The prosecution of three businessmen caught up in one of Canada’s most spectacular cannabis-industry flameouts suffered its own collapse on Wednesday, as lawyers for the Ontario Securities Commission (OSC) moved to withdraw all charges mid-trial.
But even defeat didn’t come easy for the prosecution: Defence lawyers for former CannTrust Holdings officials Peter Aceto, Eric Paul and Mark Litwin refused to merely have the charges dropped and held out for full acquittals for their clients.
“After careful review of the evidence during the trial, we are of the view that as charged, there is no reasonable prospect of conviction,” OSC lawyer Dihim Emami told the court. He asked for more time to consider the defendants’ request for acquittals, however, saying it had only been presented to him minutes earlier.
Scott Fenton, a lawyer for CannTrust’s former vice-chair Litwin, appealed to the judge to end the matter “today.”
“I’m respectfully against drawing this out.… It’s time to end it for all the gentlemen.”
The sudden turnaround in the case is just the latest twist in a saga that saw one of Canada’s most valuable publicly traded cannabis companies shattered by allegations that it grew thousands of kilograms of illegal weed and then lied to investors about it. Hundreds of jobs and nearly a billion dollars in shareholder value were wiped out, while the company and its executives, directors, underwriters and auditors were hit with a raft of class-action lawsuits on both sides of the Canada-U.S. border.
Charges based on alleged illegal growing
The RCMP and OSC charged Paul, Litwin and Aceto — who previously headed up Scotiabank’s online-banking subsidiary Tangerine — with quasi-criminal securities offences last year.
CannTrust’s greenhouse in Pelham, Ont., was at the centre of now-abandoned allegations against the company’s former CEO, ex chairman and a former director. (Tijana Martin/The Canadian Press)
The charges came after CannTrust announced in July 2019 that Health Canada had learned of “the growing of cannabis in five unlicensed rooms” at the company’s Pelham, Ont., greenhouse between October 2018 and March 2019, before the rooms received the proper approvals in April 2019.
The OSC claimed the men did not disclose to investors that nearly half the growing space at the facility wasn’t properly licensed, and that they used corporate disclosures to assert that “CannTrust was compliant with regulatory requirements.”
Prosecutors were also alleging Litwin and Aceto signed off on pitches to U.S. investors that stated CannTrust was fully licensed and compliant, and that Litwin and Paul traded shares of CannTrust while knowing about the allegations of unlicensed growing but before it was publicly disclosed.
Trial testimony last week and submissions by defence lawyers, however, painted a different picture: that the company’s entire greenhouse was licensed all along, and it just needed some routine approvals from Health Canada to start growing pot plants in the additional rooms.
Under cross-examination, CannTrust’s former director of quality and compliance Graham Lee agreed with Fenton that the company’s cannabis production licence from Health Canada didn’t actually restrict what rooms it could grow in.
That undercut the prosecution’s case, which hinged on the idea the company had been engaged in unlicensed cannabis cultivation.
At one point, Lee testified, CannTrust staff did stage photographs as part of a submission to Health Canada, in an attempt to disguise the extra growing rooms. But senior management did not instruct him to do this, he said.
Fallout
The consequences of CannTrust’s regulatory struggles have been vast: Days after it made its July 2019 announcement about the purportedly “unlicensed rooms,” the company voluntarily suspended sales of all its cannabis products. Then in September 2019, Health Canada officially suspended the company’s licence to sell. The next month, the company said it would destroy $77 million worth of plants and inventory.
As its revenue streams ran dry, CannTrust was forced into bankruptcy protection in March 2020. Once worth $1.5 billion on stock markets, the business was quickly delisted in New York and Toronto.
The company, some of its former executives and a number of its underwriters settled the cross-border class-action lawsuit for $83 million last year, without any admissions of wrongdoing. Most of the company’s remaining assets were bought earlier this year by a group of investors led by a Dutch-based private equity firm. CannTrust then changed its name to Phoena Holdings Inc.
Defence lawyers did not want to comment Wednesday. Before the trial began, Aceto’s lawyer Frank Addario told The Canadian Press that his client “behaved legally and with integrity during his time at CannTrust.”
The OSC, Ontario’s stock-market regulator, said it wouldn’t comment while the matter is still before the court.
CBC News also reached out to Health Canada with questions. The agency said it would look into it.
The case is back in Toronto’s Old City Hall court on Thursday for a determination of whether all three men will be formally acquitted.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
