The totality of circumstances, such as the type of ownership change at that time, did not justify the denial of this change.
By Rebecca Rivas, Missouri Independent
Missouri regulators acted quickly when the company that was at the heart of a large cannabis recall in February lost its appeal to reinstate the revoked license. They made sure those who were involved could no longer access a marijuana plant without supervision.
The Missouri marijuana market is still thriving despite the fact that Delta Extraction, a Robertsville-based manufacturer of marijuana products, has been punished.
In fact, long after the state initially stripped Delta Extraction of its license in November 2023, regulators approved one of the company’s co-owners—AJO LLC—to take over a cultivation and manufacturing facility in Waynesville in May 2024. The operation is much larger than Delta Extraction and involves multiple dispensaries.
AJO LLC maintains that it only owned 50 percent of Delta Extraction. The company says it purchased 50 percent ownership of Waynesville in 2022, and that it has run the facility while waiting for the approval of license transfer.
Now, Delta’s license cancellation is at the heart of a legal battle in St. Louis between shareholders who are trying to take back the Waynesville plant from AJO.
The state, they claim, should not have approved the change of ownership because AJO was involved in a business that had its marijuana license revoked.
Lisa Cox, spokeswoman for the department that oversees the Missouri Division of Cannabis Regulation, said the constitution does allow regulators “to deny approval for ownership changes if approval is not ‘unreasonably withheld.'”
Cox stated that Delta had not yet appealed the revocation of their license in May 2024. It was nine months before the verdict came down.
Cox stated that the totality of circumstances, such as the type of ownership change at the time of change, were not enough to negate the change.
Cox also said the state’s administrative rules—which the division drafts to interpret the constitution’s intent and that take months to pass—currently do not prohibit individuals who have had a license revoked from acquiring another license.
Cox stated that the division is reviewing its rules in order to provide more detail about this authority.
Revocation of Agent ID
In a harsh 137 page decision, issued by the Administrative Hearing Commission in February, the Commission denied Delta’s request to appeal its revoked licence. The Commission concluded that Delta had “a corporate culture that was lax with respect to regulatory requirements.”
Regulations allow regulators to suspend agent ID cards if an individual violates the rules. The card is required to enter a marijuana establishment.
Cox stated that within weeks after the Administrative Hearing Commission’s February ruling, the state “revoked multiple agent IDs due to involvement in rules violations related with Delta Extraction”.
The Independent received documents from Missouri’s Sunshine Law that show cannabis regulators gave AJO director Josh Corson, a notice in March of the pending suspension of his ID card.
In the notice, it was stated that the owner and manager, Delta Extraction Inc., were responsible for the 17 violations cited, which included “manufacturing or selling bulk distillate, in a false and misleading manner, due to failure to disclose the fact that the distillate contains large quantities of cannabis unregulated.”
Corson surrendered his agent ID license shortly after receiving the notice, and the other two AJO owners—Ryan Rich and Josh Ferguson—have let their agent IDs expire, Cox said.
Cannabis regulators also revoked four Delta contractors’ agent ID cards.
AJO and Hi-Rise LLC have been running Waynesville since 2022. Hi-Rise LLC is the 50 percent-owner. Hi-Rise LLC does not have any ownership in Delta Extraction.
Peter Barden said that AJO and Hi-Rise “provided full information” to the state about their owners for the transfer of licenses.
Barden responded to Corson’s agent ID cancellation by saying that AJO “wasn’t managing the Delta Extraction Facility.” AJO is a passive investor and has never been the cause of any revocation.
Yet pages of evidence in the Delta Extraction case—including emails, depositions and testimonies from high-level employees—appear to demonstrate AJO was fully involved in Delta’s operations and even initiated the arrangement that led to their revocation.
Barden stated that AJO has “certainly monitored its investments, but has not actively supervised any manufacturing or cultivating license.”
AJO’s case
Charles Pullium appeared before a St. Louis court in an urgent hearing in February, eager to provide what he thought would be the smoking gun update on his lawsuit.
Delta Extraction’s appeal for a reinstatement of its marijuana product manufacturing license had been denied just a few days before.
Pullium represents a group that wants to take the Waynesville cultivation and manufacturing license from AJO.
Pullium claimed that, if Delta Extraction’s license had been revoked because of violations, the company leadership should not have received state approval for a cannabis production facility.
Pullium, at the hearing in February, told St. Louis’ Judge Joan Moriarty that it was an important case since the revocation or suspension of a licence is involved. “And why it’s important in this case is because when people apply for a new change of ownership…they have to answer, ‘Have any of you or your owners or anyone had a license revoked or suspended?'”
Pullium said the Delta revocation would be key in settling an ownership dispute that lasted for three years. The legal case ended up before a St. Louis Court in 2023 after AJO and Hi-Rise brought a lawsuit.
AJO and Hi-Rise are on one side in the court battle.
They are joined by 19 other individuals and companies involved in the transaction, such as Heya from St. Louis and former Missouri House speaker Carl Bearden. Delphi Management LLC is also on the list. The claim is that the sale of 2022 to AJO, Hi-Rise and other marijuana companies was illegal.
Moriarty refused to hold an emergency hearing because he did not believe that new information warranted it. He made Pullium pay Dowd Bennett’s law firm $3,037.50 for the attorney fees of AJO, Hi-Rise and Dowd Bennett.
The case is still pending.
Scott Sterling who was involved in this tangled web of ownership, has filed two complaints at the Division of Cannabis Regulation alleging AJO had not provided all of the necessary information for the transfer.
Sterling claims that one crucial fact was left out: he has never approved any sales as a 40% owner.
Cox confirmed that the division is currently investigating Sterling’s complaints.
Barden confirmed that AJO, Hi-Rise own the Waynesville store and its “current owner has not had any license revoked.”
‘…a made for T.V. drama’
In January, Pullium brought back the attention to Jason Sparks. He is a contractor for Delta Extraction.
Delta’s scandal is reminiscent of something that would be on television. drama,” the motion states, “a prior felon…buys out-of-state products from a nameless and unknown ‘network’…which he then illegally turns into uncertified product which he then sells to a complicit Delta, who then illegally sells to unsuspecting dispensaries…”
Sparks is one of four contractors who had their IDs for agents revoked by the State in March. He also has an unqualified felony that the state overlooked when he applied for the ID. In legal documents filed by his company SND Leasing in its lawsuit against Delta Extraction, Sparks primarily blames Corson.
Delta employed Sparks in spring of 2023 to produce large amounts of marijuana distillate, which Delta would then sell to 100 Missouri manufacturers. The manufacturers produced gummies for their brand and then vapes. That is why product recalls were so common.
The distillate itself was the issue.
Sparks removed a tiny amount of THC, which is heavily regulated by the Missouri state government. After that, he added an enormous amount of THC-oil extracted from hemp – a product which is not regulated.
In August 2023 the regulators pulled 60,000 items off the shelf, saying that the THC oil used by the products was unregulated and out of state, which violated the law. This also posed a health threat to the public.
Corson “was the person who located the source for the distillate” according to a motion filed in Sparks lawsuit, and it was he who signed contracts.
Sparks’ lawsuit cites testimony given by Delta COO Rachel Herndon Dunn in an Administrative Hearing Commission Hearing held in March of 2024. Dunn testified that Corson reached out to a large cannabinoid-producing facility in Florida to obtain the hemp-derived THC oil needed to make their recalled distillate.
“Corson went down to tour their labs in Ft. Lauderdale…” Dunn said during the hearing.
Sparks claimed Delta leadership assured him that regulators approved of the extraction procedure.
It is a fact that [the state] The suit claims that the defendants “never gave any assurances as to regulatory compliance”.
Delta argued hemp is not a federally controlled substance and the state has no authority to regulate hemp-derived THC products—an argument they lost in their appeal. Delta also noted that the products had undergone a final testing round before hitting the shelves. This ensured they did not pose any health risks.
The Independent reports that, despite Delta being the facility’s owner, the state regulators have not found any evidence to suggest similar practices at Waynesville.
First published in Missouri Independent.
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