Latest news with #DeltaExtraction
Yahoo
30-05-2025
- Business
- Yahoo
Co-owners of Missouri company at center of marijuana recall got greenlight for another license
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.
Yahoo
14-04-2025
- Business
- Yahoo
Missouri cannabis regulators find another 6,000 products that should have been recalled in 2023
In August 2023, the state suspended Delta Extraction's license after finding the company's distillate was made with untested 'marijuana or converted hemp from outside of a Missouri licensed cultivation facility" (Rebecca Rivas/Missouri Independent). In Missouri's massive marijuana recall two years ago, regulators pulled 62,000 products off the shelves that contained a THC concentrate the state deemed a 'potential threat to health and safety.' Last week, the Missouri Division of Cannabis Regulation added another 6,000 products to that list that should have been pulled in 2023 because they were all made with an ingredient produced by the company at the heart of the recall, Robertsville-based Delta Extraction. The new 'threats' were found after the division was ordered in February by the state's administrative hearing commission to release any Midwest Magic brand products from its 2023 recall list. During that review, the division discovered additional marijuana products containing a THC oil that Delta Extraction made using 'unregulated cannabis,' the division stated in a Thursday press release. 'Regarding risks to the public, the department recalled these products for the same reason it issued the original, related recall: It identified a potential threat to health and safety,' said Amy Moore, the divisions director, in an email to The Independent. However, there have been no adverse reactions reported for any of the product in the original or updated recall, she said. 'The initial recall was a large and complex endeavor requiring expert application of system functionality and program processes,' she said. 'The department has made improvements in both areas since that time and continues to improve in ways that ensure future recalls can better identify all relevant product at initial issuance.' Delta Extraction is a licensed cannabis manufacturing facility that specializes in making THC distillate, a highly potent and pure form of THC used for things like vape pens, infused pre-rolled joints and edibles. About 100 other manufacturers bought the distillate in question in spring 2023 and went on to make thousands of products. In August 2023, the division suspended Delta Extraction's license after finding the company's distillate was made with untested 'marijuana or converted hemp from outside of a Missouri licensed cultivation facility.' The state also issued the product recall. Delta Extraction loses appeal of its revoked license following Missouri cannabis recall A few months later, the state rolled back its recall of nearly 15,000 Midwest Magic products and allowed them to return to the dispensary shelves. Though part owner of the Delta facility, Midwest Magic owners successfully argued that the brand didn't use the distillate in its products. A company called A Joint Operation owns the other 50% of Delta Extraction. In February, Delta Extraction lost its appeal of its license suspension, but it was awarded a renewed search for Midwest Magic products on the recall list. The Thursday update released about 120 Midwest Magic products from dispensaries and manufacturing facilities. The update also allowed testing labs to release samples of several hundred recalled products so they can be destroyed. Ted Maritz, co-owner of Midwest Magic, said the company had already written off the released items as a loss. 'I'm not going to ask any stores for payment or anything,' Maritz said. 'Everyone's gone through hell for this.' While the ordered search had a small impact on Midwest Magic, it is having a big impact on some dispensaries and manufacturers carrying the 6,200 products. The recall list actually represents product tags used by the state's tracing system called Metrc. Each tag in dispensaries typically represents a case of 10 to 12 units. And Metrc tags for manufacturing facilities represent ingredients that could make thousands or millions of units. One Kansas City manufacturer had almost 700 ingredients recalled Thursday. Josh Corson, co-owner of A Joint Operation, said he had not yet heard about the updated recall, in a text message Friday to The Independent and could not immediately comment. Over the last two years, several companies have opted to destroy the products to make more room in their storage areas. Lisa Cox, spokeswoman for the division, said there was a slight increase for destruction requests since February through April, following the commission's decision and totaling about 200 requests. However the division is 'unable to identify whether these requests are specific to the February decision,' she said. The units remaining on hold for the Delta Extraction recall, which have not been destroyed, total nearly 157,000 items. That includes 4,000 THC concentrate items that equal 378,000 grams of oil, along with about 13,000 grams of marijuana flower. It also includes 18,000 infused edibles, more than 40,000 pre-rolled joints and 90,000 vape cartridges. In Delta's appeal, the company argued the process it used to make the distillate was safe and legal. Delta Extraction admitted to importing a large amount of THC-A — a non-psychoactive compound of the cannabis plant that becomes intoxicating when heated — purportedly extracted from hemp plants. The company's contractor would mix it with a smaller amount of THC-A extracted from Missouri-regulated marijuana. Delta argued the hemp-derived THC-A should fall under the same rules as added ingredients, like flavors or the non-intoxicating cannabis compound CBD, because hemp is not a federally controlled substance like marijuana. It was taken off the federal controlled substance list in the 2018 farm bill. But Carole Iles of Missouri's administrative hearing commission, wrote in her 137-page ruling that THC-A becomes intoxicating through the exact same process no matter if it's extracted from hemp or marijuana, so the state is correct in regulating the THC the same as marijuana. That means it must be grown and manufactured in licensed Missouri facilities, Iles concluded, and tracked from the time the seed goes into the soil in the Metrc system. 'THC originating from other sources,' she wrote, 'is prohibited.' Chuck Hatfield, former attorney for Delta Extraction, said licensed facilities have the ability to challenge these new recalls of the products on their shelves. 'They probably should,' Hatfield said. 'Because DCR has had such difficulty figuring out which products should be recalled, no licensee can be sure which products it can sell.'
Yahoo
20-02-2025
- Business
- Yahoo
Delta Extraction loses appeal of its revoked license following Missouri cannabis recall
Delta Extraction argued the hemp-derived THC-A should fall under the same rules as added ingredients, like flavors or the non-intoxicating cannabis compound CBD, because hemp is not a federally controlled substance like marijuana (Rebecca Rivas/Missouri Independent). The company at the center of a massive cannabis product recall in 2023 lost its appeal to get its license back on Tuesday, with Missouri's administrative hearing commission concluding it had a 'corporate culture of lax compliance with regulatory requirements.' The scathing 137-page ruling, issued by Commissioner Carole Iles, comes almost a year after a three-day hearing on the appeal filed by Robertsville-based Delta Extraction. Iles agreed with the Missouri Division of Cannabis Regulation that the company's practice of bringing in hemp-derived THC concentrate from other states and adding it to Missouri-grown marijuana products was a violation of state law. Almost all of the reasons cited for revoking Delta's license and pulling 60,000 marijuana products off the shelves were upheld. That list included failing to notify law enforcement immediately after someone broke into Delta's Robertsville facility and stole the company's server, just days after the state shut down its operation. The server included the only copy of Delta's video surveillance files. It also included allowing a contractor who was previously convicted of conspiracy to distribute cocaine to operate its facility on the weekends when he didn't have a state-issued agent identification card. During that time, regulators say the contractor was using another Delta employee's ID to enter the facility and logging information into the state's system used to track and trace products, Iles wrote. Chuck Hatfield, an attorney for Delta Extraction, said the company has no comment. A spokeswoman for the division said in an email to The Independent that the department is currently reviewing the decision. The case has been widely watched by companies who had to destroy the products they purchased from Delta or have had them locked in vaults since the recall in August 2023. The company's challenge also posed major questions about whether the state has the authority to regulate intoxicating hemp products. Delta Extraction admitted to importing a large amount of THC-A — a non-psychoactive compound of the cannabis plant that becomes intoxicating when heated — purportedly extracted from hemp plants. The company's contractor, Jason Sparks, would mix it with a smaller amount of THC-A extracted from Missouri-regulated marijuana. Delta argued the hemp-derived THC-A should fall under the same rules as added ingredients, like flavors or the non-intoxicating cannabis compound CBD, because hemp is not a federally controlled substance like marijuana. But Iles wrote that THC-A becomes intoxicating through the exact same process no matter if it's extracted from hemp or marijuana, so the state is correct in regulating the THC the same as marijuana. That means it must be grown and manufactured in licensed Missouri facilities, Iles concluded, and tracked from the time the seed goes into the soil. 'THC originating from other sources is prohibited,' her order states. Iles' order outlined the timeline of how Delta came into a 'partnership' with Sparks, who worked with the Oklahoma-based marijuana brand Conte. In December 2021, Rachael Herndon, who was serving as Delta's chief operations and compliance officer, learned that Conte had broken off its relationship with a different manufacturer and might be looking for a new partner. She met with Sparks to discuss Delta partnering with Conte to manufacture and sell its brand. As part of their agreements, Iles' ruling states that Conte licensed its brand to Delta, which at the time was called SLCC, and received a royalty for all products sold under the Conte brand in Missouri. 'The parameters of the arrangements were not entirely clear, but there were oral arrangements' between Delta and Sparks' company SND Equipment Leasing LLC and Conte, Iles wrote. Sparks became responsible for providing the unregulated THC-A oil to be used in the Conte products, Iles wrote, along with extracting and distilling the final THC distillate that would be incorporated into the Conte products. In a separate agreement, Sparks and Delta agreed that he'd manufacture a bulk distillate that was later sold to about 100 other Missouri manufacturers. This operation at Delta's facility took place on the weekends. Sparks, Conte owner Tania Conte and Conte employees would drive up from Oklahoma, Iles wrote, and up to 20 temporary workers were brought in by Sparks from the St. Louis area. In August 2022, Sparks applied for an agent ID and submitted an offer of employment from Delta, signed by Herndon, in support of his application. It was denied because he had a disqualifying felony conviction. However, he was later issued an agent ID in June 2023, according to the division, because of a moratorium on FBI criminal background checks after recreational marijuana was legalized in December 2022. Sparks was in the facility on a regular basis between February through July 2023 and never properly signed in or out of the visitor log, Iles wrote. 'Because Delta had to sponsor Sparks by making a written offer of employment for him to apply for the facility agent card, Delta knew that Sparks' application for an agent card had been denied and the reason for it,' Iles wrote. 'Because Sparks was central to the efforts of Delta to create the bulk distillate and Conte products, we conclude Sparks and Delta intentionally kept his name from appearing on the visitor log.' The temporary workers Sparks hired also only wrote their first names in the log and didn't include the purpose for being in the facility or times they were there. 'As with Sparks' failure to sign the visitor log, we conclude this non-compliance was intentional,' Iles wrote. 'Neither Sparks nor Tania Conte could identify the individuals who were doing the work. They were paid in cash and Sparks was vague on how or where he found the workers. For its part, Delta simply turned its facility over to SND and Conte for the weekends and did nothing to identify who was in the facility or monitor their compliance with the security requirements.' Before May 2023, the unregulated THC-A oil Sparks was bringing into the Delta facility came from Sparks' network of personal associates. 'Sparks believed it was derived from hemp,' Iles wrote. Illes focused on what was produced between Feb. 3, 2023 — when the initial recreational marijuana rules were in place — and August 2023. To understand Delta's alleged violation, Iles said it is necessary to first understand 'the basics.' The psychoactive chemical that produces the high consumers look for in marijuana products is tetrahydrocannabinol, otherwise known as THC. 'THC does not occur naturally in either the marijuana plant or the hemp plant,' she states. 'THC-A does.' THC-A is found in large amounts in marijuana plants and smaller amounts in hemp plants. By itself, it's not intoxicating. For example, if you eat a raw cannabis bud, you shouldn't get high because the THC-A has not been heated yet, through a process called decarboxylation. That happens when you light a joint or bake pot brownies. The THC-A oil used at Delta was extracted from hemp plants by sources outside Missouri, Iles wrote, not by Delta or Sparks in the Delta facility. The oil was converted into THC before products were sold, she said. And that's a major reason it violates state rules. 'It was not resold as THC-A,' she states. Delta believed the company was compliant as long as 'a single gram of THC sourced from a marijuana plant obtained from a licensed Missouri cultivator is included in a batch of product that might contain hundreds or thousands of grams of psychoactive THC' that come from hemp plants. 'This interpretation is unreasonable,' Iles wrote. In a lawsuit filed last year, Sparks' group SND claimed Delta owes the company more than $13 million for producing about 1,100 liters of THC concentrate oil, or distillate, and other products. A liter of 80% concentrated THC can make more than 70,000 individual gummies at 10mg THC a piece, industry experts say. That's almost 80 million doses — or twice that amount if they're 5mg THC gummies. The company is also asking for $5 million in loss of revenue, after the state confiscated its extraction equipment that was inside Delta's facility for five months. SND has agreed to enter into arbitration, and a hearing is scheduled for that case next month in Franklin County Circuit Court.
