a one-third interest Curaleaf, as well as back pay, compensatory damages and attorneys' fees. The suit did not prevail.

“After I was fired, the history of Curaleaf was rewritten,” Konieczny now says. “I totally disappeared in the history of what this company became.”

Eventually new money came in, bought the Simsbury facility and the Curaleaf name. This was the New Jersey company Palliatech, which had been active in the Garden State’s medical marijuana industry. Palliatech re-established itself in Wakefield (although incorporated in Delaware), became a public company, and finally changed its name to Curaleaf in 2018. The press release announcing this last move boasted: “Curaleaf is a leading vertically integrated cannabis operator in the United States.” But it didn’t mention the modest effort in Simsbury, where the name was born.

The company’s website only says: “Curaleaf became a wholly-owned subsidiary of Curaleaf Holdings, Inc., a publicly traded company through a reverse takeover, or RTO, on October 29, 2018.” (Sic)

A “reverse takeover” is a business tactic in which a company legally acquires its own “shell company.”

This was the ignominious end to the original and now-forgotten Curaleaf as a legal entity. But the lurid details of the figures behind Curaleaf Holdings are only emerging now — thanks, in large part, to the spotlight on Russian oligarchs due to the war in Ukraine.

Russian oligarch capital
In late February 2022, as the bombs and missiles began to fall on Ukraine, Curaleaf moved to counter internet rumors that the company was facing sanctions because of its executives’ ties to Russia..

“Rumors and misinformation spread during turbulent times,” Curaleaf said Feb. 25 in a press release and message to shareholders posted to the company website. “The speculation on social media that the company and its major shareholders and executives will somehow be subject to any US government economic sanctions now or in the future is incorrect.”

Curaleaf said that its founder, executive chairman and largest shareholder (some 20% of the $1.6 billion company’s stock) Boris Jordan, is a US citizen who was born on New York’s Long Island and has never been a citizen of any other country.

The statement acknowledged that Jordan had worked in Russia for several years, and still has businesses interests there.

An account on MarketWatch found that Jordan served as chair of Renaissance Capital, a Cyprus-based emerging-markets investment bank, which he founded in 1995. He also served as managing director at Credit Suisse in Moscow from 1992 to 1995. And he remains president and CEO of another company he founded, the Sputnik Group, a Moscow-based private-equity firm.

According to its website, the Sputnik Group specializes in “M&A” (mergers and acquisitions), so its founding in the 1990s came at a propitious time — as the vast resources of the Soviet empire were up for private grabs. The year of Sputnik’s launch, 1998, was the one before Vladimir Putin took power.

A 2007 diplomatic cable from then US ambassador in Moscow William Burns (today director of the CIA), released by Wikileaks, stated that Jordan by his own admission “once had a close relationship with Putin.”

Curaleaf’s second-largest shareholder Andrei Blokh, said not to be active in the company, is a US citizen who also holds a Russian passport. The Curaleaf press release described Blokh as a “retired CPG [consumer packaged goods] entrepreneur.” But as his profile on Forbes notes, in 1998 Blokh served as president of Russia’s Siberian Oil Company, or Sibneft — today majority-owned by Gazprom, the parastatal hydrocarbons titan that is a pillar of Putin’s power.

But there is a third figure not mentioned in Curaleaf’s statement: London-based oligarch Roman Abramovich — a man with his fingers in many metaphorical pies.

Who is Roman Abramovich?
Abramovich owned a controlling interest in Sibneft until its absorption by Gazprom in 2005. After Sibneft was put together from privatized Soviet state assets, Abramovich struggled for control of the company with rival oligarch Boris Berezovsky. The feud between the two men wound up in the British courts, which cleared Abramovich of blackmail charges in 2012. The British press called the $6.5 billion legal battle the biggest private court case in the United Kingdom’s history.

The Guardian notes that Abramovich was also a major backer of Renaissance Insurance — which is linked financially to Renaissance Capital, of which Jordan served as chiar.

Abramovich, with a net worth estimated at $9 billion, was once a high-roller in Britain’s business elite—most famous as owner of Chelsea Football Club. He also held a large stake in the Evraz PLC steel and mining group. But since the start of the Ukraine invasion, he has been under European Union sanctions. Last March, he reportedly sequestered two of his super-yachts in ports of non-EU member Turkey to prevent them from being confiscated.

Abramovich has not been sanctioned by the US, but the Justice Department obtained a warrant from a federal court in Manhattan to seize two of his private planes in June “based on probable violations” of the sanctions on Russia. These concern unauthorized flights to Russia after the start of the invasion. The US Commerce Department’s Bureau of Industry & Security also initiated administrative proceedings against Abramovich seeking penalties of up to twice the value of the planes.

Abramovich seems to have exercised some real political skill to avoid US sanctions. In the tentative and ultimately abortive peace talks between Russia and Ukraine in Istanbul last March, Abramovich was on the scene—his presence noted by both Russian and Turkish sources. Turkish President Recep Tayyip Erdogan acknowledged Abramovich’s role in the talks. The implication was that he had sold himself as a useful potential broker for negotiations, to launder his image and appease world opinion.

However, there were also reports that he had been poisoned at one of the Istanbul meetings — perhaps indicating that he had not entirely won the trust of some either on the Russian or Ukrainian side. (Poisoning seems to be a favored method of Putin’s Kremlin to eliminate undesirable elements.)

Abramovich is also a player in Israel’s political scene — and has been linked to land-grabs by the Israeli occupation in East Jerusalem. A 2020 leak of bank documents known as the FinCEN Files revealed that companies linked to Abramovich donated $100 million to right-wing groups in Israel — and especially the Elad Foundation, which has funded controversial settlement efforts in Silwan, a Palestinian neighborhood in occupied East Jerusalem. The Elad Foundation’s claims to Palestinian lands and homes under the dubious doctrine of “Absentee Property Rights” have led to physical confrontations as well as litigation.

Investigative website Forensic News reported in December that the company now called Curaleaf received hundreds of millions of dollars in financing from Roman Abramovich during its early years. According to Forensic News, Abramovich’s investments in the company and its principals amounted to around $225 million.

The report cited newly leaked documents from an accounting firm in Cyprus released by the group Distributed Denial of Secrets, a non-profit that hosts leaked and hacked data. According to Forensic News, the documents show that Abramovich was quietly funding Jordan and companies under his control via a firm based in the British Virgin Islands, Cetus Investments.

Writes Forensic News: “Tens of millions of dollars in loans were issued to Jordan and his companies, something that appears to have never been disclosed by Jordan or Curaleaf. Some of the loans included stipulations that the money was only to be spent on purchasing shares in Curaleaf...”

After the Forensic revelations, CT New Junkie reported that cannabis regulators in both Connecticut and Massachusetts have opened investigations into whether the loans from Abramovich were legal, or properly reported to state authorities.

Curaleaf distances itself from Russian plutocrats — including Putin
In a statement to Forensic News, Curaleaf confirmed that Jordan and Blokh received funding from Abramovich’s Cetus: “As with any young company in its early days of securing capital, shareholders Boris Jordan and Andrei Blokh were raising funds through multiple sources and family offices to grow Palliatech, which later became Curaleaf.”

Curaleaf added that “Cetus was a lender to many businesses around the world. All loans [from Cetus] were repaid long before Curaleaf was formed or went public. Curaleaf has no debt with Cetus. We cannot speak on behalf of shareholders.”

But the report notes yet another Curaleaf shareholder directly linked to Russia’s industrial elite. According to the leaked documents, Cetus sold 663,900 Curaleaf shares in September 2021to one Daria Plutnik for $8 million. Daria Plutnik is the wife of Alexander Plutnik, who currently serves as the deputy managing director of Russian Railways, a state-owned company that the US and the EU both placed under sanctions after the Ukraine invasion.

The report also details Abramovich’s relationship with Measure 8 Ventures, a New York-based cannabis investment firm ostensibly founded by Jordan. Records reviewed by Forensic show that Abramovich was actually its largest beneficiary. Forensic details an elaborate network of machinations involving Cetus by which Abramovich money found its way into Measure 8 through third parties.

Abramovich also invested smaller sums in various other stateside cannabis companies. He owned $1 million worth of shares in Green Gorilla Inc, which specializes in organic CBD products. Cetus also invested heavily in such US cannabis companies as Eaze, Tradiv and Tilt Holdings.

In an interview with Bloomberg after the Forensic News revelations, Jordan insisted the disclosures shouldn’t affect Curaleaf.

“He lent me and Andrei money to invest,” Jordan said of Abramovich. “All those funds have long ago been repaid, before the war, in late 2020 or late 2021. Curaleaf today doesn’t have Roman Abramovich as a shareholder to the best of our knowledge.”

Jordan said the financing went to Curaleaf’s predecessor company Palliatech from 2015 to 2017, after he contacted the Abramovich family office through Blokh. Jordan of course emphasized that neither Blokh nor Abramovich are currently under sanctions in the US.

“Before the war, he was one of the most sought after investors in the world,” Jordan said of Abramovich. “Having him as an investor was seen as a very big positive.”

Jordan also acknowledged to Bloomberg that he has personally met Russia’s autocratic leader — but was quick to put it in the past. “I haven’t seen or talked with Putin since 2003,” he said.

Questionable industry practices
Apart from its ties to slippery Russian financiers, Curaleaf has won a rep for practices that don’t live up to cannabis industry standards — or that even skirt the law.

Most embarrassingly, last October Curaleaf agreed to pay $100,000 to settle a class-action suit over a 2021 manufacturing error in which the company sold supposed CBD drops in Oregon that were actually loaded with THC. Several people reported alarming symptoms (panic attacks, shaking, increased heart rate) after ingesting the drops, sold under Curaleaf’s Select brand. Some were driving when they suffered the effects; others were rushed to medical clinics. Some 500 people were involved in the suit, receiving some $200 each.

Additionally, the company reached settlements with 13 people who sued individually over the snafu. Most of the terms were private but Oregon’s Willamette Week revealed that one plaintiff received $50,000. One of the confidential settlements was for “wrongful death.” That lawsuit alleged that 78-year-old Earl Jacobe died two months after a traumatizing experience with the drops, which were a “substantial factor” in his death.

Curaleaf was also slapped with a $130,000 fine and 23-day suspension by the Oregon Liquor & Cannabis Commission.

CuraLeaf got into a spot of bother with New York regulatory authorities last August, when it was forced to pull thousands of products from the shelves of its Empire State dispensaries for misleading labeling. CuraLeaf apparently decided to start calculating THC content by “dry weight” rather than “wet weight” (the state norm) in order to jack up percentages. The NY Office of Cannabis Management said it couldn’t do that without prior official approval.

In July 2019, the federal Food & Drug Administration sent a warning to Curaleaf, scolding the company for illegally selling unapproved products that made “unsubstantiated claims [to] treat cancer, Alzheimer's disease, opioid withdrawal, pain and pet anxiety.”

Curaleaf had recently become the first supplier of CBD products to CVS, but the nation’s biggest pharmacy chain pulled their products after the FDA letter. Curaleaf’s stocks took a tumble in response to the news.

Multinational canna-corporation
Curaleaf is held to be the largest cannabis company in the world, with operations in 23 US states, including some 200 dispensaries, 22 cultivation sites and 30 processing facilities. Curaleaf International has just been launched to promote its global operations, with big designs on the European market. It already has licensed products in Italy, Poland and Malta. Curaleaf employs more than 4,000 people, and claimed $1.2 billion in profits last year.

Curaleaf is also gobbling up the competition. Last January, it announced its acquisition of the vertically integrated cannabis company Bloom, which has five dispensaries in Arizona, as well as cultivation and processing sites.

Curaleaf also recently announced that it is partnering with Southern Glazer’s Wine & Spirits to distribute its Hemp and Select CBD products. Glazer’s is the world’s largest alcohol distributor and will also distribute Curaleaf products via its Proof e-commerce platform.

In 2019, Curaleaf opened the country's first drive-thru cannabis dispensary in Miami, operating under the Florida medical program. The company boasts that its new Select Squeeze edible “kicks in fast” because it is engineered with “nanotechnology.”

Alas, this freewheeling character also seems to extend to the company’s handling of unionization efforts at its facilities.

Union-busting 
Curaleaf’s labor practices have also received unflattering media attention. Last November, the National Labor Relations Board ruled that the company violated US labor law by refusing to bargain with unionized workers at its Chicago locations.

An NLRB panel found that GHG Management LLC, which supervises the company’s Windy City Cannabis and Curaleaf Weed Street locations, was obliged to recognize and bargain with employees who had affiliated with Local 881 of United Food & Commercial Workers.

“By failing and refusing since May 5, 2022, to recognize and bargain with the union as the exclusive collective-bargaining representative of the employees in the appropriate unit, the company has engaged in unfair labor practices affecting commerce within the meaning of federal labor law,” stated the order.

Windy City Cannabis is a formerly independent operator that was taken over by Curaleaf in 2021.

As industry watcher Bezinga reported, this decision followed Curaleaf’s lay-off of 220 employees in an effort to cut costs and boost efficiency. The company is said to be seeking $40 million in cost savings in 2023.

Curaleaf was dealt a similar defeat by an NLRB administrative law judge in Boston in July 2021. The ruling found that Curaleaf violated labor laws after workers affiliated with CWA Local 328 at its medical dispensary in Hanover, Mass. While Judge Iran Sandron dismissed the most serious charges from Local 328 — firing, transferring and interrogating employees for their support of the union — he still found the company illegally attempted to discourage unionization efforts. Curaleaf was ordered to desist from such tactics as “implicitly” promising benefits for resisting the unionization drive. The Hanover location was also ordered to post a notice for 60 days stating that employees are legally allowed to form a union.

Last June, Curaleaf issued a company-wide email informing employees that those represented by a union would not be receiving holiday pay for Juneteenth. This was just a year after Juneteenth was declared a national holiday, amid much talk of redressing the country’s legacy of racial and social injustice.

And on Jan. 11 of this year, Phoenix New Times reported that a budtender at the Curaleaf dispensary in Gilbert, Ariz., filed a complaint with the NLRB over what she said was her retaliatory firing after attempting to organize her co-workers.

Curaleaf responds
Contacted by Project CBD, Curaleaf had this to say about the the investigations into the loans from Roman Abramovich which have now been opened in Connecticut and Massachusetts: “We have fully complied with all requirements regarding disclosure of our ownership and financing in Massachusetts and Connecticut, and we have a collaborative and transparent working relationship with regulators in both states. There is nothing to hide, and we are disappointed that the continued misguided narrative to malign the company continues among journalistic outlets — despite any evidence supporting these false and defamatory claims.” (Sic)

The company rep added: “As always, we will fully cooperate with state regulators and address any concerns promptly. The matter concerning Curaleaf’s early creditors has been addressed repeatedly and we stand by our original statement.”

We were directed to a December tweet from the company which asserted that the largest sum it ever owed to Abramovich or his conduit companies was $120 million, and that “all shareholder loans to Boris Jordan and Andrei Blokh were paid back years ago.” The tweet accused Forensic News of “gross exaggeration.”

Asked about legal settlements in Oregon over THC-spiked CBD drops, the company said: “Curaleaf is pleased to have resolved this issue and appreciates the work of the OLCC [Oregon Liquor & Cannabis Commission] in addressing the regulatory sanctions as a consequence of the May 2021 product mislabeling, which was determined to have been the result of human error. We are grateful to the OLCC for recognizing that Curaleaf ‘provided extraordinary cooperation in the investigation demonstrating acceptance of responsibility’ in the matter. Through a thorough customer outreach, we promptly recalled the effected products and offered appropriate compensation to every customer who reported being affected by the mislabeled product. This incident and Curaleaf’s response demonstrate why consumers continue to be best served by established, regulated and insured cannabis companies operating in the licensed market.”

And indeed the Curaleaf controversies may have a particular media appeal at the moment because of the Ukraine war and the West’s showdown with Russia. But for many observers, they raise a red flag about where the American cannabis business is going generally — with or without the taint of Moscow intrigues.

  
Cross-post to Project CBD

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