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Stock photo of a marijuana commercial growing operation.

Getty Images/iStockphoto

A federally licensed medical marijuana company caught in the fallout from a recent tainted cannabis scare has shuffled its senior management ranks, naming a new chief executive officer.

Organigram Inc., which was discovered selling products containing a banned pesticide that produces hydrogen cyanide when heated and can cause serious health problems in those who consume it, announced Wednesday that Greg Engel has been appointed CEO, taking over from Denis Arsenault.

Mr. Arsenault, who ran the company for the past three years, is moving to the board of directors as executive chairman, Moncton-based Organigram said in a press release issued before markets opened.

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Related: Company caught selling tainted marijuana can't trace source of contamination

Read more: Medical marijuana recall expanded after banned pesticide found

Globe Investigation: What's in your weed? We tested dispensary marijuana to find out

The move is the second high-profile shakeup at a federally licensed medical marijuana company since Canada's tainted cannabis problem came to light. The CEO of Mettrum Ltd., which was also found selling product containing the banned pesticide myclobutanil, has left that company. Mettrum was purchased by rival Canopy Growth Corp. in January, and its CEO Michael Haines was not retained, the Smiths Falls, Ont.-based company said.

Mr. Arsenault said in a statement that the corner-office change at Organigram had been planned, and that he will stay on with the company in an investor relations role. Mr. Engel is a former CEO of another medical marijuana producer, Tilray Canada Inc.

The management shuffle comes just two days after Organigram announced the results of an internal investigation into a recall announced two months ago after myclobutanil was discovered in medicine sold to patients. The company said its investigation turned up "inconclusive findings" with "no hard evidence leading to the source of the contamination."

The inability to pinpoint the problem, and the continuing worries over banned chemicals in the sector, have cast doubt on the credibility of the new industry, which is licensed by the federal government to produce safe, pharmaceutical products for patients who use the drug to treat everything from cancer-related pain to epilepsy.

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Three federally regulated companies – Organigram, Mettrum and Aurora Cannabis Inc. – have issued recalls due to the myclobutanil scare. The Globe and Mail uncovered the problem in December when Mettrum issued a recall, but neither Health Canada nor the company disclosed to the public that the pesticide was the reason.

Soon after the Mettrum problem came to light, Organigram announced its own recall due to myclobutanil, which was discovered after Aurora found the chemical in a bulk shipment it purchased from the company.

The recalls have exposed serious gaps in Health Canada's oversight, particularly as Ottawa prepares to legalize cannabis for recreational use in the coming year. An employee at Mettrum told The Globe he witnessed workers spraying the chemical directly on plants as far back as 2014, despite knowing myclobutanil was banned. Staff hid the chemicals inside the ceiling tiles to evade detection when Health Canada inspectors visited the site, the employee said.

Health Canada acknowledged to The Globe last month that it had not been testing companies for any banned pesticides because if felt the industry knew those chemicals were prohibited, and therefore would not be using them.

Organigram maintains it has never used myclobutanil, which is known among growers as an easy but dangerous shortcut to saving crops threatened by mildew. Organigram said the chemical could have gotten into its plants through "inputs" in the growing process, such as contaminated fertilizer, soil or peat moss.

Organigram is taking a $2.26-million charge due to the recalls. However, contrary to an earlier report, the company is not refunding money to patients who bought the recalled product, but will instead issue credit on future purchases.

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This has angered customers who consumed the tainted cannabis and now want their money back. Several affected patients told The Globe they are not sure if they can trust the products again, particularly since Health Canada does not require regular safety testing for all 38 companies in the industry to ensure the medicine is clean.

Some patients say the products have left them with serious health conditions, including lung problems, rashes, abdominal pain, and persistent nausea and vomiting. At least two law firms are now looking at launching actions that would force the company to surrender profits related to the tainted product.

Since the recalls came to light, Health Canada has mandated that Organigram and Mettrum start testing all their products for pesticides. Health Canada has also said it would introduce random testing for pesticides for the broader industry.

However, some companies don't think those efforts go far enough. Another licensed producer, CanniMed Therapeutics Inc. in Saskatoon, said last week it is commissioning independent lab tests on some of its products and making the data public to show consumers that its medicine contains no banned pesticides. In doing so, the company hopes to distance itself from the myclobutanil worries now hanging over the sector.

Organigram said Mr. Engel, 52, will assume the CEO job on March 13. "I consider this appointment an outstanding opportunity," Mr. Engel said in a statement.

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