Business owners seeking medical marijuana licenses faced lawsuits

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Two former Goldman Sachs executives hoping to be among those granted licenses to open medical marijuana businesses in Illinois have faced lawsuits in other states.

Nicholas Vita and Michael Abbott’s companies have won licenses to run dispensaries in Arizona, Massachusetts, Nevada and Washington, D.C.

But the two East Coast businessmen, or their companies, have been named in lawsuits as defendants or mentioned in a legal complaint, a review of court records in some of those states has found. 

Vita, Abbott, and four local investors, are seeking to open a dispensary on Chicago’s Northwest Side, according to records obtained through the Freedom of Information Act.

Related: Familiar Chicago names involved in medical pot industry

They and 13 others are scheduled to go before the city’s Zoning Board of Appeals on Friday to seek special use permits for the new legal marijuana businesses expected to open next year.

Asked about the lawsuit, Vita said of his company, “Columbia Care is proud of the work we do in providing compassionate treatment to those suffering from debilitating illnesses. We have an impeccable operating record, a best-in-class team and a proprietary research program we believe will help improve lives.”

In Massachusetts, Vita and Abbott’s company, Patriot Care, has been awarded three state licenses to open medical marijuana dispensaries, said Dennis Kunian, a company spokesman.

The award for a dispensary in Lowell, Massachusetts, has resulted in a lawsuit against the Massachusetts Department of Public Health. 

The company that didn’t receive the license, Cardiac Arrhythmia Syndromes Foundation, claims in a lawsuit filed in March that the state arbitrarily awarded Patriot Group the license because, among other reasons, Vita didn’t properly disclose a Texas lawsuit in which he was accused of “fraud, fraud by omission, and gross negligence” as an officer for Diabetes America, which accepted settlement money that allegedly should have been paid to another company.

That case in Harris County, Texas, was dismissed after an out-of-court settlement, records show.  

The Massachusetts lawsuit also claims Vita should have mentioned that Diabetes America filed for bankruptcy when Vita was the chairman.

The Massachusetts case — which does not name Vita, Abbott or any of their firms as defendants — is ongoing, according to court records and an attorney on the case. 

“The lawsuit is about the fairness of the process and the adequacy of disclosure of potential applicants,” said John H. Ray III, the attorney representing the Cardiac Arrhythmia Syndromes Foundation. Clearly part of CAS Foundation’s dispute raises questions about Patriot Care’s disclosures.”

The Patriot Care spokesman, Kunian, said this suit “has nothing to do with us.”

“The state has already awarded us the license,” he said, adding that officials went through a rigorous background check conducted by the state.

“It’s a very expensive process and some people get angry and said the process was unfair,” Kunian said.

In Arizona, a medical marijuana consulting firm sued 203 Organix, one of the dispensaries in which Vita and Abbott are listed as managers, claiming the dispensary had not paid the consulting firm, 4Front Advisors, $50,000 that was part of an established agreement. A company official denied those allegations. 

Kris Krane, 4Front’s managing partner, declined to comment. He is consulting in Illinois with medical marijuana entrepreneurs including strip club and trucking firm owner Perry Mandera who seeks to open a dispensary and cultivation center in Chicago. He is also scheduled to go before the city zoning board Friday.

And in Washington, D.C., Jeremy Joseph, a California resident, alleged he had been forced out of a medical marijuana company he had formed. He sought salary and bonus payments from the company, whose lead investors are Vita and Abbott, federal court records show. An arbitrator ordered the company to pay Joseph $161,250, but the arbitrator determined there was no conspiracy or secret plan to kick Joseph out of the company, federal court records show. The arbitrator also found Joseph had “misappropriated $124,000 by writing unauthorized checks, and $11,000 in company funds by charging personal expenses” to the company, VentureForth. The arbitrator ruled Joseph had to be separated from the company. Joseph declined to comment. 

Vita and Abbott are executives for a D.C. dispensary and cultivation center, Capital City Cares. 

In a statement, Vita said, “Our high standards mean that we do part ways with individuals and organizations when we feel that the relationship no longer is in the best interests of our patients. We were the prevailing party in Washington, D.C.; the former employee was legally “disassociated” — a rare punishment based on the judge concluding the company acted properly. We have just begun discovery and are confident that the outcome will be in our favor regarding the contract dispute in Arizona.”

Ald. John Arena (45th) said he found news reports about those lawsuits when he first saw the application for the dispensary in his ward, which would open a few doors down from his ward office at 4758 N. Milwaukee. Arena said he demanded an explanation and was told there were “issues with disgruntled employees, there was some theft of property and I guess some retaliation using the legal system.” 

But Arena, who has not issued any letters of support for any dispensary, also takes comfort in Massachusetts awarding Vita and his group multiple licenses. 

“That gave me a little bit of confidence that the state of Massachusetts had vetted them,” he said.

Another group is seeking to open in Arena’s ward, right next door to Vita and his group.

Euflora Health Center, which is affiliated with an owner of what is known as the “Apple store” of marijuana in Colorado, is seeking to open a dispensary at 4760 N. Milwaukee.

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