Co-owners of Missouri company at center of marijuana recall got greenlight for another license

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5 days ago

Delta Extraction's license revocation is the center of a lawsuit playing out in St. Louis courts between a complex web of shareholders seeking to snatch back ownership of a Waynesville facility (Rebecca Rivas/Missouri Independent).
When the company at the center of a massive cannabis product recall lost the appeal of its revoked business license in February, Missouri regulators moved quickly to ensure those involved would no longer be permitted access to a marijuana facility without supervision.
But that punishment doesn't mean those involved with Robertsville-manufacturer Delta Extraction are out of the Missouri marijuana industry.
In fact, long after the state initially stripped Delta Extraction of its license in November 2023, regulators approved one of the company's co-owners — AJO LLC — to take over a cultivation and manufacturing facility in Waynesville in May 2024. It's a far bigger operation than Delta Extraction, and it also involves several dispensaries as well.
AJO LLC says it was only a passive investor in Delta Extraction, where it owns 50%. The company claims it bought 50% of the Waynesville facility in 2022 and has been running it while awaiting approval of the license transfer last year.
But now Delta's license revocation is the center of a lawsuit playing out in St. Louis courts between a complex web of shareholders seeking to snatch back ownership of the Waynesville facility from AJO.
They argue the state shouldn't have given its final approval for the ownership change because of AJO's involvement in a company that had a marijuana license revoked.
Lisa Cox, spokeswoman for the department that oversees the Missouri Division of Cannabis Regulation, said the constitution does allow regulators 'to deny approval for ownership changes if approval is not 'unreasonably withheld.''
However, in May 2024, Cox said Delta's appeal of its license revocation was still pending. The final verdict didn't come down until nine months later.
'The totality of the circumstances at the time, including the nature of the ownership change, was not sufficient cause to deny the change,' Cox said.
Cox also said the state's administrative rules – which the division drafts to interpret the constitution's intent and that take months to pass – currently do not prohibit individuals who have had a license revoked from acquiring another license.
The division, Cox said, is 'reviewing its rules to add further detail to this authority.'
A scathing 137-page decision issued in February by the Administrative Hearing Commission denying Delta's appeal of its revoked license concluded the company had a 'corporate culture of lax compliance with regulatory requirements.'
Regulators are permitted to revoke agent ID cards for individuals who violate the rules. No one without an agent ID can access a marijuana facility without supervision of someone with a card, though you don't need one to own or run facilities.
Within weeks of the Administrative Hearing Commission's February decision, Cox said the state 'revoked several agent IDs for involvement in rule violations associated with Delta Extraction.'
In March, cannabis regulators issued AJO principal Josh Corson a notice of pending revocation of his agent ID card, according to documents The Independent obtained through Missouri's Sunshine Law.
The notice stated that as an owner and manager of Delta Extraction, he was responsible for 17 cited rule violations, including 'manufacturing and selling bulk distillate in a false or misleading manner due to the failure to disclose that the distillate contained large quantities of unregulated cannabis.'
Corson surrendered his agent ID license shortly after receiving the notice, and the other two AJO owners — Ryan Rich and Josh Ferguson — have let their agent IDs expire, Cox said.
Cannabis regulators revoked the agent ID cards of four of Delta's contractors as well.
AJO has been helping run the Waynesville operation since 2022 with Hi-Rise LLC, which is the other 50% owner. Hi-Rise has no ownership interest in Delta Extraction.
Peter Barden, a spokesman for AJO and Hi-Rise, said the companies 'provided complete information' about the owners to the state for the license transfer.
In response to Corson's agent ID revocation, Barden said AJO 'was not managing the Delta Extraction facility. It was a passive investor, and no action of AJO has ever been the basis of any revocation.'
Yet pages of evidence in the Delta Extraction case – including emails, depositions and testimonies from high-level employees – appear to demonstrate AJO was fully involved in Delta's operations and even initiated the arrangement that led to their revocation.
Barden said AJO 'certainly monitors its investments but has not actively managed any manufacturing or cultivation license.'
Charles Pullium stood before a St. Louis judge in February in an emergency hearing, anxious to share what he believed would be a smoking-gun update in his lawsuit.
It was just days after Delta Extraction had lost its appeal seeking to get its license to manufacture marijuana products reinstated.
Pullium is an attorney representing a group hoping to wrestle the Waynesville manufacturing and cultivation license away from AJO and Hi-Rise.
If Delta Extraction violated state law to the point where its license was revoked, Pullium argued, its leadership shouldn't have won state approval to operate a different cannabis facility.
'It's a huge case because it involves the revocation of a license,' Pullium told St. Louis Judge Joan Moriarty at the February hearing. 'And why it's important in this case is because when people apply for a new change of ownership… they have to answer, 'Have any of you or your owners or anyone had a license revoked or suspended?''
Pullium argued the Delta revocation was key to settling a three-year legal ownership battle, which ended up in St. Louis court in 2023 when AJO and Hi-Rise filed a lawsuit.
On one side of the legal battle are AJO and Hi-Rise.
On the other side are 19 named individuals and marijuana companies connected to the deal, including St. Louis-based marijuana company Heya, former Missouri House Speaker Carl Bearden and Delphi Management LLC. They argue the 2022 sale to AJO and Hi-Rise was invalid.
Moriarty disagreed the new information was worth holding an emergency hearing for and made Pullium's client pay $3,037.50 in attorney fees for AJO and Hi-Rise, which are represented by Dowd Bennett law firm.
The lawsuit is ongoing.
In January, Scott Sterling, who is involved in the tangled ownership web, filed two complaints with the Division of Cannabis Regulation, alleging that AJO did not provide all the information necessary for the transfer.
One crucial detail left out, Sterling contends, is that he never signed off on any sale as a 40% owner.
The division has opened an investigation into Sterling's complaint, Cox said, and it is ongoing.
Barden said the Waynesville location is legally owned by AJO and Hi-Rise and 'current ownership has never had a license revoked.'
One of Pullium's motions in January returned the spotlight to Jason Sparks, one of Delta Extraction's contractors.
'The facts underlying the Delta scandal read like a made for T.V. drama,' the motion states, 'a prior felon… buys out-of-state products from a nameless and unknown 'network'… which he then illegally turns into uncertified product which he then sells to a complicit Delta, who then illegally sells to unsuspecting dispensaries…'
Sparks was among the four contractors that had their agent IDs revoked in March, and he has a disqualifying felony on his record that was overlooked by the state when he obtained that ID. However, Sparks directs the blame largely at Corson in legal filings in his company SND Leasing's lawsuit against Delta Extraction.
In the spring of 2023, the supply for marijuana distillate was low across the state and Delta hired Sparks to make large amounts of distillate that Delta sold to about 100 other Missouri manufacturers. Those manufacturers went on to produce gummies and vapes for their brands, which is why the product recall was so widespread.
At issue was what's in the distillate.
Sparks extracted a small amount of THC from Missouri-grown marijuana, which the state heavily regulates. Then he added a large amount of THC oil that was extracted from hemp, a product that is completely unregulated.
Regulators pulled 60,000 products off the shelves in August 2023, arguing the use of out-of-state, unregulated THC oil violated state law and posed a public health risk.
Corson was 'the person who found the supply for the distillate,' a January motion in Sparks' lawsuit states, and he was the one who signed the contracts.
In his lawsuit, Sparks points to the testimony from Delta's COO Rachel Herndon Dunn during an Administrative Hearing Commission hearing in March 2024. Dunn testified that Corson reached out to a large cannabinoid-producing facility in Florida to obtain the hemp-derived THC oil needed to make their recalled distillate.
'Corson went down to tour their labs in Ft. Lauderdale…' Dunn said during the hearing.
Sparks claims Delta leadership reassured him that cannabis regulators signed off on the extraction process.
'The reality is that (the state) never gave assurances of regulatory compliance,' the suit states.
Delta argued hemp is not a federally controlled substance and the state has no authority to regulate hemp-derived THC products — an argument they lost in their appeal. Also, the products went through a final round of testing before they hit the shelves, Delta noted, so they didn't pose a health risk.
Despite the ownership connection to Delta, state regulators told The Independent they've found no evidence of similar practices taking place at the Waynesville facility.