Former CannTrust compliance worker says unlicensed growing 'very openly' discussed

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TORONTO — A former director of quality and compliance at CannTrust Holdings Inc. says the growth of cannabis in unlicensed rooms was "very openly discussed" at the pot company.

"There was no hiding this. There was no denial of this," Graham Lee told the Ontario court of justice's Old City Hall court on Monday.

The issue was discussed on multiple occasions, even with members of the senior leadership team, Lee added.

His remarks come as three former executives at the cannabis company face a series of securities offences linked to unlicensed growing that allegedly occurred at a Niagara, Ont. area facility owned by CannTrust, which is now called Phoena Holdings Inc.

Peter Aceto, Eric Paul and Mark Litwin have pleaded not guilty to fraud and authorizing, permitting or acquiescing in the commission of an offence.

Litwin and Paul are also facing insider trading charges, and Litwin and Aceto are charged with making a false prospectus and false preliminary prospectus.

Aceto, who served as CannTrust's chief executive until he was terminated with cause in 2019, was aware of the unlicensed growing and the pair discussed it at a 2018 meeting in Aceto's office at CannTrust's headquarters, Lee said.

By the time of the meeting, plants were already being grown in one unlicensed room and there were plans to place other plants in another unlicensed room.

Lee said Aceto told him to proceed with the plan because the company had "created an internal precedent" by already planting in unlicensed rooms.

Frank Addario, Aceto's lawyer, previously pointed out his client was hired because of his financial acumen and track record (Aceto was previously the president and chief executive of ING Direct Canada) and said the company was subject to inspections and financial audits that uncovered no material issues.

"The evidence will show Peter Aceto behaved legally and with integrity during his time at CannTrust," Addario said in an email.

Lawyers for Paul and Litwin, CannTrust's former chairman and vice-chairman, have also maintained their clients are innocent. After the unlicensed growing came to light, Paul was ordered to step down and Litwin resigned in March 2021.

Lee's court appearance on Monday also touched on Health Canada, whose representatives inspected the facility, including one of the unlicensed rooms. Lee recalls staff had been told not to lie to inspectors and to answer questions from Health Canada workers truthfully.

When the inspectors left, Lee wrote an email to other staff saying, "very high level, we dodged some bullets, but are also looking at a significant regulatory review" because Health Canada could have noticed the growing in unlicensed rooms.

But Lee was growing uneasy. As these events unfolded, he wrote emails to senior CannTrust describing areas of concern, including the unlicensed growing.

His goal was to "create a paper trail" to "protect myself," he said.

He added that he wanted evidence of what was going on "because I was under the impression I would be thrown under the bus pretty rapidly."

This report by The Canadian Press was first published Dec. 5, 2022.