MedMen's CFO Trial Begins With Claims Of Illegal Activity

The MedMen (OTC: MMNFF) trial in Los Angeles began on Friday with a spicy first day of testimony. Former MedMen Chief Financial Officer James Parker took the stand to testify against his former employers in a case that stems from a 2019 complaint. Parker was once the CFO of the hard-charging California-based cannabis company but abruptly left filing a case that ultimately caused Chief Executive Officer and Co-founder Adam Bierman to leave the company and lose majority voting rights.

According to Law360, Parker told the Los Angeles jury on Friday that he had no choice but to resign after discovering potential illegal transportation of marijuana and stock market manipulation. Law360 also reported that Parker did not finish his testimony and that Parker’s attorney Michael J. Kump of Kinsella Weitzman Iser Kump & Aldisert LLP told the jury during his opening statement that Modlin and Bierman also “created and imposed a toxic management style that included racist, homophobic and sexist slurs and other abusive conduct,” and that Parker complained to them “repeatedly about this.”

The report stated that MedMen’s attorney William F. Dugan of Baker & McKenzie LLP “told the jury during opening statements that Parker was a poor CFO who was in over his head and that he negotiated the terms of his own contract. Dugan also said Parker violated his contract by suddenly quitting without giving a 90-day notice, and did so just as he had been informed he was being put under a performance review.” For its part, MedMen is paying for Parker’s legal fees which can go as high as $500,000 a year.

Law360 also noted that attorneys for the individual defendants, Bierman and Modlin, did not deliver any opening statements. 

The scandal broke not long after MedMen became a publicly-traded company when Parker abruptly resigned and filed a case that exposed many scandalous details about the co-founders. The most serious claims accused the founders of transporting cannabis across state lines and paying someone to buy the company’s stock in order to artificially inflate the price. In addition to those allegations, Parker also claimed that the MedMen dispensaries were accepting credit card charges, which are not allowed by the major credit card companies MasterCard and Visa. In addition to those allegations, Parker cited the toxic workplace and abusive language he was subjected to by Bierman. MedMen also claims that Parker is also guilty of inappropriate and offensive comments.

Background

MedMen began trading publicly in 2018 and was described as the cannabis industry’s first unicorn with a billion-dollar valuation. Parker led the company’s move to become a publicly-traded company, but then he resigned in November 2018. This was seen as a red flag as it is pretty unusual for a CFO to leave a company within months of going public. MedMen was also changing the terms of its capital raise while reporting big losses and mediocre revenue (when compared to the company’s valuation).

It was in February 2019, that Parker filed the lawsuit claiming wrongful termination saying MedMen had begun searching for a new CFO while he was still performing those duties. He alleged that MedMen ordered him to make payments from the company’s money for personal expenses by the co-founders. These expenses ranged from high-tech safe rooms in their homes to special-ordered vehicles. He also accused the co-founders of taking private jets and bringing along friends and family and basically using the MedMen company money to pay for an extravagant lifestyle. 

Parker alleged he sent money to a “consultant” in Canada that was propping up the stock when it sold off. Parker claimed that he personally paid for company items with his credit card because the co-founders Bierman and Andrew Modlin were able to get a large enough credit line due to their work in the cannabis industry. Parker said in the court filing that these expenses could reach as high as $150,000 to $250,000 a week. 

More Problems

In March 2019, MedMen’s CEO Bierman claimed ignorance when it came to light that the OTC Markets were making inquiries into stock promotion activity by a company hired by MedMen. The website www.marijuanastox.com ran a story created by a third-party consulting firm that was intended to promote MedMen stock. By April, more top executives began to leave the company. COO Ben Cook and General Counsel Lisa Sergi both resigned along with the Senior Vice President of Corporate Communications Daniel Yi. 

The expenses at the company remained elevated, while the revenues were not enough to cover the costs. Rumors of the company being unable to pay vendors caused even more problems. 

In addition to that, MedMen made great fanfare about buying the privately-held PharmaCann only to terminate the deal months later. 

CFO Churn

By August 2019, MedMen was churning through CEO’s like tinder dates. Jim Miller had been appointed interim CFO after Parker resigned. He was replaced by Michael Kramer in December 2018, who was terminated in October 2019. Zeeshan Hyder was named the new CFO in October 2019. Hyder only lasted a little over a year before leaving in December 2020. Reece Fulgham became the new interim CFO and remains in that role today. 

Bierman Ousted

It wasn’t until January 2020, that co-founder Adam Bierman stepped down and relinquished his super-voting shares. The company’s COO Ryan Lissack took over as interim CEO. In March 2020, Tom Lynch was named interim CEO and was made the permanent CFO in July of 2021. He remains in that role today. 

MedMen has since sold several assets and most recently reported that its 2021 fourth-quarter revenue was $42.0 million, up 55.4% year-over-year and up 18.5% from the previous quarter. 

 

Debra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


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