Investors claim ‘looting’ at NJ medical marijuana dispensary, sue for independent manager to run it

The chairman of the board of directors of a medical marijuana dispensary in Hudson County is set to be removed from his post for allegedly plunging the nonprofit into $30 million in debt and diverting funds to a cannabis company in Israel, according to a lawsuit filed by investor-owners last week.

Secaucus Investors LLC, which took control of Foundation Harmony in a bitter arbitration battle in October, took the extraordinary step of seeking an emergency hearing in state Superior Court to appoint a ‘custodian’ to oversee day-to-day operations and prepare for its sale.

A hearing on the application is scheduled for March 18.

If the request is successful, the decision would oust former CEO and current board chair Shaya Brodchandel, as well as board member Yehuda Meer. The lawsuit filed last Monday alleges Harmony allowed taxes and bills to go unpaid, hired family and friends for unnecessary work, and defied arbitration and court orders ordering them to cede control and share all financial records with Secaucus Investors.

“Brodchandel and Meer ‘looted and squandered Harmony’s assets, continue to perpetuate Harmony solely for their personal benefit, and acted in an oppressive and fraudulent manner,'” the lawsuit alleges.

Harmony attorney Peter Slocum called the allegations “baseless” and the Secaucus investors’ latest tactic “an endless campaign to slander Shaya Brodchandel and Yehuda Meer,” according to a response filed Wednesday.

Harmony appealed the arbitration award, as well as the ruling of state Superior Court Judge Edward A. Jerejian affirming the arbitrator’s decision. Fabricating an emergency based on “wild accusations” is a way to make a “final run” around the appeals process, Slocum’s response said.

The Harmony Foundation, one of the first six alternative treatment centers selected by the state 11 years ago to serve registered medical marijuana patients, has been at the center of controversy for most of its existence. .

It took seven years to open, following a thorough review by the state health department after a Star-Ledger investigation revealed bankruptcies among two members and ties to a training school in the cannabis in Colorado whose medical adviser faced allegations of fraud in New York. Harmony also encountered local delays in land use and changed locations.

In 2020, Harmony’s Head of Communications, Leslie Hoffman for follow-up Brodchandel and Meer, alleging that they ousted her from her part of the business after benefiting from her experience, funds and contacts.

In October, Harmony senior executive Robert Moroni filed a lawsuit against the company, claiming he was fired after alerting the board. Brodchandel had told him that he had sent $1 million of company money to Israel for personal investment. Brodchandel refuted the allegations and produced the money he kept offsite.

The judge reinstated Moroni in office in December. Moroni is a party to the Secaucus Investors lawsuit.

Secaucus Investors’ concern about Brodchandel’s interests in Israel is a key reason they want him fired.

Brodchandel’s brother, Alexander, operates a dispensary in Israel, also named Harmony, but Shaya Brodchandel said he has no ownership in the company, according to court records.

Among the evidence presented by Secaucus Investors to dispute this includes a paid invoice from an architect who worked for Harmony Tel Aviv.

They also submitted an article published online in Hebrew and translated into English with Google translate, “[t]Harmony Israel’s activities will be led by Alexander Brodchandel, one of the owners of the Harmony New Jersey group.

Of the $30 million Harmony owes, Secaucus Investors says they owe $18 million of an unpaid loan. This claim, Harmony’s attorney wrote, “is nothing more than an attempted double dip” because Secaucus controls 55% of the company.

Harmony’s bank account statements from December showed a balance of $524,139, according to a photocopy of the statement filed with the lawsuit. But the mounting debts include $1.6 million in federal income taxes from 2020, $1.67 million in lien imposed by a steel company in 2021 and nearly $4 million paid to CXDG, a Californian company, in exchange for “valuable intellectual property” for the extraction of THC, the psychoactive ingredient in cannabis. According to the California Secretary of State’s website, however, CXDG is a “management company,” according to the lawsuit.

Harmony claims his economic status is on the rise in his court filing.

“The once-threatened Internal Revenue Service lien has already been lifted. Harmony obtains … a low-interest loan from Harmony’s bank for immediate funding of $2 million, and the State of New Jersey is expected to award Harmony a $1.3 million tax refund shortly,” Harmony’s attorney wrote.

Secaucus Investors has suggested that David Knowlton, the former chairman of the board of directors of Compassionate Care Foundation in Egg Harbor, be chosen as custodian. Knowlton brings dispensary experience and “was involved in the sale of Compassionate Care to Acreage Holdings, a publicly traded cannabis company,” the lawsuit states. His previous work also includes serving as President and CEO of the New Jersey Health Care Quality Institute, a nonprofit research and consumer advocacy organization.

“Apart from his previous role as CEO and chairman of the Compassionate Care Foundation where he worked with Moroni, he has no connection” to Harmony, the lawsuit said.

“The crucial question is who is best placed to manage Harmony in the future. Secaucus Investors is not seeking to control Harmony,” said Secaucus Investors attorney Louis Modugno of Morristown. “Instead, based on the arbitrator’s extensive findings and newly uncovered evidence, Secaucus Investors seeks the appointment of an independent, honest and respected custodian to ensure the nonprofit is operated in the best interest of Harmony, Harmony’s employees and, most importantly, the patients and community it serves.

But Harmony dismissed Knowlton for the simple reason that he has a “multi-year professional relationship” with Moroni, Slocum wrote in his response to the lawsuit. A retired judge already serves as a special tax agent overseeing the company’s finances, which should suffice, according to the document.

Harmony operates a grow facility and dispensary in Secaucus, selling 3,287 pounds of weed in 2020 and earning $20.4 million after rebates to low-income patients and veterans, according to data from the Cannabis Regulatory Commission. of State. Harmony plans to open dispensaries in Hoboken and Jersey City and a grow facility in Lafayette.

The 11 medical marijuana “Alternative treatment centers” like Harmony are uniquely positioned to be among the first companies to sell recreational weed once the state gives its approval. These entities have a head start, with an already growing workforce, packaging and selling the product to approximately 130,000 patients. New Jersey’s recreational cannabis market is expected to be worth at least $1.5 billion. To say the competition is fierce is an understatement.

Secaucus Investors estimates Harmony is worth $94 million, according to the lawsuit.

Regardless of the court’s decision, the cannabis commission must approve the owners and conversion of a non-profit alternative treatment center to a for-profit business. Commission spokeswoman Toni-Anne Blake declined to comment on the dispute on Friday.

A spokesperson for Harmony Friday declined to respond to any of the “ridiculous” charges in the lawsuit.

“Shaya Brodchandel, as CEO and Chair of the Board of Harmony Dispensary, has remained focused on providing continued access to high quality cannabis products to those in need,” said Steve Lenox, the spokesperson. Additionally, Harmony has created a new patient discount program and employment program for minority communities.

“We look forward to defeating Secaucus Investors in court and will not be distracted from our important mission,” Lenox said.

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Susan K. Livio can be reached at slivio@njadvancemedia.com. Follow her on Twitter @SusanKLivio.

About Charles D. Goolsby

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