Twice this summer, Andrew Mullins emailed state marijuana regulators to make sure they knew about a potential problem.
Mullins, the president of the Missouri Cannabis Trade Association, feared that licensed Missouri cannabis companies may be tempted to add illegal marijuana products brought in from other states to their own products in order to keep their production numbers up — a process known as “inversion.”
“We understand that production is still catching up with demand and wholesale commodities are in short supply,” he wrote in a June 30 email to Amy Moore, director of Missouri’s Division of Cannabis Regulation. “This is an environment that tends to breed shortcuts and bad actors. We are hopeful it’s not the case but fear it could be.”
A month later, Mullins emailed Moore again to ask if her department had the capability to “review extraction efficiency percentages” to see if the illegal products are being introduced during production.
Within hours, Moore replied to Mullins that the state was building teams devoted to this kind of analysis, but the “fastest route” to identify this issue is for a whistleblower to file a complaint.
Soon after, state regulators received an anonymous tip about a potential problem at Delta Extraction, a Robertsville-based licensed marijuana manufacturer that specializes in making THC distillate, a highly potent and pure form of THC used for things like vape pens and edibles and sold to other Missouri manufacturers for their infused products.
Days later, Delta Extraction was suspended from conducting business in Missouri, accused of sourcing untested “marijuana or converted hemp from outside of a Missouri licensed cultivation facility.” This week, the state issued a product recall that pulled more than 60,000 items off the shelves that contained ingredients from Delta Extraction.
The decision to issue a recall surprised the state’s burgeoning marijuana industry.
Even Mullins’ association, who urged the state to pay attention to the issue, believes the state can continue its investigation without recalling thousands of products or “jeopardizing public safety,” because the manufacturers who used Delta’s distillate in their products had to go through another round of “rigorous testing.”
“It is our understanding that all the finished, packaged products currently on hold…have successfully passed the state’s lab testing requirements that determine if cannabis products in Missouri are safe for consumption,” he wrote in his Friday letter.
The back and forth between the industry’s worry about financial hardship and the state’s concern about a threat to public safety culminated Monday, when Delta made its case in front of Missouri’s Administrative Hearing Commission to appeal the state’s decision to suspend its operations.
Mullins’ emails to Moore were included in case exhibits submitted by the state. The commission has not made a decision in the case.
In their motion to appeal, Delta Extraction said they didn’t understand what they were being accused of, other than potentially adding a hemp-derived THCa, a cannabinoid that must be heated to produce a high — such as through a vape pen. Hemp products can legally cross over state lines, but Missouri’s new cannabis regulations that went into effect on July 30 specifically banned adding THCa brought from other states to Missouri products.
“To the extent any of Delta Extraction’s processes required the use of THC-A distillate, Delta Extraction ceased any such process on or before July 30, 2023,” the motion stated.
In its legal filings to the commission, the state did not specify the allegations were limited to sourcing THCa.
Regulators said there have been “no adverse reactions” reported from the products. But the state has been unable to verify that the recalled products “came from marijuana grown in Missouri or that the product passed required testing prior to being sold at dispensaries,” the state’s Monday press release stated.
Red flags
At every phase, marijuana products are weighed and tracked through a system called Metrc, or Marijuana Enforcement Tracking Reporting Compliance.
If a company says it yielded a certain amount in production, and then that total jumps significantly down the line, that’s a red flag. It could mean that the company brought in distillate or a THC commodities from another state like Oklahoma, where it’s much cheaper, and tried to pass it off as their own yields.
That’s the accusation facing Delta Extraction. State regulators provided instances where there was an “unsupportable increase in product weight occurred after mandatory testing was conducted.”
“This is an example of how a licensee may introduce untested and illegal marijuana into the Missouri regulated market through the statewide track and trace system,” the state’s Aug. 12 motion states. “Once the untested and illegal product is in Metrc, the licensee may continue moving the illegal product to other Missouri licensees to make final marijuana products that will be sold to patients and consumers.”
However, that’s not all. The company is also accused of obstructing the state’s investigation.
On Aug. 7, the cannabis division was supposed to visit Delta Extraction’s facility, but the company asked investigators to postpone it to the next day. That night, the company notified the state that someone had broken into the facility and stolen their security equipment.
“In the few short days since the issuance of the [Order of Immediate Suspension], critical evidence of potential regulatory and criminal behavior has been spoiled,” according to the state’s Aug. 12 motion. “The security equipment maintaining the video recordings within the facility and that stored the facility’s access control information have vanished.”
Franklin County law enforcement reported that “a facility representative believed the suspect was possibly an employee attempting to destroy the security system due to an audit the state was conducting,” the motion further states.
Investigators went to the scene and saw that the burglars mysteriously didn’t take the “large volume of marijuana and marijuana products, checks, and drone equipment” that was in their path to the security equipment.
This, combined with the timing of the burglary, “indicate intentional interference” in the department’s investigation, the motion states.
In Delta’s appeal, the company argues the claims are unsubstantiated, and their suspension could lead to them shuttering their business, according to testimony from Rachael (Herndon) Dunn, the company’s chief operations officer.
“Delta Extraction employs 18 individuals,” Dunn stated in an Aug. 9 affidavit of her testimony. “If Delta Extraction is required to cease operations for any substantial period of time or completely, it may be required to at a minimum temporarily lay-off employees or permanently fire them.”
However, the state argued the threat to public safety has not yet been eliminated.
The state is advising patients and consumers who have purchased the recalled product to discontinue using it.
“All unused product(s) should be discarded or returned to the dispensary where purchased,” according to the state’s Monday press release. “Returned products will not count toward a patient’s purchase limit.”
If they have adverse reactions, patients and consumers should report them to to CannabisComplaints@health.mo.gov or fill out a complaint form located here.
Earlier this month,the state said that three marijuana facilities had been suspended pending investigation, but didn’t name the companies.
Right after the state suspended Delta, they also ordered dispensaries statewide to pull thousands of cannabis products that had been infused with Delta’s product from their shelves and put them in secured vaults, where they’ve stayed for two weeks pending the investigation.
About a dozen other manufacturers regularly purchase Delta’s distillate and add it to their own products, industry leaders say. They trusted it was a legal product, and that’s why the recall was so widespread and is impacting so many companies.
“What releasing these holds absolutely will do is head off financial ruin for dozens of Missouri small businesses, who through no fault of their own have found themselves with no good path forward,” said Mullins’ Aug. 12 letter to Moore, prior to the recall. “We absolutely believe that a failure to do so will greatly increase the likelihood hundreds of Missouri jobs will be lost and some businesses will be irreparably damaged or forced out of business.”