A messy corporate split is giving the public a rare peek inside the state’s secretive cannabis industry as the Wellness Connection of Maine, the state’s biggest medical dispensary, tries to fire the company behind its fast-growing edibles operation.

Wellness claims CanWell LLC of Rhode Island is to blame for $14 million in losses caused by low yields from CanWell extraction equipment and processes. CanWell blames the losses on Wellness, saying it cannot retain enough experienced workers to properly operate CanWell’s sophisticated equipment.

In a court document filed in Rhode Island last week, CanWell claims Wellness and its national corporate parent, Acreage Holdings, trumped up the charges to get out of an old long-term contract and claim the lucrative New England cannabis extraction market for themselves.

It also claims Wellness has stopped making its 20 percent sales royalties, and owes it at least $650,000.

Wellness gave CanWell its walking papers last month, but CanWell claims it can’t be fired without cause. It is demanding arbitration, and on Friday, a Rhode Island court issued a temporary restraining order to put a hold on the divorce until both parties can make their case at a Sept. 3 hearing.

The arbitration filing provides a jilted partner’s behind-the-scenes look at the complicated, confidential deals that prop up the U.S. marijuana industry. The deals show the connections between even the small Maine scene and a few powerful companies that dominate the national market.

According to CanWell, Acreage owns 97.4 percent of the company that runs Wellness. Its executives sit on the Wellness board, and earn lucrative salaries to do Acreage’s bidding, even if that means firing the extraction company they were praising in emails in 2018, according to the filing.

Wellness had no comment on the details of CanWell’s filing Monday. Executive Director Patricia Rosi is still reviewing the filing to decide how to respond to its “numerous inaccuracies,” she said by email, and indicated the company would be making a statement in the future.

Wellness has downplayed the connection to Acreage, a Canadian company with its U.S. headquarters in New York. It admits it is a major investor, but insists upon Wellness’ independence, especially during the recent debate over out-of-state investment in Maine’s emerging recreational market.

Acreage is a publicly traded Canadian company that got its start in Maine’s medical marijuana industry. Among its board members are political heavyweights such as former U.S. House Speaker John Boehner, former Massachusetts Gov. Bill Weld and former Canadian Prime Minister Brian Mulroney.

CanWell’s CEO, Terence Fracassa, was one of Wellness’ initial financial investors, and in 2011, helped to form the management company that provided equipment, methodology and training so that Wellness, a nonprofit corporation, could grow marijuana and process it into edible products.

In 2015, CanWell signed a 23-year deal to supply the method, equipment, and training Wellness needed to produce its edibles, in exchange for a 20 percent cut of gross sales and a non-compete clause in New England. CanWell claims it has increased Wellness’ edibles business from 6 to 35 percent of gross sales.

As a result of that non-compete clause, CanWell claims it invested millions to expand into other New England states, thinking its partners, Wellness and Acreage, would not be fighting for the same extraction deals, but it claims they are muscling it out, and trying to acquire a Rhode Island extraction lab.

It claims Wellness is trying to blame its extraction losses on CanWell, when they are really the fault of Wellness’ own high employee turnover, with more than 20 processing or kitchen employees leaving or getting fired since 2015.

In January, CanWell claims Rosi complained that CanWell’s extraction equipment was producing a 40 percent yield instead of its targeted 85 to 90 percent yield. CanWell sent its team to test the equipment, and found it was producing above-average 99 and 100 percent yields when properly operated.

Fracassa claims he helped recruit Kevin Murphy, now Acreage’s CEO, to invest in Wellness, marking his first venture into the medical marijuana industry. The company that he and Fracassa helped start, High Street, became Acreage in 2018, although CanWell now owns less than 1 percent of it.

Acreage now has grown, with processing or retail license partnerships in 19 states, and is one of the largest U.S. marijuana companies. Earlier this year, Canopy Growth, an Ontario-based company that is thought to be the biggest cannabis company in the world, concluded a deal to buy Acreage for $3.4 billion.

An Acreage spokesman did not return emails or calls seeking comment Monday.


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