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CannTrust's Management May Have Known About Illegal Operations All Along

Javier Hasse

CannTrust Holdings Inc. (NYSE: CTST) shares plummeted Wednesday after Toronto's Globe and Mail reported that the company’s chairman and chief executive officer knew about the unlicensed grow rooms they were operating.

Chairman Eric Paul and CEO Peter Aceto did not find out about the breaches when Health Canada informed them earlier this month. Instead, the execs were informed about it in an email last November.

According to the Globe and Mail, CannTrust’s director of quality and compliance, Graham Lee, sent an email on Nov. 16 to Aceto and other executives, saying they had “dodged some bullets” during a routine Health Canada inspection. The email was then forwarded to Paul.

“[Health Canada] did not ask about RG8E/W, which are unlicensed rooms currently full of plants,” Lee’s email allegedly said. The missive pointed out several other irregularities and non-compliance issues.

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“Although serious, on their own, each of these can be talked through with [Health Canada]. The concern is that together they will paint a picture with the regulator of a company not in control. We have dodged observations for items 1 and 6 despite having HC in the building,” Lee said.

To these concerns, Paul had allegedly responded, instructing Lee to put the responsibility on Health Canada: “We need to clearly point out that we have been diligent in submitting the applications for each new area and they have been slow in responding. We are supporting the legislation and we need their cooperation. Politely as always.”

CannTrust has yet to comment on the Globe and Mail report.

CannTrust's stock closed down more than 22% on Wednesday at $2.04 per share.

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