Missed tax payments, missing money and a suspicious copy cat company registration.
Cannabis-friendly California-based Pacific Banking Corp. got an earful from the judge that is hearing a case involving Cann Distributors. According to Law360, the case dates back to March 2020 when Cann Distributors accused Pacific Banking of failing to make millions of dollars in tax payments to the state of California on its behalf, as well as failing to pay vendor invoices. Cann was assessed $2 million in penalties by the state for not making those tax payments.
The company also secured an order blocking Pacific from touching the roughly $2.8 million Cann said it had deposited with the bank that sees itself as a middleman between cannabis companies and traditional banks. The bank has refused to return the money to the customer. Cann though didn’t get off scot-free either as the exasperated judge fussed at both parties.
“I don’t know whether it’s you on the defense side or you on the plaintiff side or some regrettable combination of the two, but I’m out of patience. This is a waste of judicial resources. I’m just done with it. So we’re going to get to the bottom of it and sanctions are going to fly. I’m going to determine who’s responsible and that person will be punished,” said U.S. District Judge James Donato of the Northern District of California in published transcripts.
He went on to say, “I’ve got 400 other cases that are more deserving attention than this, which is our fifth or sixth round of these discovery disputes, which are largely because you on the defense side are a rock in the gears of this court.”
The bank’s lawyers had a witness that apparently at one point claimed he had no knowledge of the tax payments, but then two weeks later changed his version of events. The witness, bank CEO Justin Costello, said he recalled the payments had been made but they got returned. The bank also seemed to stall in providing any of the requested information during the discovery process.
In addition to the issue over the tax payments, Cann Distributors also told the judge of a disturbing situation it learned during the Costello deposition. The bank has apparently registered the Cann Distributor name in the state of Washington without telling the company. The lawyer was caught unaware of the move, but the witness who was in attendance confirmed that the bank had in fact done so and claimed it was within the service agreement to do so.
Costello said, “We did that so we could bank the actual entity inside of the state, because we used a state credit union, not a federally chartered bank.”
The judge replied, “I have to say, that is the weirdest thing I have ever heard. I have never heard of an agreement that said one party could create a fictitious business in another state using the other party’s name.” The judge gave Cann 60 days to do some additional digging to find out what was going on with the bank. The bank has also gone through several ownership changes throughout the process. Pacific Processing was bought by Pacific Compliance, which was then bought by Renewal Fuels. It was also supposed to have been acquired by GRN Holdings (OTC: GRNF) which recently changed its name to Marijuana Inc.
Show Me The Money
Cann also told the judge that they have no idea where their money is. This is money that the judge asked to be “mothballed” but now Pacific can’t seem to confirm the money’s location. The witness, Costello asked to plead the Fifth Amendment when asked if had he moved any of this money. All he could say was that the money was in an account, but he couldn’t state how much or where the account was, although he said he believed it was in a credit union in Washington. The court gave the witness seven days to say where the money was being held and with an account number for the money.
The case has been pushed back once again as the Cann Distribution lawyers try to untangle all the various ownership issues and attempt to find out where the company’s money is residing.
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