Health Minister Rona Ambrose is concerned about the controversy surrounding CEN Biotech, and the company's application to become Canada's largest medical marijuana producer is being sent back to the RCMP for further investigation, her office said.
"The allegations against this company are deeply concerning," Ms. Ambrose's spokesman Michael Bolkenius said in an e-mailed statement to The Globe and Mail on Thursday. "This application is with the RCMP," he added. "And it won't be going anywhere until all these issues are addressed."
The statement comes on the heels of a Globe investigation that revealed the Ontario company had misrepresented itself to the public, the government and shareholders on numerous occasions and – in an unusual twist – was caught inventing a fake employee to dispute the allegations.
All applicants are vetted by the RCMP initially. But the pattern of false claims by CEN Biotech over the past 14 months has called for further investigation. The concerns include misleading investors about its licence status with Health Canada and suggestions that CEN was being favoured by the government
Some of these claims helped push the company's shares up more than 2,000 per cent in the loosely regulated penny stock market. Meanwhile, its chief executive officer, Bill Chaaban, was selling off millions of shares for more than $4.6-million.
In December, CEN issued a press release disputing the story, which quoted a company official identified as Isak Weber claiming The Globe's story had been "created." In fact, Mr. Weber had been created. A public relations firm hired by CEN a few weeks ago uncovered the lie when company officials confided he was a fabrication. The firm subsequently severed ties with CEN.
In response to the revelation, Mr. Chaaban told The Globe this week that Isak Weber was a "nom de plume," and compared the situation to when corporations use mascots such as Ronald McDonald and Mr. Clean. The explanation was problematic, because McDonald's Corp. doesn't use Ronald McDonald to speak on behalf of its CEO. In another interview, Mr. Chaaban wondered whether Canada had become "communist" for questioning the millions he made selling his shares as an insider, while heavily touting the stock.
The CEN Biotech situation is a headache for the federal government because the company is the biggest licence applicant under Canada's new medical marijuana program. The industry was created in April, stemming from a Supreme Court decision that requires the drug to be made available to patients, and is expected to grow into a multibillion-dollar business in the years to come. CEN Biotech is the Canadian subsidiary of Michigan-based Creative Edge Nutrition, and has applied to grow 600,000 kilograms of medical marijuana in Canada – more than any of the 1,200 applicants seeking a licence.
Prior to the Globe investigation, CEN Biotech had made it to the final stage of Health Canada's seven-stage approval process. The company was vetted by the RCMP last year and had undergone a site inspection in the summer. Health Canada staff were aware the company was making false statements publicly, and had warned the company about its conduct in early 2014. However, the department did not follow up on that warning and the company continued to misrepresent itself.
"This application has not been approved by Health Canada," Ms. Ambrose's spokesman said on Thursday, adding that the RCMP is conducting a security assessment on the application.
It appears CEN Biotech has been sent back to the early stages of Health Canada's seven-step licence evaluation process. Steps 1 to 3 are: Preliminary Screening, Enhanced Screening and Security Clearance, which involves RCMP screening.
Health Canada said it has rejected about 800 applications for a licence so far. Only 15 applicants, or less than 2 per cent of applications, have been approved for licences. Many of the rejections are for reasons a lot less troublesome than misrepresentation and faking the identity of a company official.
The Globe and Mail obtained 129 refusal letters through Access to Information, and many of them list incomplete paperwork or improper site design as reasons for the dismissal. One of the letters deals directly with a company misrepresenting itself, and lists "false or misleading information" as the reason for rejection.
Mr. Chaaban said that Isak Weber was the nom-de-plume of a CEN employee named Roger Glasel. The CEO did not explain why the company needed to invent a fake persona for an employee. However, in a situation that has created further problems for the company, Ms. Ambrose's office has learned that CEN officials were claiming Mr. Glasel had connections to Ms. Ambrose through her riding association. The minister's office issued a statement Thursday denying that.
"The Minister is a public figure and interacts with hundreds of Canadians on a weekly basis," Mr. Bolkenius said. "She does not know Mr. Glasel and is disturbed by the allegation he is using her name without her permission or knowledge."
Mr. Chaaban could not be reached for comment Thursday evening.
In a separate statement Thursday, the department said it was also aware of the problems. "We are aware of the allegations with respect to CEN Biotech," Health Canada department spokesman Eric Morrissette said in an e-mail. "We can assure you that medical marijuana is regulated in the same scrupulous and effective manner as other drugs."
Grant Robertson