Quebec’s public procurement watchdog says it has asked the province’s anti-corruption police force to look into cannabis producer Hexo Corp. in the wake of a media report linking the company to a man with ties to the Hells Angels.
Hexo has denounced what it calls “false allegations” circulating about the company and said it operates “at the highest standards of legal and regulatory compliance.”
Quebecor Inc.’s Le Journal de Montréal tabloid reported last week that there are what it called “troubling links” between an Ontario entrepreneur named Josh Hill and Hexo, one of the biggest suppliers to Quebec’s cannabis retailing monopoly. Mr. Hill is the son of Ken Hill, a well-known industrialist who amassed a fortune selling cigarettes on Ontario’s Six Nations reserve before his death earlier this year.
Autorité des marchés publics (AMP), an independent body that oversees all public contracts in Quebec, sent a “request for verification” to the Unité Permanente anticorruption (UPAC) provincial police squad on the issue, AMP spokeswoman Karine Primard said Friday. The body’s role includes overseeing supply agreements between cannabis producers and the Société québécoise du cannabis, the government corporation controlling the sale of recreational marijuana in the province.
UPAC received the request and is weighing it, said Mathieu Galarneau, spokesman for the police force. It is part of the unit’s mandate to vet companies that want to do business with Quebec by doing background checks on their executives and shareholders.
“We are taking this new information seriously,” Mr. Galarneau said. “You need to understand that at this moment, this would not be an investigation. This would be a verification of the integrity of the owners.”
Corporate filings show Joshua Raymond Hill was the sole director of one of just eight numbered companies that were shareholders of Redecan Inc., a Brantford, Ont.-based private cannabis producer that was bought by Hexo in May, as part of a $925-million cash and stock deal. Hexo paid for the acquisition with $525-million in Hexo shares and $400-million in cash.
A source close to the company confirmed to The Globe and Mail that Mr. Hill is still a Hexo shareholder. The Globe is not identifying the source because they are not authorized to speak publicly on the matter.
The Journal published six photos online as part of its report, which it said were mostly taken from Instagram accounts. According to the newspaper, three photos showed Mr. Hill posing with men identified by their reporters’ police sources as being members of the Hells Angels. The winged-skull logo of the outlaw motorcycle gang is visible in the shots, the newspaper said.
A fourth photo showed Mr. Hill in front of a cannabis growing operation, the newspaper said. It said a fifth showed him embracing Peter Montour, currently a Hexo director, as well as Will Montour, who is currently a non-voting observer on the Hexo board.
Some of the photos published on social media remain accessible. In one Instagram photo dated Jan. 25, 2021, Mr. Hill can be seen posing with a man wearing a T-shirt with the Hells Angels logo on the front. He posted a greeting that said, “Happy Birthday to my brother.”
The Hells Angels is considered by some courts in Canada to be to be a criminal organization.
Multiple attempts to reach Mr. Hill, through social media and his personal website, went unanswered. The Globe also tried to contact Mr. Hill through his father’s tobacco company, Grand River Enterprises, and did not get a response.
The Sureté du Québec provincial police considered the photos significant enough that they alerted the federal government, the Journal said, citing unnamed sources. A spokesman for the police force said he had no knowledge of any such report to Ottawa.
There is “no business relationship” between Hexo and Mr. Hill, now or in the past, said Sarah Brown, a Hexo spokeswoman. She declined to confirm if Mr. Hill was a shareholder in the company.
“We are disappointed by any attempt to tarnish the Hexo name with false accusations,” Ms. Brown said in an e-mailed statement to The Globe. The company has addressed the allegations “with the province and has reassured relevant parties of the misconstrued nature of the reports,” she added.
Health Canada is also aware of the news report and is following up with Hexo and Redecan, department spokeswoman Anna Maddison told The Globe. The ministry has a variety of tools available to provide oversight and investigate potential instances of non-compliance with cannabis regulations, she said.
Hexo acknowledged Health Canada had made inquiries about the news report and that both parties have “engaged in a due diligence process.”
“All of the company’s certifications with Health Canada are in good standing,” Ms. Brown said.
Federal cannabis regulations require all corporate directors and individuals occupying senior positions at licensed cannabis companies be subject to a criminal background check and verification from the RCMP that they do not have an association with organized crime, in order to obtain security clearance.
In the case of private companies, Health Canada has the jurisdiction to look into “key investors,” in the event the agency needs to determine who exercises direct or indirect control over the operations of a company.
Hexo’s stock, which is listed on the Toronto Stock Exchange and the Nasdaq, is trading near all-time lows. The Gatineau-based cannabis producer has seen its share price decline by more than 60 per cent over the past year as it tries to navigate fluctuating consumer demand for cannabis and a series of pricey acquisitions that have left the company saddled with debt.
The company’s auditors recently raised concerns about Hexo’s future, amid its shrinking cash balance and burgeoning liabilities linked primarily to a US$327.6-million debt financing it undertook to acquire Redecan.
Redecan was founded as a private company in 2014 by Richard Redekop, and became one of the first cannabis producers to obtain a licence from Health Canada to grow medical cannabis. The Montour brothers – Peter and Will – are co-owners of Redecan.
Under the terms of the Hexo-Redecan deal, Peter was given a Hexo board seat, and Will is poised to also have one after the company’s annual general meeting in January. Hexo confirmed to The Globe that Peter and Will both have valid security clearances from Health Canada.
The Redecan deal was widely seen as a much-needed win for Hexo when it was announced six months ago, given that Hexo – like many others in the highly competitive recreational cannabis space – was struggling to maintain market share.
Redecan’s cannabis products have consistently sold well in most provinces since legalization for recreational use more than three years ago. The company was seen as a coveted asset for some of the largest cannabis producers, which were actively buying up smaller producers to gain market share.
According to Ontario corporate filings, the other directors of numbered companies that made up Redecan’s shareholders included Peter Montour, Will Montour, Georgia Anne Montour, Roxanne Montour and Mr. Redekop.
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