Trulieve Files Racketeering Lawsuit Against Former Employees, Vendors in Arizona

Florida-based Trulieve Cannabis Corp. (CSE: TRUL) (OTCQX: TCNNF) filed a civil racketeering lawsuit against two of its former purchasing managers in Arizona, as well as five other Arizona cannabis businesses, alleging they engaged in “kickback schemes” that gave the brands access to valuable shelf space at the company’s 21 Arizona marijuana shops.

The two former employees – Randall Uberecken and Daniel Hirchak – began a “commercial bribery” plot as much as three years ago, according to the lawsuit, which was filed Aug. 24 in Maricopa County Court.

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Trulieve alleges that the pair received nearly $1 million – though the company says that could be higher -and formed their own individual corporations – CTWWW LLC and YDD LLC – through which to route the kickback funds.

Other defendants in the case include:

• YourWay Cannabis Brands and two of its subsidiaries, Labtronix dba Venom Extracts and YourWay Cottonwood
• Nature’s Wonder licensed dispensary chain
• Healing Resources and Consulting Inc., a hemp company.

Trulieve said in the lawsuit that each of the listed companies paid Uberecken and Hirchak in exchange for shelf space at its dispensaries.

And those are just the ones that the company says it’s aware of, indicating the “civil conspiracy” may have included even more brands that agreed to pay kickbacks to the pair, according to the lawsuit.

Systemic Problems

The underlying problem that led to the lawsuit, according to the complaint, is that there’s “robust” competition for shelf space at relatively few legal marijuana stores in Arizona – just 169, according to the state’s department of health services.

“The robust nature of Arizona’s retail cannabis market, combined with the limited number of available and open retail dispensaries, has created competition among entities and individuals to have their cannabis and cannabis products placed into licensed retail dispensaries for sale,” the suit states.

Those were the market dynamics that led Uberecken and Hirchak to realize they were gatekeepers to valuable shelf space at Trulieve’s stores, the suit claims, especially given that Trulieve is now the “largest single retail cannabis company in Arizona,” thanks to its purchase of Arizona-based Harvest Health & Recreation in 2021.

With the acquisition came all of Harvest’s Arizona dispensaries – and Harvest employees Uberecken and Hirchak.

Scheme Details

Uberecken was first hired in 2018 and rose to senior medicated procurement manager as of June 2022 under Trulieve’s ownership. He resigned on May 24 this year, according to the lawsuit.

Hirchak began at Harvest in 2019 as an assistant buyer and was promoted to medicated procurement manager in February 2022. He reported directly to Uberecken, before he was terminated on May 30.

“Uberecken and Hirchak had the means, methods, and opportunities to carry out this plan because they controlled and decided which cannabis products plaintiffs purchased from third-parties on a wholesale basis for sale in Harvest’s/Trulieve’s Arizona retail dispensaries,” the lawsuit states.

The two had YourWay Cannabis and its brands charge Trulieve slightly more than the actual price of wholesale cannabis goods, with the difference then paid to Uberecken and Hirchak, the lawsuit alleges. YourWay and its affiliates paid the two more than $500,000 over time, according to the suit.

Nature’s Wonder and Healing Resources paid the LLCs established by Uberecken and Hirchak for “consulting services” the pair allegedly never provided. The two companies paid Uberecken and Hirchak monthly, for a total of at least $250,000, the suit claims.

Hirchak eventually confessed to the schemes, according to the suit, and confirmed much of what’s claimed, including that “he and Uberecken also received monthly kickback payments for illegitimate ‘consulting’ services from other third-parties.”

The only reason that the situation came to light, according to the suit, is because former YourWay Cannabis CEO Jacob Cohen approached Trulieve last fall about a possible job and informed the company of the kickbacks.

Cohen said that YourWay brand Venom Extracts had “paid kickbacks to Uberecken and Hirchak to ensure plaintiffs purchased Venom’s products for sale in Harvest’s/Trulieve’s Arizona retail dispensaries.”

“Cohen contacted Trulieve because Uberecken and Hirchak had declined YourWay Cannabis’ offer to white label Trulieve’s product unless it paid a kickback,” the lawsuit states.

“Specifically, Trulieve had consolidated some of its Arizona cultivation and manufacturing facilities and had product available for third-parties to white label for sale,” the suit states. “YourWay Cannabis contacted Uberecken and Hirchak to white label the product. Uberecken and Hirchak declined YourWay Cannabis’ offer and stated the reason was because YourWay Cannabis no longer paid kickbacks.”

Messages seeking comment left with YourWay Cannabis, Nature’s Wonder, and Healing Resources were not immediately returned Friday. Uberecken and Hirchak could not be reached for comment Friday.

A Trulieve company spokesperson commented additionally in an email to Green Market Report, that the Florida-based MSO “continues to be a leader in the regulated cannabis industry and as such we have a responsibility to hold bad actors accountable.”

The suit accuses all involved of civil racketeering, fraud, negligent misrepresentation, civil conspiracy, and aiding and abetting; there’s also a count of consumer fraud levied against YourWay Cannabis and its affiliates, Nature’s Wonder and Healing Resources, and counts of unjust enrichment and breach of fiduciary duty against Uberecken and Hirchak.

No hearing has yet been scheduled in the case.