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Cannabis producer Hexo Corp. announced Friday that it grew marijuana in an unlicensed facility, but federal regulators cleared the company of any wrongdoing.

Gatineau-based Hexo said the problems occurred at a facility in Ontario’s Niagara region previously owned by Newstrike Brands Inc., which Hexo acquired in July. According to Hexo, Newstrike began growing cannabis at the site in November, 2018, after receiving what it believed to be the appropriate paperwork from Health Canada. Federal inspectors subsequently visited the site in February and raised no questions about the marijuana crop.

In July, shortly after the Newstrike acquisition closed, Hexo employees discovered the site was not adequately licensed. “Hexo management immediately ceased cultivation and production activities in the unlicensed space,” Hexo said Friday in a press release. It said: “The company notified Health Canada instantly, and the regulator was satisfied with Hexo management’s corrective actions.”

Hexo closed the Niagara facility in October as part of a cost-cutting initiative. On Friday, the company said: “Hexo is choosing to proactively address this occurrence now as it recently became aware of false information that was being circulated to damage the reputation of the company.”

Unlicensed cannabis production kicked off a scandal this summer that continues to haunt rival CannTrust Holdings Inc. The federal cannabis regulator suspended Vaughan, Ont.-based CannTrust’s growing and processing licences in September after investigators discovered the company grew thousands of kilograms of cannabis in unlicensed parts of its greenhouse facility in Pelham, Ont. CannTrust plans to destroy $77-million worth of cannabis in an attempt to get Health Canada to restore its licences. CannTrust’s share price has declined by 91 per cent since the beginning of the year and the company is effectively up for sale.

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