Photo: Jaime Hogge


Science Photo Library/Getty


Fraud


DAVID MALAMED High Crimes


documents that said Pack had invested US$2.5 million in Harmony & Green and that Saenz’s wife had invested US$4 million. Neither assertion was true, Buck told Westword, Denver’s alternative weekly newspaper. “That money’s not real,” he said. In fact, he said, another of Pack’s companies owns all the


licences and is the only one with any actual value. Harmony & Green is a management company that owns nothing. “It’s effec- tively a shell company they used to launder money,” said Buck. Those weren’t the only things wrong with the transactions,


I


N JUNE 2017, SCOTT PACK, a Denver-based businessman who held 14 marijuana licences, was indicted, along with a former Colorado Marijuana Enforcement Division (MED) officer


and three others, in an alleged marijuana trafficking ring that attorney Matthew Buck called “the largest fraud case in the history of Colorado’s marijuana industry.” According to the Denver Post, the men were indicted by a grand jury for illegally producing and selling millions of dollars’ worth of marijuana across state lines. The charges followed on the heels of a related March indict-


ment of 16 people who allegedly “ran a massive home-grown marijuana operation across the Denver metro area that pro- duced hundreds of pounds of pot each month for distribution across the country,” especially in Illinois, Arkansas, Minnesota and Missouri, the newspaper reported. Also in March, Pack and his colleague Rudy Saenz were sued


by former investors who claimed they lost close to US$1 million because of their fraudulent scheme. “There are potentially victims for as much as US$10 million,” Buck said, in filing the suit. “Pack’s company is one of the larger marijuana companies in Colorado … and through a series of shell companies, it holds the leases on many buildings across the state.” According to the lawsuit, Pack had convinced Pierre and Christophe Raygot to invest US$500,000 in Harmony & Green LLC, one of Pack’s marijuana companies that he said managed his businesses in Colorado and California. The Raygots were promised that their investment would reap substantial profits within a year. The suit notes Pierre Raygot was shown


48 | CPA MAGAZINE | FEBRUARY/MARCH 2018


Buck said. “Neither Pierre nor Christophe are US citizens, so they aren’t allowed to make investments in a marijuana company under Colorado law.” In addition, “all these invest- ments should have been disclosed to the MED. They were not — and the investors should have been fingerprinted and badged, and they weren’t, either, because in almost no instances were the investors Colorado residents, and at least three of them weren’t citizens.” In a statement provided to Westword, Pack said, “We have


structured our business abiding by the governing laws and regu- lations, and there is no reason why we would need to deceive our stakeholders, who still hold value in our company. We deny the allegations in this case, which will easily be proven false once facts and evidence are revealed in court.” Those allegations amount to 11 felony charges, the Denver


Post reported: pattern of racketeering under the Colorado Organized Crime Control Act; conspiracy/endeavoring under the act; two counts of conspiracy to distribute or possess or intent to distribute 50 pounds or more of marijuana; conspiracy to commit cultivation of marijuana (more than 30 plants); two counts of securities fraud; money laundering; forgery; tax evasion; and attempt to influence a public official. Since Colorado formally legalized recreational and medical


use of marijuana in January 2014 (12 states now have similar or related legislation), “the weed industry is getting to know a time- honored tradition of the American business world: corporate fraud,” vice.com reported in September 2016. It is a message that should interest Canadians as the date for the national legalization of marijuana approaches. The sale and trafficking of pot has been a crime since 1923


(Canada was one of the first countries in the world to criminal- ize the drug). As the pros and cons of the Liberal government’s decision to permit recreational marijuana use continues to be debated, the prospect of an addition to the fraud menu perhaps


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