Chicago Cannabis Firm Faces RICO Suit Claiming Pot Trafficking

CHICAGO — A federal lawsuit accuses one of the biggest cannabis companies in the country — Chicago-based Verano Holdings — of violating the Racketeer Influence and Corrupt Organization, or RICO, Act by allegedly directing an employee to smuggle marijuana from Illinois to Arkansas.

According to the suit, company officials from Verano and several other pot firms conspired to set up a cannabis dispensary in Arkansas as part of joint operations between Verano, Arizona-based Harvest Health and Arkansas-based Natural State Wellness Enterprises.

In a complaint filed Monday in Colorado, former Harvest employee Nicholas Nielsen alleges a regional cultivation manager for the venture was instructed to go to an Illinois marijuana growing site in Illinois and bring clippings of cannabis plants across state lines to be able to set up a cultivation operation.

"In June 2019, [the manager] went to the Verano facility in Illinois, inartfully took clippings from the Verano marijuana, and secreted them in Whole Foods salad," the suit alleges. "[H]e then took the marijuana-laced salads with him on a commercial flight from Chicago to Memphis, Tennessee, where he rented a car and drove the Verano marijuana to [Nielsen] in Arkansas."

Valued at $2.8 billion, Verano went public last month on the Canadian Securities Exchange after a reverse merger with an Alberta-based minerals company. According to the company, it has a portfolio spanning 14 states and operates eight cultivation and production facilities, with 56 operational retail locations and 20 more planned.

As of 2019, Harvest was planning an $850 million purchase of Verano, which was formally called off in March 2020 following scrutiny from antitrust regulators, according to the suit.

Natural Wellness had obtained a license to cultivate marijuana in Arkansas, and Harvest company officials had discussed managing an under-construction site in Newport, Arkansas.

"Defendants faced a problem: They could now grow cannabis, but how would they obtain the cannabis in the new state to grow it?" according to the 51-page complaint. "It's a chicken or egg problem that every licensed marijuana cultivator faces: they can grow cannabis, but have no means to obtain the new plant materials that does not violate both state and federal law."

According to court records in Arkansas, Nielsen was arrested in January 2020 after police found over 9.5 ounces of cannabis, two lighted indoor growing tents, 380 THC vaporizers, multiple jars of concentrated marijuana, THC-infused food and various other paraphernalia at his apartment.

Nielsen was charged with manufacture of controlled substance, possession of a controlled substance with intent to deliver and possession of drug paraphernalia.

According to local news reports, investigators with the Arkansas Alcoholic Beverage Control Division learned the marijuana grown in the licensed facility had come from Nielsen's home. The former lead grower at the Newport site said Nielsen told him he had smuggled the cloned plants himself from Colorado to launch the growing operation, the Jonesboro Sun reported last year.

"At times, Nielsen received his instructions directly from various executives of those companies. When police raided the site, however, it was only Nielsen who was criminally charged and left holding the proverbial bag," Denver attorney Matthew Buck alleges in the complaint.

"Content to merely cash in on their conspiracy, Nielsen's former employer and coconspirators terminated him, arranged for him to receive several under-the-table payments to keep quiet about what he saw while he was a Harvest employee, and then left him to contend with the criminal justice system alone."

A spokesperson for Verano told the Chicago Sun-Times the allegations were "totally false and absurd" and portrayed the complaint as an attempt to turn an employment dispute into a "sensationalized and imagined series of events aimed at a company like Verano with a proven track record of compliant operations."

A Harvest spokesperson called the lawsuit a "thinly veiled shakedown" and said Nielsen's attorney attempted to negotiate a multimillion dollar settlement before filing the suit, according to the Sun-Times, which first reported the suit Monday.

According to Craigshead County court records, Nielsen is tentatively scheduled for trial in the first week of April. Buck, his attorney, told the Sun-Times Nielsen had never reported any members of the alleged RICO conspiracy to law enforcement but would be willing to testify against them if given the opportunity.