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CannTrust Reveals New Notice of Violations

By Eric Volkman - Aug 12, 2019 at 7:22PM

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In a fresh controversy, the embattled Canadian grower is cited for a series of transgressions at its Vaughan, Ontario, facility.

CannTrust Holdings (CNTTQ 20.00%) has received an official report from a regulator detailing a series of violations in one of its cultivation facilities.

Today the company spelled out the main findings of a report from Health Canada, which it received on Friday. The regulator said these transgressions, discovered during an inspection of the Vaughan, Ontario, facility in July, were the following: 

  • Without obtaining official approval, CannTrust converted five rooms into storage areas beginning in June 2018.
  • Again without proper permission, the company constructed two new areas in the facility. One was used as a storage area beginning in November 2018.
  • CannTrust failed to maintain sufficient security measures, nor did it conduct adequate quality assurance investigations and controls.
  • Standard operating procedures at the facility did not meet regulations.
  • Documents and information were not kept "in a manner to enable Health Canada to complete its audit in a timely manner."
Marijuana bud burning

Image source: Getty Images.

Health Canada has not yet imposed any penalties or fines on CannTrust for these violations. The company said in a press release detailing the findings that the regulator isn't providing guidance regarding the timing or nature of such sanctions.

In the press release, CannTrust quoted its interim CEO, Robert Marcovitch, as saying that "[w]e are continuing to work hard to regain the trust of Health Canada, our patients, shareholders, and partners."

The news comes on the heels of another inspection at a different Ontario facility, in Pelham, that also uncovered noncompliant activities. 

Thar inspection revealed that the company grew and sold cannabis in five rooms for several months before they were licensed; CannTrust subsequently admitted to the transgression. Health Canada placed a hold on several thousand kilos of product from Pelham, and CannTrust voluntarily did the same for cannabis cultivated at the smaller Vaughan grow space.

Following the Pelham controversy, CannTrust formed a special committee to investigate and propose solutions for the violations Health Canada cited. CannTrust also unceremoniously fired its CEO, and it demanded -- and received -- the resignation of its board chairman. 

As for the latest allegations, Marcovitch stressed that the company, along with a team of consultants it hired in the wake of the Pelham inspection, is working to correct the transgressions the regulator itemized. CannTrust aims to take any actions necessary to put it in full compliance with the law, he added.

Health Canada has not yet released any official statement on the Vaughan matter.

CannTrust investors aren't taking this latest news gently. The stock ended the day down by nearly 27%.


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