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Kaya Shack, a vertically integrated cannabis operator in Oregon, will sell its Salem dispensary by February 1, 2023 under a sale-delivery agreement for two 2019 violations, according to the Oregon Liquor and Cannabis Commission (OLCC).

Kaya Shack is owned and operated by Kaya Holdings Inc., the first fully reporting public company to own and operate a legal cannabis business from seed to sale.

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For about a year – from February 2019 to February 2020 – Kaya Shack allegedly sold adulterated pre-rolls and cannabis flower to consumers or passed them on to other licensees. The products were exposed to broken glass from dropped jars that the retailer “most likely tried to sift out,” according to an OLCC investigation.

Kaya Shack issued a statement in response to these allegations: “The company had previously confirmed with the OLCC the appropriate procedures for the destruction and disposal of glass contaminated product and subsequently documented the company’s compliance with those procedures (including videos and images of this disposal). “

In a second breach, OLCC officials allege that Kaya Shack asked or encouraged Chairman and CEO Craig Frank and Senior VP of Operations Chad Craig (“and/or employees, agents or representatives of Licensee”) on numerous occasions from approximately February 2019 to May 2020 employees to hide potential evidence of government violations “by telling them not to speak directly to the OLCC and/or by threatening employees with termination or lawsuits if they report matters of concern to government regulators.”

Additionally, according to the OLCC, Kaya’s management had employees sign a non-disclosure agreement stating that they could be fined if they made negative comments about the business.

According to Kaya, officials at the company forwarded her employment contract to the OLCC.

“[The agreement] requires employees to confirm their understanding of how any compliance concerns an employee may have may be addressed (in accordance with policies written by the OLCC, which state that employees must first discuss them with the licensee),” the statement reads Explanation. “Accordingly, the company had filed a response denying the allegations and requesting a hearing on the matter.”

Cannabis Business Hours reached out to Frank, who confirmed that the settlement only affects Kaya Shack’s Salem location, but offered no further comment beyond what the company said. Kaya Shack also has a pharmacy in Portland. Both retail locations held active OLCC licenses as of October 19, 2022.

CBT also reached out to an OLCC spokesman asking for clarity on the settlement, but that spokesman was not immediately available.

Instead of allegedly selling the usable cannabis to consumers and/or other licensees, Kaya Shack could have shipped it to be processed into extract (thus coming out the entire jar), according to the OLCC.

“The evidence in this case was complex and controversial, based in part on four previous anonymous employee complainants and an OLCC visit to the premises during which an inspector was briefed on and saw the screening process,” the summary said agreed settlement agreement.

There have been no known consumer complaints regarding the glass, according to OLCC officials, who also noted that 65% of the listed company is owned by pure investors uninvolved in the wrongdoing.

After the OLCC charged Kaya Shack with the two violations in a January 25, 2022 notice, commission officials proposed the cancellation of Kaya’s license and the seizure and destruction of the company’s cannabis items. However, according to the OLCC, the licensee requested a hearing and expressed a desire to enter into a settlement agreement.

“Staff determined that this would be an appropriate case to accept a sale-delivery agreement,” the summary reads.

While Kaya Shack’s license holders believe the allegation is unfounded, according to a company statement, they have since elected to enter into the purchase-supply agreement “in order to resolve the matter as is without the further investment of time and attorneys.” [in] the process of reducing its footprint in Oregon in favor of overseas projects in Greece and Israel.”

The statement added that Kaya Shack plans to expand its retail presence in Portland to offset the loss of the Salem location.

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