The strange saga of CEN Biotech, the company seeking to become Health Canada's largest producer of medical marijuana, has taken a bizarre new twist: The company has been caught creating a fake employee, and issued a press release quoting the made-up person.
CEN Biotech, which has made it to the final stage of a licencing process Health Canada describes as "rigorous," issued the phony press release last month after an investigation by The Globe and Mail uncovered numerous examples of the company misrepresenting itself to the public, and using Health Canada's name to make inaccurate claims about its business.
In response, CEN Biotech issued a press release Dec. 21 quoting a man named Isak Weber, head of internal public relations. Mr. Weber called the Globe's article "misleading," and suggested the story had been "created."
But the company had in fact created the identity of Mr. Weber. A Toronto public relations firm that cut ties with CEN Biotech late last week said it learned about questionable conduct by the company – including an admission that CEN Biotech executives were lying about the existence of Isak Weber – and has refused to work with them.
"We thrive with clients who are open and transparent with us," said Jeff Bangs, partner at Toronto-based Pathway Group, which specializes in government relations and public affairs. "But as professionals we do not condone fabricating an employee for the sole purpose of polishing a client's reputation when they're under scrutiny."
The revelation raises questions about Health Canada's oversight of this new sector – estimated to be a future multibillion-dollar industry. The government is doling out licences worth as much as $70-million on the stock market, but there are questions as to how much Health Canada knows about the companies it is licencing. Health Canada says it does "extensive" checks on company personnel before issuing a licence, but this is now being called into question with the CEN Biotech situation.
The Globe's investigation uncovered numerous false claims made by CEN Biotech in the past 14 months, including misrepresentations to investors about its licence status with Health Canada and suggestions it was being favoured by the government. Since then, Health Canada officials said the department wasn't responsible for looking into the problems and therefore was going to sit on the sidelines. Even though Health Canada holds sole authority over the granting of the licence, government officials said it was the responsibility of the public to inform the police of any concerns.
It is not clear whether evidence of a fabricated company official is enough for Health Canada to call into question CEN Biotech's licence application. Health Canada won't comment.
Until now, the company has not owned up to the identity of Isak Weber. However, when the Globe asked the company's CEO, Bill Chaaban, on Tuesday if Mr. Weber was real, Mr. Chaaban sent an e-mailed response saying, "Isak Weber is a nom-de-plume" for an employee. He compared the situation to when CEOs have speeches written by others. "There are also many corporations that adopt an identity," Mr. Chaaban said, listing off "Ronald McDonald," "Mr. Clean" and "Mr. Goodwrench" as examples.
It is not clear why the company feels it needs a "nom-de-plume" for its employees, nor why the mascot explanation was given. In the case of McDonald's Corp., for example, the hamburger chain doesn't use Ronald McDonald to speak on behalf of the CEO on important matters involving press releases issued to the stock market.
Health Canada unveiled its new privatized medical marijuana sector in April, opening the industry to large-scale businesses, and CEN Biotech has applied to be the federal government's largest player with an application to grow 600,000 kilograms a year. At an investor conference in 2014, Mr. Chaaban touted how close the company was to Health Canada, claiming that he had committed to "partner with them to build the industry."
Pathway Group doesn't usually speak publicly about its clients, but Mr. Bangs said the unusual circumstances required an explanation for severing ties with CEN Biotech to preserve his firm's integrity. "Pathway Group resigned the CEN Biotech account on January 23rd and no longer has any affiliation with that company," Mr. Bangs said.
It marks the second time in less than a month that CEN Biotech has been dropped by a public relations firm over concerns about the accuracy of the company's statements.
CEN, which is the Canadian subsidiary of Michigan-based Creative Edge Nutrition, was dropped by New York-based 5WPR on Dec. 31, after the investor relations firm found the company had issued press releases under 5WPR's name without its knowledge or approval.
One of those problematic press releases was the one that introduced the fictitious Isak Weber. CEN Biotech released that document to the markets on Dec. 21 to address "shareholder questions" raised by The Globe's investigation.
The Globe found CEN Biotech has made claims in press releases, interviews and at industry conferences that have exaggerated the company's position in the market, including that it had obtained or was close to obtaining a licence that would make it the largest producer of medical marijuana in the world. Those claims helped push the company's shares up more than 2,000 per cent. Health Canada warned the company about these claims early last year, but never followed up on subsequent problems. Meanwhile, Mr. Chaaban was selling off more than 71-million shares in 2014, netting significant profit, since he acquired his stock as an insider for next to nothing. Mr. Chaaban sold at least $4.6-million (U.S.) worth of stock through several dozen large share sales.
Mr. Chaaban has attempted to cloud the picture in recent weeks, sending a lengthy letter to Health Canada and Health Minister Rona Ambrose, in which he claims The Globe's investigation is incorrect. However, in this letter to Health Canada, Mr. Chaaban makes further false claims, including denying he had done an interview with The Globe for which there is a recording, and claiming, wrongly, that the Globe had misquoted a company press release that is readily available on the Internet.
When the Globe pointed out these inaccuracies, and numerous other misleading statements in his argument, Mr. Chaaban told the Globe in a subsequent letter that he was mistaken. "This was in error," Mr. Chaaban said of his denial of the interview, and his claims that the press release was misquoted. However, Mr. Chaaban did not send this subsequent letter to Health Canada or Ms. Ambrose.
The inaccuracies in Mr. Chaaban's first letter are significant though, since it means that Health Canada is now in possession of misleading documents sent directly to the department and the minister. To date Health Canada has tried to distance itself from the problems.
Mr. Chaaban also said it was he who severed ties with 5WPR in New York, which is a claim the company's president Ronn Torossian calls "categorically untrue," noting that he had to demand Mr. Chaaban remove his company's name from the CEN website, which took several days.
Among, Mr. Chaaban's most confusing claims in recent weeks, however, is that the company has been in a so-called "quiet period" mandated by the U.S. Securities and Exchange Commission relating to a forthcoming deal to spin-off CEN Biotech into a separate company, and has therefore been unable to answer The Globe and Mail's questions about questionable conduct. However, despite this claim of a quiet period, Mr. Chaaban has been actively conducting interviews, including a phone call with The Globe two weeks ago where he said the allegations facing his company were "an attack on my character." He also conducted interviews with three media outlets in the Windsor, Ont., area where the company is looking to operate.
It is not clear why Health Canada hasn't stepped in to address the problems facing its largest licence applicant. Beyond the evidence of false or exaggerated statements, and the fabrication of Isak Weber, documents filed with regulators over the past two years show six distinctly different signatures attributed to Mr. Chaaban, with little explanation for the discrepancies.
In his conversation with The Globe two weeks ago, Mr. Chaaban shrugged off the evidence of multiple signatures on company documents, saying the way he signs his name "depends on the mood I'm in." He also joked about having multiple personalities, and questioned whether Canada had become communist for questioning the $4.6-million he made selling his own shares as an insider.
In an e-mail Tuesday, Mr. Chaaban acknowledged his original statement on the signatures was "flippant" adding, "I can understand why you would pursue this." He said: "The simple reason they [the signatures] differ is that I don't want my signature to be forged and it could be if countless documents are publicly available with the same signature that I have on file elsewhere, such as at the bank." However, senior executives at publicly traded companies routinely sign documents filed with regulators.
The creation of a fake persona to speak for CEN Biotech is perhaps the most troubling development surrounding Canada's biggest medical marijuana applicant. Since Dec. 21, The Globe has asked the company and its representatives several times for an interview with Mr. Weber but to no avail.
In touting his company, Mr. Chaaban has listed several people associated with CEN Biotech – as directors and experts – as evidence of the company's credibility. Those people include doctors, lawyers, and a former financial industry whistle blower named John Germinario, who runs New York-based Global Securities Services Corp.
At an industry gathering in 2014, Mr. Chaaban described Mr. Germinario as the person who "screens every transaction now going forward, and the ones in the past that we've entered into, and ensures that it's in the best interest of shareholders and it's legal."
Reached at his office early Monday afternoon and questioned about the validity of Isak Weber, Mr. Germinario said he was told by Mr. Chaaban that Isak Weber was a real person.
"I asked Bill who Isak Weber was. He was a new hire and he's in Canada," Mr. Germinario said. Asked if he'd ever met Mr. Weber, Mr. Germinario said, "No."
However, Mr. Chaaban said Tuesday that Isak Weber is the nom-de-plume for a man named Roger Glasel, "who is an employee." He added, "It would have been improper to call him by an identifiable name, but a neutral name was chosen." It is not clear why the company could not identify Mr. Glasel as the employee speaking for the company.
Health Minister Rona Ambrose's office did not respond to a request for comment.
In recent weeks, NDP health critic Libby Davies and deputy Liberal leader Ralph Goodale called on the government to halt the company's licence application to investigate the concerns.