A view of CEN Biotech's main facility in Lakeshore, Ontario, Saturday, December 6, 2014. Health Canada has refused to grant a license to CEN Biotech to build the world’s largest medical marijuana operation.Geoff Robins/The Globe and Mail
Health Canada has refused to grant a licence to the company seeking to build the world's largest medical marijuana operation, telling CEN Biotech that its bid to open a facility in Southern Ontario has been formally rejected.
The decision was posted Wednesday on the Department of Health Canada's website, and comes after the company was told last month that the government intended to reject CEN's licence bid, amid significant concerns about its conduct. Health Canada gave CEN Biotech 20 days to provide information that could change the government's mind. In the end, the department was not swayed by the arguments it heard.
"The Department has today notified the company that the decision to reject the application is now final," Health Canada said in the statement on its website.
Health Canada did not give reasons for the rejection. However, an investigation by The Globe and Mail uncovered numerous misrepresentations by the company over the past 14 months, including exaggerated and inaccurate claims to investors, which served to push up the share price of CEN Biotech's parent company, Michigan-based Creative Edge Nutrition.
CEN touted itself as a "super grower" of medical marijuana, claiming that it would reap $5-billion in revenue from the business. On multiple occasions, the company suggested it had already been licensed or was on the verge of being licensed by Health Canada to grow more than 600,000 kilograms under a new federal program. While the company was making these claims and asking for patience from investors, its chief executive, Bill Chaaban, was quietly selling off more than 71 million shares at a significant profit in 2014.
Concerned by the company's actions, Health Canada sent Mr. Chaaban a reprimand letter warning that CEN could not claim it had a licence or was close to being licensed. The company again ran afoul of Health Canada in January, when the department learned CEN was claiming one of its employees, Roger Glasel, had close ties to Health Minister Rona Ambrose. That forced Ms. Ambrose's office to take the unusual step of issuing a public statement that she did not know Mr. Glasel and was "disturbed by the allegation he is using her name without her permission or knowledge."
CEN Biotech's problems with Health Canada deepened in February when, after being informed that the government intended to reject the licence, the company issued an update to shareholders that the government called misleading. Facing rejection, CEN did not inform its investors of the extent of the problem, but said it was "pleased to announce it has been asked to provide additional information to Health Canada in support of its application."
Health Canada issued a statement one day later disputing the press release it said "mischaracterizes the meaning of the Department's recent action."
Some of the company's actions have been difficult to understand. In response to The Globe's investigation in December, which detailed a series of misrepresentations and lucrative stock sales by its CEO, CEN Biotech issued a press release quoting a man named Isak Weber, head of internal public relations, who disputed The Globe's story. When The Globe's efforts to contact Mr. Weber failed, it was revealed that Mr. Weber, in fact, did not exist. Mr. Chaaban said in January that Isak Weber was a "nom de plume" for Mr. Glasel and compared the situation to companies who use mascots as spokespeople, such as Ronald McDonald and Mr. Clean. He did not explain why company executives needed to operate under a nom de plume.
When documents emerged that same month showing six distinctly different signatures attributed to Mr. Chaaban, including on papers filed with regulators, the CEO told The Globe and Mail that his signature depended on his mood and it didn't matter how he signed his name – he could sign with his feet if he wanted.
CEN Biotech has filed for a judicial review of Health Canada's rejection, arguing that the department's refusal is "unlawful" and "unreasonable." The company says in court documents that it was issued a permit to build its facility more than a year ago and that it has satisfied the regulatory requirements for a licence. CEN had made it through to the final stage of Health Canada's approval process.
However, Health Canada has said in the past it retains the right to reject an application if new information or concerns arise during the process.