OSC Withdraws Charges Against CannTrust Officials Following Inaccurate Witness Testimony

The Ontario Securities Commission withdrew its case against three CannTrust officials initially charged with securities offences including fraud, after a major witness conceded they made incorrect statements in their testimony.

In an Ontario provincial court on Wednesday, OSC’s lawyer said the regulator won’t proceed with its case against former CannTrust CEO Peter Aceto, former chairman Eric Paul, and former director Lark Litwin, after the defendants’ lawyer pressed key witness Graham Lee to admit his testimony was inaccurate. The trio were accused of growing cannabis in eight unlicensed rooms, whilst Litwin and Paul were also charged with insider trading after they sold the company’s stock despite willfully knowing cannabis was being grown without adequate licensing.

Following a Health Canada inspection in 2019, numerous CannTrust employees were terminated and the company was slapped with several class action lawsuits, ultimately prompting a bankruptcy filing. The OSC brought Lee, who served as CannTrust’s quality compliance manager, as one of its key witnesses against the company. During his initial testimony last week, he unveiled it was common knowledge among CannTrust employees that the rooms were being used to grow “unlicensed” cannabis, which he at the time relayed to Aceto.

However, when the defendants’ lawyer pressed Lee about his initial statement, he walked back the claim. The witness admitted he incorrectly used the term “unlicensed” when describing the cannabis growing in the eight rooms. He affirmed the facility did in fact have adequate licensing to grow the plants, but the only paperwork absent was ministerial approval— a regulatory piece he acknowledged Health Canada would view only as non-compliant, rather than illegal. Litwin’s lawyer, Scott Fenton, asked Lee if he “used the wrong terminology” when referencing the company’s licensing for the rooms.

“Yes,” Lee responded. “Were you confused regarding the operation of the Cannabis Act and its regulations,” Fenton asked, to which Lee said, “at times.” When pressed further by Aceto’s lawyer Frank Addario regarding his prior testimony that CannTrust officials knew cannabis was being grown in unlicensed rooms, Lee admitted it was incorrect terminology. “The facility was in fact licensed?” Addario asked. “Yes,” Lee replied.

OSC lawyer Dihim Emami said the case against the trio will be withdrawn because “there’s no reasonable prospect of conviction” in light of the revelations. the former CannTrust officials’ lawyers requested Justice Victor Giourgas grant the three men full acquittal, but Emami asked for a one-day adjournment in order to resume case law.

Information for this briefing was found via the Globe and Mail. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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