A former Colorado marijuana enforcement officer and a Denver-based marijuana entrepreneur already the target of fraud allegations were indicted in connection with a suspected massive illegal marijuana trafficking ring that operated throughout the state.
A grand jury cast a wider net after the March indictments of 16 people in an allegedly illegal marijuana trafficking ring led by Michael Stonehouse, and on June 7 indicted former Colorado Marijuana Enforcement Division officer Renee Rayton and three others. According to court records and the indictment obtained by The Cannabist, warrants were filed for the arrest of Rayton; entrepreneur Scott Pack, whose businesses Harmony Green LLC and HGCO LLC also were charged; and Travis Bridle and John Edward Loos, both growers and suspected middlemen in the operation.
Pack, whose businesses hold 14 marijuana licenses, played a “pivotal” role in the Stonehouse drug-trafficking organization responsible for illegally producing and selling millions of dollars worth of marijuana across state lines, according to the grand jury’s indictment. Earlier this year — in a lawsuit first reported in April by Denver Westword — Pack and Rudy Saenz, who was indicted in March, were sued by former investors who claimed they lost close to $1 million because of the duo’s fraudulent scheme.
Investigators claim that Rayton, a former Pitkin County Sheriff’s deputy who joined Colorado’s MED in 2015, left her enforcement division job in the fall of 2016 after Pack offered her a 6-month, $8,000-per-month position as a compliance consultant. She started working for Pack — and pocketing cash from illegal operations — barely two weeks after leaving her post, investigators allege, in violation of state licensing policies requiring a six-month “cooling off” period before former employees can work in an industry related to their oversight.
During her involvement with Pack and his Harmony & Green businesses, Rayton also told a source that she was aware of compliance breaches and said “that she knew ‘(Department of Revenue) employees’ who would help the (drug-trafficking organization) ‘get legal,’” according to the indictment.
Officials for the 18th Judicial District in Arapahoe County said they do not comment on open cases. Pack, Rayton, Bridle and Loos could not be immediately reached for comment.
A spokeswoman for the state’s marijuana regulatory agency said via email that MED was “actively engaged” in the investigation. She also noted that Rayton’s alleged illegal activity occurred after she left her job on Nov. 2, 2016.
“Out of an abundance of caution, we requested that the Colorado Bureau of Investigation conduct a formal and independent investigation involving matters related to the Marijuana Enforcement Division,” said Lynn Granger, communications director for the Colorado Department of Revenue, which oversees MED.
Rayton was charged with violation of state licensing authority and conspiracy to commit the cultivation of more than 30 plants of marijuana. She was released after posting a $5,000 bond, court records show.
Pack was charged with 11 counts, all felonies: Pattern of racketeering under the Colorado Organized Crime Control Act; conspiracy/endeavoring under COCCA; two counts of conspiracy to distribute or possess or intent to distribute 50 pounds or more of marijuana; conspiracy to commit cultivation of marijuana more than 30 plants; two counts of securities fraud; money laundering; forgery; tax evasion; and attempt to influence a public official. A warrant is out for his arrest, and his bond has been set at $1 million, court records show.
Pack’s companies were charged with: conspiracy to possess with intent to distribute more than 50 pounds of marijuana; cultivation of 30-plus marijuana plants; and two counts of securities fraud.
Bridle and Loos, who investigators alleged illegally cultivated marijuana for sale out of state, also served as middlemen in the shipments and payments, the indictment claimed.
Loos was charged with two counts: conspiracy to distribute or possess with intent to distribute 50 pounds or more of marijuana and conspiracy to commit money laundering, according to court records. Bridle was charged with conspiracy to distribute, distribution of 50 pounds or more of marijuana, money laundering and conspiracy to commit money laundering. Bond for each was set at $250,000 and warrants have been issued for their arrests.
‘A front for a successful illegal marijuana trafficking organization’
Pack and Saenz were 50-50 partners in Harmony & Green LLC, an asset holding company and licensing business; Pack created HGCO to obtain marijuana licenses, according to allegations in the June 7 indictment. During the course of two years, Pack obtained 14 marijuana licenses for the firm, but he kept Saenz’s identity as an owner cloaked from the state.
Pack never disclosed to the state that his business partner was a man who was barred from obtaining a marijuana license nor that there were investments made from out of state or country, investigators allege.
Harmony & Green’s scheme involved soliciting investors for money to build out warehouses that had been leased or bought by Pack’s father, Michael Pack. The younger Pack and Saenz deceived investors, saying they had invested millions of their own money when they had not, and they misrepresented a $678,000 annual revenue stream that did not legally exist, according to the indictment.
Under the guise of a licensed Colorado cannabis business, Harmony & Green and HGCO served as a front for the drug-trafficking organization, investigators claim, noting that the businesses never made a single legal sale of cannabis in their two years of operation.
Pack and Saenz reeled in $1 million during 2016 from the illegal distribution of marijuana, investigators allege.
“All of this was done under Scott Pack and Rudy Saenz’s scheme of using HGCO LLC as a shell company, which essentially provided licenses that Harmony & Green LLC could never hold,” investigators alleged. “Harmony & Green LLC then scammed unknowing individuals into investing hundreds of thousands of dollars to a company, which never once sold legal marijuana in the state of Colorado, but provided a front for a successful illegal marijuana trafficking organization.”
Eight of the 16 people indicted held active or expired licenses for operating a marijuana business in Colorado, The Denver Post reported in March.
The story has garnered national attention, and U.S. Attorney General Jeff Sessions cited The Denver Post in a recent letter to Congress framing his opposition to the Rohrabacher-Farr Amendment, which prevents Justice Department funds from being used for prosecutions in states with medical marijuana laws. The letter dated May 1, 2017, was published Monday by MassRoots, a marijuana social media company.
“Drug traffickers already cultivate and distribute marijuana inside the United States under the guise of state medical marijuana laws,” Sessions wrote. “In particular, Cuban, Asian, Caucasian and Eurasian criminal organizations have established marijuana operations in state-approved marijuana markets. The individuals in these organizations often find a place for themselves within state regulatory systems.”
Original article via TheCannabist