How Canadian Cannabis Stock Schemers Successfully Stole an American Activist’s Entire Business
This article was produced with support from the Cannabis Museum’s Investigative Fund. If you would like to support investigative journalism in the cannabis industry during this pivotal transition please make a donation to the Cannabis Museum- Investigative Fund.
After nearly three years tied up in court fighting for his non-profits, his businesses and even the rights to his own name, Paul Stanford’s case has been closed. In 2014, Stanford was approached by a deep-pocketed group of Canadian venture capitalists to expand his businesses and take them public ahead of Canadian, and eventually American, legalization. A year later they took control of the company and diluted his ownership to 0.0002 percent without ever paying him a dime. They easily out-lawyered Stanford in court and with his finances drained, they were granted a requested dismissal of their case against him, despite him pleading that the judge reexamine the fraud he says precipitated the theft of his companies.
READ: How Canadian Venture Capitals Stole Millions of Americans Private Medical Records
What was sold to him as a holdings company in his name that would provide him a legacy of “multi-generational wealth”, Stanford’s Medical Agricultural and Applied Retail Technologies of British Columbia (SMAART BC) has now changed their name and gone public while he has been busy fighting for his businesses and properties in court. The new company, Empower Clinics, trades on the Canadian Securities Exchange as CBDT and shares three key founders- Alan Friedman, Alan Rootenberg and Ryan Roebuck — with Canadian corporate cannabis giant Cronos.
Cronos made headlines late last year when tobacco giant Altria (formerly Philip Morris Companies Inc.) invested $1.8 billion for a 45 percent share of ownership in the fledgling corporate cannabis company. Altria has “strategic investments” as well in alcohol giant Anheuser-Busch and the e-cigarette company Juul.
“Selecting the right partner in this category was critical, and we’ve done just that,” CEO Howard Willard said of the Altria investment in a January 2019 shareholder earnings call. “Cronos’s strong management team has built unique capabilities to compete globally across the medicinal, recreational and nutraceutical categories. Our investment will allow Cronos to more quickly expand its global footprint and production capacity.”
Technically, Stanford was being sued not by the Cronos-affiliated venture capital group, but instead by Empower Clinics Inc., the new name for the companies he founded that lived under the SMAART BC umbrella; The Hemp and Cannabis Company, SMAART Inc, Empower Healthcare Corporation and SMAART Holdings (a Nevada corporation).
Stanford’s original medical cannabis clinics, The Hemp and Cannabis Foundation (THCF) Clinics, were at the center of his business and activism. They were the first such clinics to set up in many key medical cannabis states as their programs were rolling out. They amassed hundreds of thousands of private patient files in these critical early markets, making them a serious “acquisition target” for data-hungry biopharmaceutical firms looking to cash in on the cannabinoid craze. The data has been used to promote the value of the Empower Clinics stock.
Meanwhile, with a shared board of founders with Cronos Group, Empower Clinics could be the new acquisition target. With Stanford out of the way, the acquisition of his company could very well provide multi-generational wealth, just not for him.
A dismissal of the case against Stanford without prejudice means the case can be taken up against him again at any time. Stanford doesn’t have the ability to fund an international legal battle he says would prove his company — and the medical records — were fraudulently stolen from him. Six months into the court battles, he ran out of money to pay his attorneys. He hired another for significantly less who would represent him for the next year, but ultimately failed to make prepared arguments on the facts of the case before dropping him as a client. In the last year and a half, Stanford was forced to represent himself. He opened a smaller private clinic to engage in the same business to earn a living. The case was amended in early 2017 to include the new clinic as a defendant.
The Empower Clinics have four separate judgements totalling over $150,000 against Stanford, two separate cases of contempt, one over the lease on his Portland office and another a home that was used for non-profit medical cannabis caregiving. After exhausting attempts to appeal the orders barring him from the businesses, the plaintiffs continued to further the case as Stanford continued to attempt to delay while seeking adequate representation and funding to pay for it. In March 2019, plaintiffs filed the motion to dismiss the case without prejudice, which was granted on April 23, citing his inability to pay the judgments that he already owed.
Molly Honore of Markowitz Herbold PC, the powerful and expensive Oregon law firm now representing the Empower Clinics, argued for the dismissal, “Plaintiffs have money judgments against [Stanford]. Obtaining more at this point is not necessarily worth the cost of going to trial… Plaintiffs think it makes sense to dismiss without prejudice.”
Multnomah County Circuit Court Judge Jerry B. Hodson agreed, reprimanding Stanford for attempting, again, to prove the fraud, “You have had lots of opportunities to have a hearing where you are represented and presented info and you show up at the last hour at the last minute not having filed anything and expect me to believe that it is true?”
Stanford had, in fact, filed responses, claims and counterclaims in a timely manner, which Judge Hodson had previously been dismissed with prejudice, meaning Stanford could not take up his claims in that court again. In order to fight the fraudulent transfer of ownership of his company, he would need to file suit in Canada.
“The biggest mistake I made was trusting that the plaintiffs would conduct their business in an honest fashion and would act within the law and commonly shared ethics. I was wrong. They deceived me and they have deceived this court,” Stanford argued unsuccessfully.
This article was produced with support from the Cannabis Museum’s Investigative Fund. If you would like to support investigative journalism in the cannabis industry during this pivotal transition please make a donation to the Cannabis Museum- Investigative Fund.
