rewrite this title and make it good for SEOLawsuit claims “systemic diversion” at cannabis MSO Curaleaf

Illinois cannabis regulators suspected “systemic diversion” at major multistate operator Curaleaf Holdings’ cultivation center in the state, a former high-level employee alleged in a recent lawsuit.

According to a July 29 complaint filed in U.S. District Court in the Northern District of Illinois by Matthew Kalmick, a former Curaleaf regional compliance director, state officials noted “a vast amount of unaccounted-for inventory” at the company’s operation in Litchfield, Illinois.

In addition to “potential systemic theft,” Bresha Brewer, then the cannabis bureau chief at the Illinois Department of Agriculture (DOA), also “flagged numerous environmental, health and safety …  concerns” including “unlicensed pesticide use,” according to Kalmick’s suit.

Rather than correct that “crisis” or address separate “ongoing non-compliance” at another Curaleaf location in North Dakota, company brass fired Kalmick in May 2024 after he reported possible “violations of state and federal law,” the lawsuit alleges.

Unique for its detailed and serious allegations coming from a senior employee, Kalmick’s suit is also notable in alleging diversion in Illinois, a $2 billion annual market where state law restricts both the number of cultivators and their output.

Those are two factors usually absent in states where operators allege product missing from regulated supply channels.

Contacted through his attorney, Chicago-based Davina Rae DiPaolo, Kalmick declined to comment.

In an email, Curaleaf spokesperson Jordon Rahmil said the company would not comment.

Court records show that Curaleaf on Monday requested a three-week extension to file its response to Kalmick’s complaint, initially due this week.

Kalmick’s lawsuit claims violation of state and federal employment law, including whistleblower protections and retaliation, and seeks unspecified damages at a jury trial.

MJBizDaily could not immediately corroborate Kalmick’s claims..

Brewer, who has since left the DOA for another post in state government, did not respond to requests for comment.

Illinois state law dictates that “all inspections and investigations of a licensee are confidential,” Lori Harlan, a DOA spokesperson, said in an emailed statement.

Harlan declined to comment further.

Cannabis diversion allegations rare in Illinois

Allegations of diversion, in which cannabis grown in regulated channels ends up on the illicit market, are almost routine across markets in the $32 billion legal industry.

But, as observers noted to MJBizDaily, they’re not often made in Illinois, where limits on the number of cultivators and their square footage have prevented the oversupply problems that depress prices and otherwise encourage diversion.

Illinois cannabis prices did drop slightly in 2024, the year after state regulators allegedly shared their concerns about Curaleaf, according to Kalmick’s suit.

The Illinois DOA permits 21 large-scale “cultivation centers,” which state law limits to no more than 210,000 square feet of canopy for plants in the flowering phase.

Records show that multistate operators, including Green Thumb Industries and Cresco Labs, both of which are headquartered in Chicago, hold many of these permits.

States where cannabis prices have crashed amid oversupply – and where state law does not impose such limits – such as Oregon and Oklahoma are often mentioned when the diversion problem is discussed.

Both the state of origin as well as Kalmick’s position within the company make his complaint stand out.

Lawsuit claims Curaleaf brass knew of Illinois diversion problem

According to his suit, Kalmick, a Chicago resident, worked at Curaleaf as a compliance director from April 2020 to June 2021 and again starting in January 2022.

That month, he became regional compliance director for operations in six East Coast states but continued to work remotely from Chicago.

According to his LinkedIn profile, Kamlick worked at multistate operator Verano Holdings between his stints at Curaleaf.

He learned of Illinois regulators’ apparent concerns following an October 2023 corporate restructuring that caused “widespread confusion” in the company, according to the suit.

Kalmick resumed oversight duties in Curaleaf’s central region, including Illinois and North Dakota, in November 2023.

The next month, according to the lawsuit, Illinois’ Brewer told another Curaleaf employee that state regulators “remained deeply concerned about conditions at Curaleaf’s Litchfield cultivation facility.”

State regulators had identified  “the same unresolved issues in multiple site visits over the prior nine months, including a vast amount of unaccounted-for inventory – raising suspicions of systemic diversion,” the lawsuit alleges.

“Brewer also flagged numerous environmental, health and safety (“EHS”) concerns, including improperly stored chemicals, obstructed emergency exists, unlicensed pesticide use, and insufficient use of Personal Protective Equipment (“PPE”),” the lawsuit continues.

Curaleaf also penalized for pesticide use, lawsuit claims

Kalmick claimed to have “escalated” the issues to company brass, including Senior Vice President Paul Chialdikas, who ignored them, the lawsuit claims.

In January 2024, Illinois regulators dinged Curaleaf again, this time “for unlicensed pesticide use,” according to the lawsuit.

That same month, Kalmick learned from other employees that company leadership was “aware of ongoing non-compliance at the Fargo (North Dakota) facility but were indifferent” despite penalties and fines assessed by both Illinois and North Dakota, the suit alleges.

In all, Kalmick claims to have informed company leadership of diversion or other concerns 12 times.

The situation deteriorated the next month, according to the suit.

During  a state inspection on Feb. 14, 2024, regulators halted “all product shipments from the Litchfield facility” after expressing “serious concern over units of missing, unlabeled, mislabeled, or unaccounted-for inventory,” the lawsuit claims.

Kalmick’s suit also accuses former Curaleaf CEO Matt Darin of interfering with his relationship with state regulators and then later retaliating against him for reporting the alleged diversion problems by denying him a promotion and finding a pretext to fire him.

He was fired on May 20, 2024, the suit claims.

Curaleaf settled separate labor violations in Illinois

Curaleaf’s Litchfield cultivation center had come to authorities’ attention before.

Separately from Kalmick’s allegations, records show federal officials cited Curaleaf for three “serious” workplace safety violations in Litchfield in 2023.

Curaleaf paid about $16,800 to settle three violations related to employees’ use of respirators, according to federal Occupational Safety and Health Administration records.

Chris Roberts can be reached at chris.roberts@mjbizdaily.com.