Pubdate: Mon, 12 Jan 2015
Source: Globe and Mail (Canada)
Copyright: 2015 The Globe and Mail Company
Contact:  http://www.theglobeandmail.com/
Details: http://www.mapinc.org/media/168
Author: Grant Robertson
Page: B1

PUBLIC TOLD TO CONTACT POLICE WITH CONCERNS OVER MARIJUANA FIRM

Health Canada is instructing anyone with concerns about CEN

Biotech - the company seeking to become the country's largest medical
marijuana producer - to contact police or securities regulators.

The unusual request comes as allegations of misrepresentation, stock
manipulation and falsified documents swirl around the company and its
top executive.

Health Canada said it can't comment on the status of CEN's licence
application, but a department official said the RCMP and other
regulators should be notified of concerns, adding that "we work
closely with the RCMP."

CEN Biotech, the Canadian subsidiary of Michigan-based Creative Edge
Nutrition, has applied to build a massive marijuana growing facility
in Lakeshore, Ont., just east of Windsor. The company wants to sell
600,000 kilograms of the drug a year, making it by far the largest in
the new sector.

But the company is now under a cloud of suspicion for allegedly
issuing false news releases, suspect signatures on documents, and
making misleading statements about partnerships and endorsements from
Health Canada.

The brewing scandal has become an embarrassment for Health Canada, and
for Health Minister Rona Ambrose, since the company has made it to the
final stage of approvals with the department.

Multiple misrepresentations helped drive the market value of Creative
Edge Nutrition, a penny stock traded on the loosely regulated U.S.
over-the-counter market, to more than $350-million (U.S.) this year.
But as chief executive Bill Chaaban was touting the stock to investors
using false claims involving Health Canada, he was quietly selling 71
million shares and pocketing more than $4.6-million in proceeds.

Health Canada has asked those with evidence of impropriety to also
contact securities regulators. Due to a loophole in Ontario securities
regulations, Creative Edge is beyond the reach of the Ontario
Securities Commission or any other Canadian body. It instead falls
under the jurisdiction of the U.S. Securities and Exchange Commission.

A spokeswoman for the SEC in Washington said the agency won't comment
on whether or not it is investigating a company. However, two sources
have told The Globe and Mail they have been in touch with
investigators inside the SEC regarding the company.

Health Canada appears ill-equipped to deal with the problem on its
own. Officials with the department have demonstrated a lack of
understanding on the matter in conversations with The Globe, and Ms.
Ambrose's office has indicated little comprehension of the severity of
the allegations against its biggest applicant.

Now, a new case of suspicious looking documents produced by the
company threatens to make the situation more problematic.

An anonymous poster on an Internet message board recently produced
documents filed by the company to regulators bearing Mr. Chaaban's
signature. A document dated Dec. 29 contains a signature that is
distinctly different than others filed by the CEO in 2014. The Globe
and Mail subsequently obtained the documents, which are available
through filings on Bloomberg and the appearance of the signatures
raises questions about their validity. Calls and e-mails to Mr.
Chaaban for comment have not been returned.

Health Canada says it performs "rigorous" background checks on people
and companies seeking to become licenced. But there are questions as
to how much diligence the government has done on its biggest
applicant. A federal licence can be worth $70-million (Canadian),
based on surges in market value seen in other publicly traded stocks
once the permit is granted.

Health Canada's checks on CEN Biotech appear to have missed a trail of
concerning conduct and legal problems, including two people associated
with the company who have been charged by the SEC for alleged fraud.
One of them was fined, while the other is still before the courts in
the U.S. Other misrepresentations by the company - through news
releases and public statements - suggest questionable ethical
standards at CEN Biotech have been mostly ignored by Health Canada.

After The Globe and Mail published an article in December detailing
those problems, the investor relations firm representing CEN Biotech,
New York-based 5WPR, severed ties with the company, saying it had not
approved, nor was aware, of at least two news releases issued under
its name.

Ms. Ambrose's office is trying to distance itself from the brewing
scandal. Her spokesman told The Globe and Mail the Minister has no
role in granting or refusing licences. However, Health Canada has
rejected hundreds of licence applications so far. The Globe and Mail
obtained 129 of these refusal letters through Access to Information.
On at least 102 of the letters, the Health Minister is listed as the
reason for rejecting the licence. "The minister must refuse to issue a
licence for this application," the letters state.

One letter deals directly with a company misrepresenting itself. "The
Minister has reasonable grounds to believe that false or misleading
information," was issued by the applicant, says the March 19 letter to
a B.C. company.

In July, Mr. Chaaban told investors he had a "partnership" with Health
Canada, among other claims. Though such claims were invented, Health
Canada did not step in. Ms. Ambrose, through her spokesman, has
declined requests for comment.
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MAP posted-by: Matt