Cresco Labs Ends Lawsuit Against Co-Founder Joe Caltabiano
Vertically integrated, multistate operator (MSO) Cresco Labs and its co-founder Joe Caltabiano have ended a multifaceted dispute in a Canadian court after Cresco alleged in a lawsuit that Caltabiano engaged in inappropriate behavior and created a “toxic work environment” while working at Cresco and breached his contract with the company, which he left last year.
On Jan. 29, Cresco filed a civil suit in British Columbia’s Supreme Court against Caltabiano, who was Cresco’s president and a member of its board of directors, and against Ken Amann and Choice Consolidation Corp. (Though it operates in the U.S., Cresco has an office in Vancouver, B.C., and is publicly traded on the Canadian Securities Exchange.)
By Feb. 4, the case was discontinued.
“The claims outlined in the lawsuit have been resolved through a mutual settlement agreement and Cresco has successfully mitigated the regulatory issues referred to in the complaint,” Cresco spokesperson Jason Erkes told Cannabis Business Times and Cannabis Dispensary in a Feb. 11 email. “The lawsuit has been discontinued in the Supreme Court of British Columbia.”
“This lawsuit was quickly dismissed on Feb. 4,” Shawna McGregor, a publicist who represents Caltabiano, told CBT and CD in a Feb. 12 email. “Had it proceeded, Mr. Caltabiano and Choice Consolidation Corp would have denied the allegations as untrue. Like all legitimate organizations, Choice Consolidation Corp. has every right to exist and operate within the U.S. cannabis marketplace.”
In its suit, Cresco claimed that Caltabiano bullied and intimidated female employees at the company and “sought to embarrass his female employees at every turn.”
The company also alleged that Caltabiano and Amann, Cresco’s former chief financial officer and a former senior employee, “misused confidential information belonging to Cresco, including information about existing Cresco investors, and information about Cresco’s business plans and M&A targets” to benefit a separate, competing venture, the special purpose acquisition corporation (SPAC) Choice Consolidation.
In addition, Cresco alleged, “Caltabiano routinely directed subordinates to act without proper regard for regulatory compliance, and he personally showed disregard for regulatory compliance.” Cresco stated that it had to spend large sums of money to remedy a regulatory issue in Illinois that occurred because of “Caltabiano’s misconduct,” though the suit did not specify what the alleged misconduct was. Illinois regulators could not be reached for comment by CBT and CD‘s deadline.
The lawsuit also claims that when Cresco attempted to remove Caltabiano from various licenses, he “refused to cooperate, and advised Cresco that he would assist with such process only if he received substantial compensation for doing so.”
« In the face of Caltabiano’s intransigence, Cresco took steps to remove Caltabiano from various of its licenses in the absence of Caltabiano’s cooperation,” it states. “Aware that this was happening, Caltabiano actively intervened with applicable state authorities in Ohio and Arizona in an effort to retain or reinstate his position on Cresco’s licenses in those states. His active interference occurred as recently as January 22, 2021.” Regulators from both states declined comment for this story.
The Jan. 29 filing stated that Caltabiano “also enabled inappropriate, harassing and abusive language by male employees under his direct supervision towards female employees of Cresco.”
Female employees came forward with “numerous complaints,” which Cresco “confirmed through internal and externally led investigations, of harassing conduct by male employees within Caltabiano’s area of responsibility,” according to the complaint.
“Caltabiano repeatedly engaged in inappropriate, abusive, harassing and misogynistic conduct directed towards female employees of Cresco,” the lawsuit alleged. “While Caltabiano ‘managed’ … many of the employees through fear, bullying, and intimidation, he repeatedly belittled female employees for minor performance issues, made demeaning remarks about female employees’ appearance and personal characteristics, and sought to embarrass his female employees at every turn.”
Cresco planned to terminate Caltabiano for cause and, in February 2020, placed him on administrative leave, according to the suit, which then states that he resigned on March 2, 2020.
“Caltabiano continued as a director of Cresco until June 2020,” the complaint states. “He resigned as a director immediately before Cresco published its management information circular, knowing that the circular would disclose that he was not being nominated for re-election as a director of Cresco.”