Cannabis Processor Layercake Farms is the Latest to Have License Permanently Revoked

What This Means for the Industry

The Cannabis Regulatory Agency and its Executive Director, Brian Hannah, handed down another license revocation to a facility that was in blatant violation of the CRA’s administrative rules. It’s another example of why Director Hanna, a former law enforcement officer, was made the top person in the agency: to identify, investigate and get rid of bad actors who are infiltrating the industry with unregulated (black market) products.

Factual Details

Candid Labs, LLC (Layercake Farms) is (was) a licensed class C Medical marijuana grower and processor with a facility located in Corunna, Michigan. On October 1, 2022, Candid self-reported that its video surveillance system malfunctioned. The CRA visited the grower facility, which was co-located with their licensed processing facility. During this visit, the CRA identified literally dozens of violations, most of which involved unregulated products. Among other violations, they discovered the following:

36 mason jars of THC distillate without Metrc tags.

An offsite yellow storage container which was not secured nor monitored by video surveillance and contained therein they discovered:o5 glass jars of distillate
An offsite white storage container that contained multiple stacked cardboard boxes, totes, and large bags all full of marijuana products, all of which were without Metrc tags.

5 barrels containing marijuana biomass in a black and green trailer without Metrc tags

Further, illustrating the importance of maintaining up to date facility plan records, as their floor plan did not disclose the storage containers

The facility was unable to retain and provide the prior 30 days of video recordings as required by administrative rule.

Additionally, there were multiple Metrc violations with the product that did have tags but was in the wrong location or had changed from its original form into another without proper Metrc logging. Another site inspection was conducted on June 24, 2022, during which the CRA identified in Metrc 44,000 plants even though they were only supposed to have 1500 pursuant to their class c medical license.

Characterization of the violations–they were blatant

The violations in this case were blatant and significant. There were hundreds of pounds of marijuana, marijuana waste and distillate that was not properly tagged. It also is a representation of flat-out dishonest representations by the licensee to explain its violations. Someone might also see this as an example of how a licensee can get away with such a high level of blatant violations. License revocation would have been the only option, and this in my opinion is not an example of the CRA being tough on a licensee. The level of violations was so blatantly, obvious and excessive that revocation was the only expected result. It also came by consent of the license. A contested hearing was not conducted at the office of administrative hearings. The violations were so blatant that the licensee and its stakeholders voluntarily accepted the license sanction.

Meaning of License Revocation–they are done in Michigan, and likely everywhere else.

License revocation basically means that the licensee and stakeholders will never possess a license again in the state of Michigan. Because most states also look at compliance actions conducted in other jurisdictions, they will likely be denied a license in every jurisdiction in the country. What is also interesting is that the licensee will not likely be facing criminal charges. I am aware of individuals whom have had similar allegations of unlicensed/unregulated conduct face felony charges. But because Candid Labs was licensed, they will probably not face any criminal charges.

Why this is important to the CRA–shows they are serious about cracking down on unregulated product.

A little over a year ago Brian Hanna, with a law-enforcement and military background, was made Executive Director of the CRA with the specific direction to crack down on illicit marijuana product infiltrating into the regulated Metrc control system. Since then, there has been multiple investigations resulting in license revocations, including this one. Brian Hanna has lived up to his task and the department continues to crack down and this is an example. This is a blatant example of rule violations that had no other option but revocation in my discussions with Director Hannah he has been very adamant about one of his top priorities, which is cracking down on illicit product. What license actions like this do for the industry

This latest example of a license revocation will continue to cause those serious about being in the industry to play by the rules. But the level of noncompliance on display in this case demonstrates that there simply needs to be more enforcement regulations and random spot checks of licensees. This incident was not from a random facility inspection, but rather a follow up to an investigation reported by the licensee’s failure to maintain security recordings. The CRA proposed a new set of administrative rules which also contain numerous changes to assist in their compliance investigations. These things are an example of a new era for the Cannabis Regulatory Agency to send the message that ensure facilities and the operators will be encouraged to maintain compliant operations or risk expulsion from the industry.

It is imperative to contact us at The Cannabis Legal Group, should you decide to “self-report” or have compliance issues with the CRA.