CanadaNewsRegulationsCannTrust to Destroy $77 Million Worth of Cannabis to Regain Compliance

CannTrust will destroy $77 million of illegally grown cannabis to get its growing and selling licenses back, which were suspended by Health Canada in September.
Michelle Gamage Michelle GamageOctober 15, 20197 min

CannTrust Holdings Inc. (TSX:TRST) (NYSE:CTST) announced Monday it will destroy $77 million of cannabis to get the company back in line with Health Canada regulations and in hopes of having its licences to grow and sell weed reinstated.

The company’s remediation outline includes increased training for key personnel on how to follow Health Canada regulation and the destruction of $12 million worth of plants and $65 million of unauthorized inventory.

The inventory set for destruction includes product returned by patients, distributors and retailers, which cannot be reprocessed and sold to other licensed producers because CannTrust had its license to produce and sell cannabis suspended September 17.

CannTrust to Destroy $77 Million Worth of Cannabis to Regain Compliance
CannTrust crops in the company’s Pelham, Ontario growing facility. Image courtesy of CannTrust.

CannTrust won’t challenge license suspension

In a press release CannTrust said it will not challenge Health Canada’s September decision but instead will focus on working collaboratively and transparently with the government to address its digressions.

“CannTrust is confident that its detailed remediation plan will not only address all of the compliance issues identified by Health Canada, but it will also build a best-in-class compliance environment for the future,” said Robert Marcovitch, CannTrust interim CEO in a statement.

“Our goal is to meet and exceed Health Canada’s regulatory standard, and to rebuild the trust and confidence of our primary regulator, investors, patients, and customers.”

The company said Health Canada should receive a detailed remediation plan by Oct. 21.

The announcement was followed by the company’s American-listed stocks rising by 24 per cent, according to the Financial Post.

Fake walls, illegal grow rooms and black-market seeds

CannTrust’s remediation plan comes after its summer of non-stop bombshell scandals.

Starting in early July the company was flagged by Health Canada for illegally growing cannabis for six months in five unlicensed rooms in its Pelham, Ontario growing facility. This first scandal dropped the company’s stocks by more than 20 per cent.

CannTrust to Destroy $77 Million Worth of Cannabis to Regain Compliance
Former Canntrust CEO Peter Aceto at the CannTrust cannabis production facility in Fenwick, Ontario. Photo courtesy of  Galit Rodan, Bloomberg via Getty Images.

News broke later that month CannTrust fired its CEO Peter Aceto and demanded chairman Eric Paul resign once media reports revealed the two men allegedly knew the company was violating government regulations and growing cannabis in unlicensed rooms.

The bombshell Globe and Mail report revealed allegations from former CannTrust employee Nick Lalonde that his employer had him building fake walls to hide the illegal plants from Health Canada officials.

Officials found the company’s second grow facility in Vaughan, Ontario was also in violation of growing regulations. And finally in September, company insiders came forward with allegations CannTrust was cultivating around 1,000 pot plants from black market seeds.

That was around the same time the company announced it had laid off 180 employees, around 20 per cent of its workforce, in order to cut costs while it awaited its sentence from Health Canada.

On Sept. 17, Health Canada suspended the company’s licences to produce and sell cannabis, but allowed the company to continue to cultivate and harvest its legal crops.

The destruction of the offending cannabis will free up much needed storage space, said the company, adding the exact amount of material destroyed will be measured once the destruction is complete.

The company also plans to improve its inventory tracking and recover the rest of its illegally grown or cultivated product.

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