William McKenna, the former Finance Director for Los Angeles-based cannabis company THC Designs filed a lawsuit against the company on July 6, 2022. McKenna claims he was fired for refusing to defraud investors and tax authorities went the company’s owner Ryan Jennemann asked him to doctor the financials. He claims he was asked to reduce the liabilities so that the company could borrow more money. McKenna also thinks that the company was growing and selling psilocybin mushrooms for cash and not recording those sales.
Cooking the Books
McKenna said he was fired on February 9, 2022, despite having performed his duties and was given no reason for the termination. McKenna also stated in the complaint that the termination was one month before his wedding, which took away some of the wedding joy. The termination also threw him into debt and other hardships as he claims he wasn’t paid all of his wages upon his termination. McKenna’s previous job was as an Accounting Director for SoFi Stadium, home to the LA Rams and LA Chargers sports teams. He was drawn to the offer from THC Designs of $150,000 per year with a monthly performance bonus of $4,167 because he was getting married soon. He began his employment on July 12, 2021.
He says in the complaint that within his first month of employment Jennemann asked him to remove liabilities from a balance sheet that was being prepared for an
investor in an effort to obtain a $15 million loan. “Plaintiff refused to provide the doctored accounting because he reasonably believed removing the liabilities from the balance sheet report would be fraudulent and illegal.” McKenna also alleged that the prior Director of Finance, Dave Eing, was asked to do the same and he also refused. The complaint says, “Ryan Jennemann ultimately had a third-party contractor remove the liabilities from Defendants’ balance sheet in order to obtain the loan.”
McKenna also alleges in his complaint that the company was growing psilocybin or magic mushrooms and selling the product for cash but wasn’t declaring the income. He says he was expected to declare the operating expenses, but not the income. The complaint states, “Plaintiff’s suspicions were confirmed when Mario Suazo (former Director of Sales) texted Plaintiff that he had magic mushrooms for sale. (Plaintiff did not purchase the mushrooms.) Plaintiff asked Defendants’ third-party accounting manager if she was aware that Defendants were selling magic mushrooms, to which she replied, ‘they are great!'” Internally, the company was describing the product as shitake mushrooms to avoid detection, he claims.
McKenna said that on December 9, 2021, the California Department of Tax and Fee Administration (“CDTFA”) him asking for vendor invoices for a list of entities, including “Mushroom
Farm.” Jennemann said that he fired his previous Director of Finance Dave Eing for submitting to the CDTFA information that referenced “Mushroom Farm.” This time, Jennemann told Mckenna not to reference “Mushroom Farm” or “Sabina Farms” and instead to reference only “XXX E 32nd St” (the location of the mushroom farm). (THC Designs has asked that the address not be published for the safety of the people at the location.) He says in the complaint he became increasingly concerned that the illegal operation would result in a tax violation and began to communicate his concerns to Jennemann. That only put him on shaky ground with the owner.
The ex-employee said that THC Designs had gone through three prior Directors of Finance in less than two years and that they all left or were terminated for similar reasons. McKenna is asking for his legal fees to be paid and other damages. The case was filed in the Superior Court for the county of Los Angeles.
July 12, 2022 at 10:40 am
Hope no one finds out about the speak easy hidden above the grow offices…