Pubdate: Fri, 16 Jan 2015
Source: Globe and Mail (Canada)
Page: B4
Copyright: 2015 The Globe and Mail Company
Contact:  http://www.theglobeandmail.com/
Details: http://www.mapinc.org/media/168
Author: Grant Robertson

HEALTH CANADA MARIJUANA DECISION ASSAILED

Health Minister Rona Ambrose is leaving the oversight of Canada's new
medical marijuana sector in the hands of U.S. regulators while the
federal government sits on the sidelines, opposition critics say.

As mounting problems swirl around CEN Biotech, which has applied to
become Canada's largest medical marijuana producer, Ms. Ambrose has
refused to answer questions regarding the controversy. Concerns about
alleged misrepresentation, stock manipulation and falsified documents
should be addressed to the U.S. Securities and Exchange Commission
(SEC), a spokesman for the minister said this week.

However, deputy Liberal leader Ralph Goodale said that policy is
tantamount to exporting the oversight of a Canadian industry to a
regulator outside the country.

"The problems with this one company certainly raise questions about
the integrity of the government's process," Mr. Goodale said. "They
want to do business in Canada, but appear to be taking advantage of a
loophole that avoids Canadian scrutiny. That should set off another
set of alarm bells with Health Canada."

CEN Biotech is the Canadian subsidiary of Michigan-based Creative Edge
Nutrition, which is publicly traded on the loosely regulated U.S.
over-the-counter (OTC) market, and is therefore outside the
jurisdiction of the Ontario Securities Commission. Last year, Ontario
opted out of a new rule that gave provinces the power to sanction OTC
companies doing business in Canada, saying such changes weren't
needed. Securities lawyers refer to this as the "Ontario loophole."

In the past year, CEN Biotech chief executive officer Bill Chaaban has
used Health Canada's name to make statements that pushed up his
shares, including claims of endorsements and pacts with the government
during presentations with investors. At the same time, Mr. Chaaban was
selling millions of shares that were obtained as an insider for next
to nothing, and pocketing millions of dollars in proceeds.

The Globe and Mail detailed many of the problems in a Dec. 20, 2014,
article. Among the list of misrepresentations by Mr. Chaaban is a
claim that the company had been licensed by Health Canada to open the
world's biggest marijuana operation, which was not true. Health Canada
sent a letter of reprimand telling him to stop. But despite that slap
on the wrist, similar inaccurate claims continued throughout 2014 and
Health Canada did not follow up. Among those instances, the CEO told
investors in July he had "essentially" been approved by Health Canada,
and in August said he was on the verge of getting a licence. These
statements misled investors, while the CEO sold large numbers of his
own shares.

Health Canada said it is not equipped to deal with allegations of a
financial nature. But several of the allegations against CEN Biotech
involve general misrepresentation that should call the company's
application for a medical marijuana licence into question, Mr. Goodale
said.

The company has made false claims about nationally distributing health
products at major Canadian retailers, and has issued news releases
containing misrepresentations of its business, including a Dec. 21
news release issued after The Globe article. Since then, documents
have emerged showing at least four distinctly different signatures
from Mr. Chaaban on company filings, including submissions to the SEC.

Mr. Chaaban brushed off those concerns this week, saying the way he
signs his signature "depends on the mood I'm in." He said he has
operated by the book, calling the allegations "an attack on his character."

The Globe sent Mr. Chaaban a list of 24 detailed questions in early
December, asking about his claims, the company's conduct and the stock
sales, to which CEN Biotech did not respond. The company later said it
could not address those questions because it was in an SEC-mandated
quiet period. However, that claim is also suspect, given that SEC
quiet-period rules do not apply to the company, according to
information from the regulator.

Opposition health critic Libby Davies said the matter is too important
to be left to regulators outside Canada, who may not see the issue of
Canada's new medical marijuana sector as a priority. Ms. Ambrose's
treatment of the file is an abdication of responsibility by Health
Canada, Ms. Davies said.

"This is a big business - we're talking about hundreds of millions of
dollars overall in medical marijuana," Ms. Davies said. "Their
approach of, 'It's not really our problem, let's leave it to other
people to follow up' - this is a completely failed response. It's
surprising, given this is the Conservative government that holds
itself up to a high standard in terms of market practices."

Multiple requests for comment from Ms. Ambrose have been declined by
her office.  
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MAP posted-by: Jo-D