The inside story of how regulators took down a successful marijuana company

Sweet Leaf store

The Sweet Leaf marijuana store in Federal Heights, Colorado, was allowed to remain open temporarily after Denver regulators shuttered most of the chain’s other storefronts. (Photo by Matt Staver)

(This story appears in the April issue of Marijuana Business Magazine.)

New details have emerged from both sides in the high-profile flameout of Denver-based cannabis company Sweet Leaf, one of the most talked-about falls from grace in the regulated marijuana industry to date.

A brief background: In 2017, the company boasted 400 employees and was on pace to become one of the largest retail chains in Colorado. It held 26 marijuana cultivation, processing and dispensary licenses in Denver alone, with more in surrounding communities as well as a cannabis business in Portland, Oregon.

Then the wheels fell off.

By the end of that year, the Denver police would raid the company’s stores, arrest more than a dozen budtenders, destroy roughly 7,000 pounds of cannabis and sentence the three owners to a year in prison each for their roles in an illegal, multimillion-dollar sales scheme.

In 2019, owners Matthew Aiken, Christian Johnson and Anthony Sauro each pleaded guilty to violating the Colorado Organized Crime Act. Local authorities found them to be fostering the practice of “looping,” in which one customer would buy the maximum amount of marijuana allowed (an ounce) multiple times during the same day.

The Denver prosecutors said some consumers “looped” up to 40 times per day, leading to almost 2.5 tons of marijuana diverted to the illicit market.

But there’s a lot more to the story, says Nichole West, who was vice president of sales for Sweet Leaf before the raid and arrests. West pleaded guilty to felony drug charges and served a 30-day jail sentence for her role in the sales plot.

Nichole West of Sweet Leaf

Nichole West

In an exclusive interview with Marijuana Business Magazine, West explains why she believes the company was targeted by police and what she would have done differently.

(An interview with the former regulator involved in the Sweet Leaf investigation is available here.)

Why do you think law enforcement went after Sweet Leaf?

My biggest statement about this is 60% of the industry was practicing the same practice.

Sweet Leaf had made an effort to (offer) the lowest prices in town. That was literally our goal: to be the best price. “Working man’s weed” was our goal. We wanted to be weed for the people.

With as many stores as we had (operating), we had buying power. We had huge volume and the ability to buy a lot of product. We greatly affected the price point of the (Denver cannabis) market.

Based on our ability to buy so much more, we would get discounts. If I said, “I will buy all of it,” I would get a better price.

We were drastically busier than a lot of the other facilities around the state based on the fact that we (had) the best prices. Regardless (of whether) people were coming back multiple times, sometimes we would have lines out of our store.

We were in a lot of these really cute neighborhoods around Denver. We would end up with disrespectful customers that pissed off the neighbors, and so the city of Denver wasn’t stoked with us. We had become somewhat of
a nuisance based on how busy we were—and we weren’t in neighborhoods where that was OK.

In the Highlands, they didn’t want to see people out the door when they’re walking their children to the park. The neighborhood still had a very NIMBYian view of cannabis.

We had shifts where we would go clean up trash because customers were disrespectful. People would go buy weed and leave papers on the ground in these neighborhoods. We would be chasing these papers around.

But at a certain point, we had so much business that it was hard to keep up. It was hard to keep up with maintaining everything in the neighborhood properly while growing at the rate that we were.

The city was receiving nuisance reports from neighbors that the customers were leaving trash and weed jars all over the ground. That was a problem.

 Was there anything Sweet Leaf could have done differently?

Taken a more conservative approach. We were pushing the limit. We were trying to change things.

Realistically, how should you read the law? It never once said you can’t let somebody come back twice in one day. Never. It never said we were responsible for knowing how much someone had purchased in one day.

From our understanding, it was, “Regulate like alcohol.” You don’t track people’s beers, so why would we track your weed?

 What happened to the inventory during the raids and seizure?

Everything got taken. When the raid first happened, because this was a Denver issue, the stores that were not in Denver were not shut down.

The city of Aurora wasn’t willing to even shut them down. They were like, “That’s not against the law.” The city of Aurora did not understand (Denver’s rationale), and the same thing with Federal Heights (another Denver suburb).

So (Sweet Leaf was) able to operate in those two cities. In the city of Denver, which is where their grows were, everything got shut down.

I’m assuming the plants rotted. I wasn’t there, though.

 You were generating tax revenue. Did that seem to matter to prosecutors?

The state. The city. Jobs—we had 400 employees. Think about how much money that is for the economy.

The owners are the most kind, salt-of-the-earth, good, working people I’ve ever known in my life. We thought we were all on the same team. That’s where we went wrong.

It turned out to be Sweet Leaf versus the world.

Why weren’t you able to fight back more?

On a city level, we would have been able to, and on a state level, we would have been able to. But the state Attorney General’s Office was going to be the next court that we hit. We were terrified of federal court.

That’s where I tapped out. I ran out of money. My lawyer said, “It’s a $150,000 retainer to go to a federal trial.” Federal trial was a big deal and terrifying, and we would have faced 10 years in jail—federal prison.

We were out of options. … I had nothing left.

The Denver Police Department worked on the case for a year and a half. Their budget was endless and ours was pennies. None of us had the money. Every penny I had was going to pay my lawyer. It was exhausting.

I wish every day that I was rich. I wish every day that I had the ability to do this for the industry, to fight harder. I wish I had it in me. But I didn’t.

(The police) had invested so much. They’d sunk their teeth into us. At that point, there was no going back.

8 comments on “The inside story of how regulators took down a successful marijuana company
  1. J J on

    Because everyone was doing it, I should not get in trouble….this is a terrible excuse. I had some interaction with Matt and Christian in Denver during 2015. I can attest that these guys had no sense how to operate a large and fast growing company. They were harvesting at 50 days to get weed to market, no rinsing and the pest management practices were questionable. Looping was one problem, there were others. Yes, even more poorly managed companies have succeeded in Denver, this is why the problem of limited licensing results in a lower quality product for consumers. Poor operators can stay afloat because of limited competition. Sorry for the rant but Ms. West only apology is that she did not have more money to fight.. this is bad for the industry. Admit the mistake of not being more vigilant and to take responsibility for the actions of their agents (bud tenders) would be a more mature and respectable approach. Sweet Leaf deserved to lose their licensing and so should many others who operate irresponsibly in the pursuit of max profit.

    Reply
  2. BRUCE RYAN on

    Here in Canada cannabis was (initially) driven by the Charter of Rights & Freedoms – medical issues in court that revolved around epilepsy. This led to a favourable decision by the Ontario Court of Appeals. Government did not appeal the decision to Federal Court: the spectre of prohibition being declared a violation of rights. The law would have gone down years earlier. Instead the Medical Marijuana Access Regulations were created.
    Later, when police raided our “compassion club”, I elected to defend myself.
    Submitting MMAR documents, prosecutors dropped all charges. We immediately filed to have ALL of our property returned. Judge agreed & ruled in our favour. The police were forced to return everything…. including several thousand dollars in power tools ‘seized’.

    Reply
  3. Will Cruzes on

    Knowingly contributing to over possession and out of state diversion isn’t “avoiding responsibility to knowing how much someone has”, its expecting responsible operations to limit illegal activity.

    The defense that “administrative law wasn’t clear and we didn’t know we were violating criminal law” does not matter to criminal prosecutors.

    This wasn’t a regulatory enforcement action as much as a criminal investigation. There’s no two sides to that fact, no matter how they want to spin it or claim they are “victims of the drug war”.

    Reply
  4. Derek on

    “Realistically, how should you read the law? It never once said you can’t let somebody come back twice in one day. Never.”

    “A Retail Marijuana Store or Retail Marijuana Transporter must not deliver
    individually or in any combination, more than one ounce of Retail Marijuana, 8
    grams of Retail Marijuana Concentrate, or Retail Marijuana Products containing
    more than ten 80 milligram servings of THC to a customer in a single business
    day.”

    Page 147

    “1. A Medical Marijuana Store and its employees shall not sell to a patient in a single
    business day, individually or in any combination, more than:
    a. Two ounces of medical marijuana flower;”

    Page 236

    “A Retail Marijuana Store and its employees are prohibited from Transferring more than
    one ounce of Retail Marijuana flower or its equivalent in Retail Marijuana Concentrate or
    Retail Marijuana Product or more than six Retail Marijuana seeds in a single transaction
    to a consumer. A single transaction includes multiple Transfers to the same consumer
    during the same business day where the Retail Marijuana Store employee knows or
    reasonably should know that such Transfer would result in that consumer possessing
    more than one ounce of marijuana. In determining the imposition of any penalty for
    violation of this Rule 6-110(C), the State Licensing Authority will consider any mitigating
    and aggravating factors set forth in Rule 8-235(C).”

    Page 312

    Reply
  5. Noneya Business on

    Utter nonsense. I know for a fact her customers threatened neighbors in the Highlands with guns and their jars and trash were everywhere. They allowed and incentivized looping, period. The regulation was written clearly enough the rest of us understood it fine. Sweet leaf was even sent a letter by the MED to stop and they persisted. They got what they deserved, all the rest have to play by the rules! I’ve worked in this industry over 5 years in compliance and operations and they were idiots. The larger the operation the more likely the weed is trash and shady things are being done. Sorry lady but your sob story is trash. The owners were likely trying to juice the numbers to sell it to a sucker who would come in and not allow looping then wonder why the sales were down 50% or more. I’d watch the loopers in the Highlands pop their trunks toss in an ounce and head right back in over and over. I guess I shouldn’t believe my lying eyes?

    Reply
  6. Dwight Threepersons on

    It is mind boggling to see the excuses being made for these criminals when there are still many people, incarcerated for doing far less than this in Colorado and who are effectively locked out of the system to startup and own minority backed cannabis businesses. People of Color have been punished disproportionately by the very conservative Colorado criminal justice system, the media and society. Two issues have to be addressed, first of all the light sentences handed out by the courts for selling thousands of pounds of marijuana illegally, not paying taxes to the feds and the locals, and acting as a drug gang to facilitate, distribute and conceal the proceeds etc. The sentencing for these crimes was nothing a light slap on the wrist. Now let us do the race litmus test. Change the color of the defendants to black and latinx men caught doing these criminal acts, in that bastion of liberalism, Denver, doing the same thing, and what do you really expect the reaction of the media, criminal justice system, the police and the FBI would be? Ms. West thinks that lame excuse that just because these gangsters paid taxes and employed people while doing illegal drug deals, well so does the Mafia and other criminal enterprises. This whole case stinks of hypocrisy and does not bode well for any kind of social justice for POC in the industry or in the criminal justice system because of their involvement with cannabis.

    Reply
  7. M.C. on

    Hahahaha, What a joke of an article. Everyone knew this was illegal to do. EVERYONE. I worked in dispensaries around this time and it was very clear looping was illegal. Whether or not you followed the rules is your own decision, but to write this all out like you’re someone they picked on is garbage.

    You broke the law, you got caught, so go to jail and shut up. Its crap like this that gives the people following the rules a bad name, and makes it harder for the industry itself to thrive LEGALLY. These are people making illegal choices to get ahead, not just to make ends meet. When you’re driving a new Mercedes, its hard for me to feel bad that you went to jail for getting it they way you did.

    There are too many OG’s in this industry that think the rules dont apply to them. You’ve been making money hand over fist under soft enforcement for the last decade then you’re surprised when you’re held accountable. Tough Cookies. Maybe dont tell your employees to do illegal stuff over slack….

    Reply
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