The ongoing trial of MedMen (OTC: MMNFF) and its ex-CFO James Parker, court watchers are beginning to hear the other side of the story. So far the trial has delivered Parker’s version of events. He claims that the founders were spending corporate money as if it was their own and creating a toxic work environment. He also alleges that MedMen paid outsiders to buy the company’s stock in an effort to move the share prices higher. He also claims he was improperly terminated, even though he acknowledges resigning.
This week former president and co-founder Andrew Modlin took the stand. MedMen’s position has always been that Parker breached his employment contract, not that he had been unfairly terminated. According to Law360, Modlin testified that although he was increasingly concerned about the performance of then-CFO James Parker in the months after the company debuted on the Canadian Securities Exchange in 2018, he neither fired nor demoted him. Parker claims that the MedMen executives were preparing to fire him because he believed an executive search firm had been hired behind his back.
Modlin suggests that Parker was not performing his job very well. He is reported to have said that cash flow projections had shrunk rapidly while Parker reconfigured how he organized the company’s finances. “Now we’re a month later after the first time hearing [the projection] is going to be redesigned, and now it’s going to be redesigned again, and clearly he didn’t have any experience doing this,” he said. Law360 also said that Modlin testified that Parker projected in June 2018 the company would reach a negative cash flow by February 2019, but then a month later predicted it would be by December 2018, and then in August said cash would run negative by September 2018.
“It was August, so now we have very little time to raise more money,” Modlin testified. “In addition, seeing that this was so volatile going from February two months prior, there was barely any grip from the finance department as to what was being spent at the company.” Modlin also disputes Parker’s claim that it was his idea to list on the Canadian stock exchange and said it was the other co-founder Adam Bierman who came up with the plan. Modlin also stated that he had planned on working to improve Parker’s performance, but that he quit before that happened.
On Tuesday, MedMen brought on a transactional lawyer and adjunct UCLA professor named Neil Wertlieb to support their claim that since Parker negotiated his own employment contract he violated his own fiduciary responsibilities. MedMen believes that the employment contract isn’t enforceable since Parker didn’t have the document handled by a third party. Wertlieb said that Parker had a conflict of interest by personally negotiating a contract that would benefit himself versus the company.
Wertlieb is expected to be the last witness in the trial and while he began testifying on Tuesday, he was not able to finish and is expected back on Wednesday.
Readers may not recall that MedMen went public in 2018 and described itself as the first cannabis unicorn, meaning it would have a billion dollar valuation despite revenues being much much lower. The hyped-up company immediately faced market wrath and received a large amount of negative news that the key executives retained the majority of voting shares, while new investors would have little to no voice. In November 2018, MedMen raised C$86 million with the help of Canaccord Genuity, but the stock was halted in trading as the company had to amend the terms and announce that Parker had resigned. Parker filed his case in 2019.
In November 2019, a group of shareholders filed a lawsuit against MedMen. That case has been settled. The lawsuit claimed, “The MedMen veneer is a complex web of interconnected subsidiary entities, virtually all of which are directly managed, directed, controlled, and owned by BIERMAN and MODLIN, and all of which always pursue the best interests of BIERMAN and MODLIN, rather than the best interests of any stakeholder or entity. It is that perverse interconnectedness and rampant, brazen self -dealing that renders the actions of BIERMAN and MODLIN, and of the Entity Defendants, unlawful.”
CFO’s Keep Leaving
MedMen then began to experience massive departures from its executive suite. Even as MedMen was talking negatively about Parker, it was unable to keep a CFO on board. In October of 2019, MedMen announce that Zeeshan Hyder had been appointed CFO. Hyder followed Michael Kramer, who apparently was terminated as of October 7, 2019. Kramer was only just hired in December of 2018 and he followed the previous CFO Parker who only lasted a year and half.
In December 2020, Reece Fulgham was named interim CFO and remains in that role today.