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Oct. 25, 2020

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Cura Cannabis will pay record penalty for ‘dishonest conduct,’ misrepresenting marijuana vapes

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Oregon’s biggest marijuana company will pay a record $110,000 penalty to settle state allegations that it engaged mislabeled its Select brand of vaping products, incorrectly claiming more than 186,000 vapes were 100% marijuana. The settlement includes a “dishonest conduct” sanction.

The state has levied more than 100 penalties against recreational marijuana companies since Oregon began licensing recreational marijuana companies in 2016 but this is the largest to date. Regulators initially proposed suspending Cura’s license altogether.

Thursday’s settlement is the latest in a string of controversies plaguing Cura Cannabis. The Oregon Liquor Control Commission says Thursday’s settlement clears the way for Cura to close its sale to a Massachusetts company called Curaleaf. Curaleaf has said it expects to close the acquisition by Saturday.

Cura did not immediately respond to a request for comment Thursday.

According to the settlement, Cura misrepresented the contents of its Select Elites line of marijuana products. The company marketed its vaping products as 100% derived from cannabis, but in fact they contained added substances.

“It seems like effectively the left hand didn’t know what the right hand was doing,” said T.J. Sheehy, manager of marijuana technical operations for the Oregon Liquor Control Commission, which regulates recreational marijuana in the state.

The “cooks in the kitchen” were apparently adding ingredients to the Select products, Sheehy said, but not telling the company’s marketers what they had done. He said that apparently resulted in the improper labeling.

The commission uncovered the mislabeled products last fall, according to the settlement. More than 180,000 Select products weren’t labeled to note they included “botanically derived terpenes and/or medium-chain triglyceride (MCT) oil as an ingredient.”

It’s unclear whether such additives pose any health risks, according to Sheehy.

“The research is nebulous,” he said. “The health effects are unknown for these types of products when they’re heated and vaporized.”

The incorrect labeling also made it impossible for retailers and consumers to know that the products were subject to Oregon’s short-lived flavored vaping ban last fall because they couldn’t tell they contained flavorings. An additional “dishonest conduct” penalty results from Cura claiming that the products’ only ingredients was marijuana.

The settlement indicates that the liquor commission, which regulates recreational marijuana sales in Oregon, originally proposed a 34-day license suspension for Cura. After negotiations, regulators did not seek to apply that penalty.

The settlement indicates Cura recalled the mislabeled products.

Cura agreed in May to sell to Curaleaf in an all-stock deal initially valued at nearly $1 billion. A sharp decline in marijuana stocks substantially reduced the transaction’s value in the ensuing months.

Curaleaf then reworked the deal to reduce the purchase price further. The transaction is now worth about $400 million, but Cura’s owners could potentially double their return if Select’s sales hit certain financial targets this year.

Cura, which obtained its initial funding from a real-estate scam that sent a Lake Oswego investment manager to prison, has also been the subject of controversy because of rape allegations against Nitin Khanna, who served as Cura’s CEO and later as its executive chairman.

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