Alleged fraud, theft, defamation, drug abuse: Longtime marijuana industry insiders prep for court battle

A legal battle royale between two cannabis consulting firms in Los Angeles will pit industry insiders and former friends against each other in a case that exemplifies how cutthroat the marijuana business has become.

In one corner is Avis Bulbulyan, CEO of SIVA Enterprises and a member of the California Cannabis Advisory Committee, which works closely with the state Bureau of Cannabis Control to shape marijuana policy.

In the other corner is Lance Ott, previously CEO of Washington state-based Guardian Data Systems and a former board member of the National Cannabis Industry Association.

After a brief stint at SIVA, Ott is now an executive with Cirrata, a new L.A.-based marijuana consulting company.

Both men also serve on the L.A. Cannabis Task Force, Bulbulyan as president and Ott as a member of the group’s regulatory advisory board.

Despite their shared interest in the marijuana industry, Bulbulyan filed suit Friday in federal court against Ott and four other executives at Cirrata, alleging the former SIVA employees executed an “illegal scheme” to “loot (SIVA) of its proprietary data … to start a rival company.”

In the process, the suit alleges, the five broke multiple laws, including one that could lead to jail time.

The suit further alleges the five Cirrata executives have engaged in attempts to damage Bulbulyan’s credibility and to allow Cirrata to siphon cannabis business clients away from SIVA.

The suit requests:

  • A temporary restraining order against the five defendants and Cirrata.
  • A permanent injunction to prevent Cirrata from using any allegedly stolen business information.
  • An unspecified amount of monetary damages.

Though out-of-court settlements are typical in such disputes, both sides say they’re prepared to go to trial.

Avis Bulbulyan

“I’m going absolutely every single step all the way to the very end – every last penny I’ve got, every last nickel I’ve got. This is going all the way to the end. I want my day,” Bulbulyan told Marijuana Business Daily.

“To me, my reputation is absolutely everything. I won’t change it for any dollar amount.”

Attorney Steve Baghoomian, who is a founding executive at Cirrata and a defendant in Bulbulyan’s lawsuit, denied the allegations and promised a fiery countersuit he said would detail “illegal activity” at SIVA, ranging from “drug abuse to financial crimes.”

“I have no interest in settling this whatsoever … If it goes to trial, it goes to trial,” Baghoomian told MJBizDaily.

“The scope of what you’re going to see coming out – this stretches the entire gamut. This is going to look like a bad episode of ‘American Greed,'” he added, referencing CNBC’s true crime TV series.

The allegations

According to the lawsuit, Bulbulyan hired Ott and Baghoomian, along with three other defendants – David Yeager, Colton Lasater and Charles Christopher – to work at SIVA between October 2017 and February 2018.

Ott, who befriended Bulbulyan in 2014, was hired as SIVA’s chief strategy officer last fall. His former company, Guardian Data Systems in Vancouver, Washington, was administratively dissolved this year after its business registration expired in December, according to secretary of state records. Baghoomian, Yeager, Lasater and Christopher were subsequently hired at SIVA.

The suit charges that between October 2017 and January 2018, Ott, Baghoomian and Yeager allegedly began conspiring to steal Bulbulyan’s clients and proprietary information, including business strategies, onboarding documents, operations manuals, market data and more.

Lance Ott

Ott, Baghoomian and Yeager allegedly set plans to form Cirrata as early as January, including searching for office space for the new consulting firm.

All five defendants began cutting Bulbulyan out of intraoffice communications while they were still employed at SIVA to conceal their plans, according to the suit.

They also allegedly reorganized SIVA’s Microsoft Outlook so certain emails would be deleted without Bulbulyan seeing them and arranged meetings with potential clients at times when they knew he would be unable to attend.

Between March 23 and April 2 of this year, all five either resigned from SIVA or were terminated.

The suit alleges that before his firing, Yeager stole 59 confidential files from SIVA, modified and deleted various files “in an attempt to sabotage and create chaos” for the company and changed administrative settings in an internal SIVA computer system “to prevent Bulbulyan from being able to gain access.”

Bulbulyan said in the suit he discovered around early April that Ott, Yeager and Baghoomian had been working behind his back to steal SIVA’s proprietary information. Bulbulyan’s revelation came, in part, because Baghoomian and Yeager left undeleted emails detailing their work in setting up Cirrata.

Bulbulyan’s subsequent investigation revealed “substantial details of theft” by all three, according to the suit, “as well as strong corroborating evidence of coordination and conspiracy between (Ott, Yeager, Baghoomian, Lasater and Christopher) to misappropriate and convert SIVA’s intellectual property … to build and maintain a competing business.”

According to California Secretary of State records, Cirrata was incorporated April 12. But Cirrata’s website domain was registered March 12, “while (the defendants) were all employed by and officers of SIVA,” according to the suit.

Since leaving SIVA, the suit alleges, the defendants have also “continued to disparage” Bulbulyan and SIVA through online employer review sites such as Glassdoor and Yelp.

Online comments refer to Bulbulyan as a “compulsive liar,” a “conman extraordinaire,” a “scam artist,” a “two bit hustler” and accuse SIVA of “ripping off” clients. The comments even suggest Bulbulyan is depressed, going through a divorce and that SIVA is insolvent.

Bulbulyan says the claims are false.

His lawsuit also accuses four of the defendants of breaking California criminal laws regarding illegal computer access and data theft, a crime that could be punishable by jail time should a prosecutor choose to take up the case.

A long fight?

Ott, Yeager, Lasater and Christopher could not be reached for comment, but Baghoomian called the suit “baseless” and “meritless.”

“We intend to bring a very, very forceful counterclaim that’s going to expose a lot of questionable – likely illegal – activity on behalf of Avis,” Baghoomian said.

He declined to specify what he was alleging, other than “drug abuse” and “financial crimes” and said those details would be outlined in Cirrata’s countersuit, which will likely be filed within a few weeks.

Baghoomian contended he was fired for raising concerns about potentially illegal activity.

“When I brought these things to Avis’ attention, that’s why I was let go,” Baghoomian said.

Bulbulyan, meanwhile, said there’s “nothing they can come to me with on settlement terms. They all have to leave (the cannabis industry).”

Regardless of the outcome, the case is serious and not uncommon in the increasingly contentious marijuana industry, said San Francisco-based attorney Katy Young, who specializes in legal business disputes.

Young said she doubts the case will go to trial, but if it does, it could take 12-18 months to play out.

She also predicted a verdict in Bulbulyan’s favor could “cripple” Cirrata because the case could deliver millions in damages to the plaintiff.

Bulbulyan contends in the suit that, because of the defendants’ actions, he lost $20 million in investment money for a large project.

He also told MJBizDaily he lost almost $3 million in the first quarter of 2018 on deals that weren’t solidified, as well as at least five business clients to Cirrata because of the defendants’ actions.

The only reason SIVA is still running is because of his reputation within the industry, Bulbulyan said.

“The takeaway is that entrepreneurs have to watch their own data traffic,” Young said. “If (Bulbulyan) had someone watching the email traffic – which an employer is allowed to do – he would have seen earlier on that employees were forwarding emails to their own personal emails.

“It’s a cautionary tale in data security. It’s a cautionary tale in checking up on what your employees are doing. Whenever you put someone in a position of trust, you’re vulnerable.”

John Schroyer can be reached at [email protected]

21 comments on “Alleged fraud, theft, defamation, drug abuse: Longtime marijuana industry insiders prep for court battle
  1. Gabriel Greenstein on

    While I can’t speak to the particulars of this situation, I can say with certainty that I have known and worked with Lance Ott for nearly a decade, and that during that period, I’ve found him to be a dedicated, honest, and hard working professional, as well as a consistent and long time activist for safe and legal cannabis.

    Reply
  2. Gracen on

    I’ve known lance for years and he’s always worked hard to help me. I gave 10k to siva (I’m young and not a trust funder so that’s quite a lot for me) and while lance did as much as he could to help me, I only spoke to Avis a couple times and to the best of my knowledge he never did anything, but apparently got most all of my money.

    Reply
    • Avis Bulbulyan on

      Gracen – Your account is the one that gave rise to the 15th cause of action in the complaint, “Monies had and received”. You may want to ask your friend how much of what you gave him was reported to SIVA and how much of what he reported was actually turned in. You’re welcome to reach out and I will gladly share the details of your account with you.

      Avis

      Reply
  3. Jason D. on

    I find it very hard to believe Ott or Cirrata associates would act in such a manner. I’ve had a 9 year business relationship with Lance, as a reseller agent for Guardian at the time. He was always transparent with me and worked tirelessly to benefit the larger whole of all businesses, large or small in the medical & recreational markets, via the NCIA. He has provided self-derived invaluable information to so many consultants and businesses, many times at no cost.

    On the other hand, I’ve referred clients directly to SIVA and have had to answer to nonexistent client or prospect service. Multiple times my clients and other propects were trying to reach Avis after initial consultations. He was always unavailable for calls and ignored many attempts at reaching out via email, creating trust and competency issues with my clients.

    Its unfortunate to see this happen.

    Reply
  4. Brandon Hirsche on

    I don’t know either of them but seems a tad fishy the defendants served a “brief stint” at Siva and then founded their own competing business doing the exact same thing while still employed. I’m assuming just by the website being registered before they had left would violate all kinds of non-competes/NDA’s etc…

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  5. Sadie on

    I have known Lance for over 15 years both personally and professionally. Lance always puts his clients first and it doesn’t surprise me that if laws were being broken and clients were not being put first causing Lance to leave. Lance would not put his reputation or his clients at risk for someone else’s lack of professionalism. I have personally witnessed Lance send Avis dozens of clients over the years and Lance has been in this industry longer than Avis. I’m wondering how much of Lance’s data he has? His knowledge of the industry exceeds Avis’. Both parties have a family to support and It’s a shame that Avis is wasting everyone’s precious time with these frivolous accusations.

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  6. Matt E on

    And here comes the entitlement and corporate greed. I can’t believe this made MJ biz. This happens every day in the cannabis industry and to so many firms and friends separation and deceit is common place as everybody looks to make the quick buck. The fact that the industry is still technically illegal as well as the fact that information in our very small but growing industry would be proprietary is insane as the industry is finally getting trademarks and patents to be approved by the US government. The bigger problem is in California you’re going to have a huge challenge proving any of that Avis. In my opinion Avis just made himself look worse. What a waste of time and a petty accusation. I know Lance very well and I sure hope that truth prevails.

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  7. Chris on

    My experiences with Lance and Steve throughout 2018 have been extremely professional. Lance was referred by one our financial partners following his Siva departure. I have not met a harder worker within the cannabis industry. His industry knowledge, work ethic and vast network of contacts has been invaluable to us. I’ve met many consultants within this industry and I consider Lance to be refreshingly honest, straightforward and fair. I have not heard nor experienced any disparaging remarks over the dozens of conversations we have had. I hope both parties can resolve quickly and continue to positively influence this industry.

    Reply
  8. yarrow l kubrin on

    Avis has been nothing but professional in my interactions with him. The fact that the defendants all left so quickly and started a competing company is not a good look. That is not to say that I know if all of the allegations have merit, but certainly the optics is not good for those folks who worked at SIVA and all departed together so quickly.

    Reply
  9. Chris J on

    I find the Siva allegations hard to believe. I’ve known Lance for six years and he’s always been professional and helpful whether he was profiting or not. He’s constantly connecting folks in the industry with each other to help them further their business and build their network. He has supported the cannabis industry both during this “green rush” and well before most people even thought the industry was going to take off. He’s one of the most respected individuals in cannabis. It’s a shame this matter is being reported here. Is this a news outlet or the National Enquierer?

    Reply
  10. The Merchant Doctor on

    While we do not know the specifics related to the cause behind the split up in this case I can speak to the integrity of Lance Ott as a pillar of moral standard in both the cannabis industry and in life. Our experience with SIVA is limited, but, after sending referrals to SIVA consulting based on Avis’ reputation our team received reports of clients being treated poorly, jobs not being completed, and arrogance – none of which are acceptable when providing consultation services. If these reports were true I would think that would be reason enough for Lance and others to move on to operate independently or with other firms. This is a sad situation and I have a feeling that whole story is not being told. The defamation from “divorce” cases like this do not benefit any of the parties involved and I hope that there is a swift and fair resolution without mudslinging.

    Reply
  11. Elizabeth on

    I know and like Lance, so this is not passing judgement and mostly feel incredibly sad to see this come to pass. However, I want to speak out on Avis’ behalf. I worked with Avis for six months at SIVA and served on the Task Force with him. He was engaged and professional, as well as being a solid community organizer and a good actor. We didn’t always see eye to eye, but I’m incredibly grateful for the time we worked together and the opportunity to learn from him. If the facts as alleged are true, it’s an incredibly serious breach of trust. It’s so important to let the facts of the case speak for themselves, and reserve judgement until then.

    Reply
  12. Avo Harutunian on

    I can say for sure Avis and his team are nothing but professionals. I have been a client of theirs for over two years and I am extremely happy with their services. For the people on the other side greed is the only word that comes to mind. Keep up the good work team SIVA you guys are awesome

    Reply
  13. Brent S. on

    When one fails or is failing, they either place blame on others or accept their failures. This is industry newsworthy? Sounds like a pissing match.

    Reply
  14. Rick on

    The good news is, this happened in California so it’ll be easy to turn it into a movie of the week. The bad news is, a friendly business that used to involve friends selling to friends is turning into typical cutthroat corporate American bad behavior. Sad to see.

    Reply
  15. John Spagnola, R.Ph. on

    Avis has my respect and admiration. Our company’s dealings with Avis personally and the SIVA team over the last 2 years has been top shelf and professional. We did not always see eye to eye but they always had my trust. If Avis says alleges these acts took place I believe him and he has my support. I do not know Lance Ott and the rest of his team but from the outside looking in the timelines and actions are suspicious at best. Let the facts fall where they may and do not get involved in Monday morning quarterbacking. Best of luck to Avis and the SIVA team.

    Reply
  16. Larry Jenks on

    If spending every dollar to go after someone is your goal then I would take a step back and think is this worth it? I have seen this behavior before and only cost them the company.

    Reply
  17. Vickie M Sheppard on

    I worked for Lance as the accounting lead at Guardian, before we realized what was up with the company. Lance was by all measures of the word transparent and had nothing but positive motives for everything he did. I can’t imagine he would be capable of trying to spy on an old friend.

    Reply
  18. Arturo.C on

    I consider Avis a pioneer in cannabis consulting. After 2 years and countless meetings for pre-licensing, I wen’t back to pursue additional opportunities today. I don’t doubt the knowledge base or commitment to customer success here, I doubt the moral conduct of those who believe learned information allows possession. Hopefully, this was one big misunderstanding,otherwise, some will owe much more than an apology.

    Reply

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