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A view of CEN Biotech's main facility in Lakeshore, Ontario, Saturday, December 6, 2014. Health Canada has refused to grant a license to CEN Biotech to build the world’s largest medical marijuana operation.

Geoff Robins/The Globe and Mail

CEN Biotech claimed to be opening the world's largest medical marijuana facility in southern Ontario last year, and touted that story heavily to investors. But if that was the case, why was the owner of CEN's facility involved in secret talks last summer to sell off the land the company was promoting as its headquarters?

That question is one of several raised from information contained in new documents obtained by The Globe and Mail that shed light on CEN Biotech's operations – and how much shareholders in the company weren't being told. It is the latest development in the CEN Biotech saga, which has sent ripples through the federal government, resulting in Health Canada refusing the company's bid for an operating licence.

The company is under investigation by the Ontario Securities Commission for misleading investors, and the series of new documents raises further concerns about CEN's lack of disclosure as it rose to be worth more than $350-million (U.S.) on the back of false and exaggerated claims in the stock market.

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According to a contract signed last June that was obtained by The Globe, the owner of CEN's facility, Jim Shaban, paid two lobbyists at the Toronto communications firm Pathway Group a fee of $5,500 a month to line up potential buyers for the property. The detailed contract and accompanying cover letter show that Mr. Shaban was looking for a way to cash out on his ownership of the land as soon as a buyer could be found. The sale process included finding companies who might find the land or building useful for their own operations.

What is largely unclear is what that would have meant for CEN Biotech's future, and why investors weren't told such plans were being pursued. Selling the land to another business would have made it difficult for CEN to continue pursuing the licence, since the company's application was tied to that site in Lakeshore, Ont.

But while a sale was being engineered by Jim Shaban, shareholders of CEN – a company run by his relative Bill Chaaban – were being told that plans to open a massive medical marijuana facility were moving quickly ahead.

According to the contract, dated June 19, 2014, Pathway Group's role was to "determine potential purchasers of the property" and draw up a shortlist of buyers. "I understand that you would like a strategy to divulge [sell] the property in order to maximize your revenue," Pathway Group partner Kelly Mitchell says in a letter to Mr. Shaban dated June 21, 2014.

"We can support your goal by identifying prospective customers and using public relations to find other customers looking to purchase your property. By increasing your public profile, not only will it help to find a purchaser, but it can be done to maximize your personal profile and be supportive of your other businesses."

The documents seem to indicate that, as far back as June, other plans were being made for the land on which CEN Biotech's licence application was attached – even though CEN was telling prospective investors it was on the verge of being licensed by Health Canada. The Canadian government later said this claim by the company was false.

In March, Health Canada told CEN Biotech, which is the Canadian subsidiary of Michigan-based Creative Edge Nutrition, that it would not be getting a licence to operate in the medical marijuana sector because of concerns over the company's conduct.

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Mr. Shaban could not be reached for comment. The sale process was handled by Kelly Mitchell and Justin Ferguson, who acted as lobbyists at the federal and provincial government levels for Pathway Group and represented Mr. Shaban. Mr. Mitchell told The Globe this week he could not comment on the contract.

A Globe and Mail investigation in December showed that CEN Biotech and its CEO Bill Chaaban made numerous inaccurate claims that caused the share price of Creative Edge Nutrition, a penny stock, to soar. Those claims included that CEN had been licenced or was on the verge of being licenced by Health Canada. At the same time, Mr. Chaaban sold more than 71-million shares at a significant profit.

According to the contract between Mr. Shaban and Pathway Group, once a buyer for the site was chosen, Pathway was to also "provide strategic advice and counsel to the client and the successful purchaser on how to communicate the purchase to the federal government, specifically Health Canada."

Such a sale would have left CEN Biotech's shareholders out of the deal, since Mr. Shaban owns the property and leases it to the company.

CEN is seeking a judicial review of Health Canada's decision to refuse the licence. Meanwhile, the rejection appears to have reignited Mr. Shaban's desire to sell off the property.

According to a March 20 e-mail from Mr. Mitchell, which was circulated within Pathway Group, Mr. Shaban wanted to hire the firm "to help him with community engagement and frankly, to find a company that wants to use the facility." That process involved finding another medical marijuana company interested in using the site. That effort is believed to have been unsuccessful.

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The situation has called into question the oversight of penny stock companies operating in Canada. In March, the Ontario Securities Commission announced it has "an active investigation" into CEN Biotech, said Carolyn Shaw-Rimmington, a spokeswoman for the regulator.

It is believed the OSC is working with the U.S. Securities and Exchange Commission on its investigation. CEN chief executive officer Bill Chaaban could not be reached for comment.

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