Cannabis company faces record penalty, loses licenses amid allegations of maintaining off-the-books marijuana, destroying evidence

Cannabis plant ready for harvest

Nevada’s Cannabis Compliance Board has approved a penalty that the board’s executive director says appears to be the largest in state history against a marijuana company.

The board approved an agreement at its meeting Tuesday that revokes licenses from CW Nevada, and forces the company to pay $1.25 million in penalties to settle allegations that the company had large quantities of marijuana off-the-books, sold cannabis that appeared to be untested and destroyed evidence.

The company, which had 14 licenses for “Canopi”-branded dispensaries, cultivation facilities and other business operations in Las Vegas and Pahrump, became the subject of a state investigation in 2018 after it fell behind on taxes, according to a complaint.

Inspectors later accused the company of a host of other violations, including illegally moving marijuana around and failing to maintain video surveillance that would document product movements, as well as for inaccuracies in record-keeping in the state’s seed-to-sale tracking system METRC.

According to the complaint, during less than three months in 2019, the company sold 1,793 products that did not have a certificate of analysis indicating they were laboratory tested. The company also allegedly had more than 4,100 marijuana plants that were not registered in the state’s tracking database.

The state has since destroyed all the “untagged” marijuana and cannabis products.

While six of CW Nevada’s marijuana licenses have been revoked, eight remain active. A court-appointed receiver has been directed to sell the active licenses within the next six months to help pay CW Nevada’s debts, including more than $1 million the labor commissioner says the company owes to its employees.

As of March, the company owes the state back taxes of more than $1.5 million, and various others have made claims against the company totaling nearly $207 million. Of that, the receiver has determined that about $32 million of those claims are allowable.

The agreement says the state will continue to pursue civil penalties and fines against majority owner and manager Brian Padgett individually, as well as revoking his marijuana agent card. Padgett did not return a request for comment on the matter on Tuesday.

Receiver Dotan Melech submitted public comment in support of the settlement, saying it strikes a balance between disciplining the company and enabling the company to recoup some of the money owed to its creditors. Melech noted that in addition to the penalty, the value of the licenses that were revoked is about $4.5 million to $6.75 million, and the company will be dissolved at the end of the receivership.

Another party that says CW Nevada did not fulfill its end of a joint venture agreement — Nuveda — argued that the settlement did not go far enough to address the alleged misconduct, and sought a delay in approving the settlement. The board approved the agreement in spite of that request.

Craig Slater, attorney for about 60 of CW Nevada’s former employees who had been making $12 to $18 an hour before pay stopped, said he supported the settlement because it represented an opportunity for his clients to finally recoup wages that are more than a year overdue. He said some had continued to work for the company because they felt it was the only way they might at some point get their back pay.

“CW Nevada's failure to pay my clients the wages due and owing is wreaking havoc on my clients,” Slater wrote. “Many of my clients fell behind in their bills and have yet to fully recover from the devastation.”

CW Nevada Settlement Agreement - Cannabis Compliance Board by Michelle Rindels on Scribd

Under casino pressure, cannabis smoke gets in City Council’s eyes

Back in the dime bag days, the shadowed alley off Sahara Avenue near Las Vegas Boulevard ran behind Honest John’s and the Jolly Trolley, a pair of gaudy grind joints. The Trolley is best remembered for the mob guys who skimmed its slots and fought over nickels and dimes on their way to prison.

The alley was a bustling profit center for pimps and drug dealers. It may have made more than the casinos.

These days, the homely strip mall is anchored by the behemoth Bonanza Gift Shop, a 40,000-square-foot Costco of tchotchkes located in the heart of the action. If you wanted key chains, a dice clock or “I Lost My Ass in Vegas” T-shirt to take back home to Des Moines, it’s the place to go.

And the alley and surrounding Naked City neighborhood? It’s changed a little, but not very much.

“It’s where I used to pick up my drugs and hookers on Friday night,” an old friend said recently, laughing at what we now consider nostalgic. An extremely successful Las Vegas businessman, his tastes in fat smoke and skinny girls became more nuanced after he left the alley and went corporate.

Cannabis has gone corporate, too. It’s not only legal, but celebrated as a source of job creation and tax revenue for the Silver State. Locally, marijuana distribution licensees include some the best-connected people in the valley. 

I heard my old friend’s laughter echo Wednesday at City Hall as the Las Vegas City Council considered, and then sidelined, what by all appearances was a legal and reasonable attempt to secure a special use permit to open a cannabis dispensary in a 3,600-square-foot section of the gift shop otherwise devoted to all those souvenirs.

The applicant, CWNevada and L Chaim 24 Fremont Properties LLC, was represented at the meeting by owner Dr. Pejman Bady. It had already received approval from the City Planning Commission, an approval recommendation by staff, and a full vetting of the 12 requirements it needed to meet that were specific to its cannabis license. Company representative George Garcia called the request “a typical special use permit application. ... We stand before you ready, having met all the requirements of the city.”

Of course, Garcia knew better.

No issue is typical when Gaming Inc. takes an interest. Opposing the pot shop approval was a casino industry contingent led by Nevada Resort Association President Virginia Valentine, veteran gaming attorney Jeff Silver, and executives representing The Strat, SLS/Sahara, and Boyd Gaming. MGM Resorts was present in spirit for its ownership of a nearby outside concert and event site. The casino side also brought out Metro Capt. Laz Chavez to oppose the dispensary.

The cannabis companies in the area aren’t without their own political weight. Essence, which advertises itself as the only cannabis dispensary on the Strip, glows green and sits in a handsome building across the Boulevard from the Strat. Although the company has blended into behemoth Green Thumb Industries, former Tropicana CEO Alex Yemenidjian and son Armen Yemenidjian hold executive positions in the Illinois-based company, and Las Vegas Sun publisher Brian Greenspun is a former partner when Essence was locally owned. But that’s the business.

(As a reminder of how close those connections come to city hall, Mayor Carolyn Goodman noted that she has a son involved in the industry and dutifully abstained from discussing the agenda item. In full disclosure, while reporting this column I discovered that a niece works for the cannabis company.)

City preliminary approvals aside, their reasoning was pretty sound.

Silver called Las Vegas Boulevard a “Yellow Brick Road” leading to downtown and dominated by casino investment, which made me wonder what he’d been smoking.

“And I know that the city and the county have had some disagreement about how long the Strip is,” Silver said. “But the Strip to me is where nonrestricted gaming is located. And that means that it’s taking it all the way past the Stratosphere hotel ... this is what we’re trying to protect. ... We don’t want a cannabis corridor on the Yellow Brick Road heading downtown. We already have what looks like to me to be a pretty heavy concentration of marijuana establishments.”

Golden Entertainment Vice President of Government Affairs Sean Higgins lamented the addition of yet another dispensary in the shadow of The Strat. He admitted  he took a keen interest in cannabis licensing before joining the casino company. But, hey, that was a couple years ago.

Higgins made The Strat sound more like a church than a gambling center when he spoke of the sacrilege of all the pot smoke wafting through the casino and on the streets of Naked City, which he admitted suffered from a crime and homeless problem. He reminded the council that four dispensaries stand within 1,000 feet of casino and 11 dot the area within a mile radius. And with $165 million invested or in the pipeline, The Strat is a major employer that holds plenty of drag on the far north end of the Strip.

“We are trying to revitalize this whole corridor,” Higgins said. “We’re working with the city, with the new archway, which is right on our property, which will be the grand entrance to the city of Las Vegas. We’re doing all those things, and we are vehemently opposed to putting a marijuana establishment, especially a recreational, at the gateway to the city of Las Vegas.”

He also illustrated the obvious: That the applicant was rushing to beat a November deadline before a new state law takes effect and mandates that future dispensaries open at least 1,500 feet from a nonrestricted gaming license.

But didn’t that just make the applicant a good businessman seeking the best location, location, location?

Perish the thought. The SLS/Sahara also weighed in with Government Affairs Director Andrew Diss reminding the council of the company’s substantial stake in the area. He also warned that one leg of a planned pedestrian bridge would empty out essentially at the front door of the proposed dispensary. And how would that look?

Again, didn’t that just make the applicant a good businessman with a great location, location, location?

Careful, smart guy.

In part because they’re hamstrung by marijuana’s outlaw federal status, in part I suspect because they crave a piece of the action, our corporate casino interests continue to send mixed messages when it comes to the cannabis crowd. They want their business, but can’t let them smoke on the property. They can’t have consumption lounges — and don’t want anyone else to start without them.

The proposed dispensary is in Ward 3, now represented by Councilwoman Olivia Diaz, who clearly felt the pressure. “I’m torn,” she said. “I feel like I love the people that are invested in this project, and I also love my downtown area command and the gaming (industry.) Right now we’re a family at odds.”

With council members Cedric Crear and Stavros Anthony against the measure, and fellow members Michele Fiore, Brian Knudsen and Victoria Seaman deferring to Diaz — thanks, guys! — that left Diaz feeling no love from the casino corporations.

In the end, the council punted and pushed the item onto a future agenda.

If you think the dispensary is a favorite for future approval, I suspect you’ve been spending some quality time in that alley.

Correction at 10:09 a.m. on 7/22/19: The original version of this column referred to George Garcia as "company attorney." It has been corrected to "company representative."

John L. Smith is an author and longtime columnist. He was born in Henderson and his family’s Nevada roots go back to 1881. His stories have appeared in Time, Readers Digest, The Daily Beast, Reuters, Ruralite and Desert Companion, among others. He also offers weekly commentary on Nevada Public Radio station KNPR. His newest book—a biography of iconic Nevada civil rights and political leader, Joe Neal—”Westside Slugger: Joe Neal’s Lifelong Fight for Social Justice” is published by University of Nevada Press and is available at Contact him at On Twitter: @jlnevadasmith