Mold scandal in Massachusetts leads to $200,000 fine for marijuana MSO

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Image of a petri dish swab at a cannabis lab

(Photo by Matthew Staver for MJBizDaily/Emerald)

(This story was updated at 12:45 p.m. ET Wednesday to include comments from Holistic Industries.)

Massachusetts regulators last month fined marijuana multistate operator Holistic Industries $200,000 after a mold outbreak in which the company allegedly “knowingly” sold contaminated cannabis.

According to an April 15 stipulated settlement between the company and the Massachusetts Cannabis Control Commission (CCC) approved May 9, the agency alleged Holistic knew about a mold outbreak at its cultivation facility in the town of Monson since at least November 2020.

According to CCC documents, rather than immediately fix the problem, the company sought out permissive lab testing that allowed the tainted marijuana to pass inspection and be sold, leading to “numerous patient and consumer complaints” that Holistic cannabis “smelled and tasted like mold.”

CCC spokesperson Tara Smith confirmed the company paid the fine, but she offered no further comment.

“We had issues with mold in our Monson facility in 2020/2021 and determined the safety of our plants was not compromised,” Jamie Ware, interim head counsel at Holistic Industries, told MJBizDaily in a statement emailed Wednesday.

“To be clear, no product was ever sold or in the hands of consumers that did not pass testing from a state-approved facility.”

In public comments at the CCC meeting on May 9, before the settlement was approved, Commissioner Kimberly Roy praised the employee whistleblowers for alerting officials to the problem and pushed for the creation of a dedicated “whistleblower hotline.”

“We want to thank these employees for being brave enough to speak up,” Roy said.

“We want to make sure consumers and patients are safe, but also our workers.”

Big fine, increased scrutiny

According to the settlement, the CCC determined that Holistic violated four state regulations, including jeopardizing “the welfare of the public.”

Despite increased scrutiny in recent years about the relationship between marijuana operators and independent testing labs, the situation came to light only after employees contacted regulators in fall 2021, according to the CCC.

Employees claimed company leadership knew about the problem, but moldy product was “pushed through anyway,” according to the settlement agreement.

Speaking for Holistic, Ware said via email that “even though all products passed all testing requirements during that time, we decided to completely renovate the facility at significant expense to ensure we could provide the best quality, safest products with no future issues.”

“During that time, we also consulted with top environmental science experts and OSHA (Occupational Safety and Health Administration) and were assured that any issues within the facility did not pose a human health hazard.”

Gaming the system?

Critics say the situation highlights several ongoing problems, including lax oversight that allows unscrupulous operators to use labs that provide desirable results, including inflated THC potency.

Seeking lab results that allow contaminated product to enter the market creates potential for health and safety crises that affect both workers and consumers.

“I think it’s fairly serious. The ease with which the system was gamed is really concerning here,” said Jeff Rawson, the Cambridge, Massachusetts-based founder of the Institute of Cannabis Science, a consumer-advocacy and watchdog group that’s been sounding the alarm over lax testing and safety standards.

“It’s fraud, and it’s also an unlawful occupation hazard.

“You are not allowed to employ people in a workplace that’s full of mold.”

Such problems aren’t limited to Holistic, according to Rawson, who has performed random testing of off-the-shelf cannabis products in Massachusetts and found about 10% of those selected failed his own testing for mold.

‘Knowingly’ sought PCR testing

As part of its settlement with the state, Holistic “neither admits nor denies” any allegations, including:

  • Mold “was present” throughout Holistic’s 56,000-square-foot cultivation facility, including grow rooms, processing tables, “office spaces, drains, HVAC systems and structural elements.”
  • Holistic “knowingly” requested polymerase chain reaction (PCR) testing rather than plate assay testing “to ensure the maximum volume of product would reach the market.”
  • Holistic did not begin remediating the mold outbreak until April 2021, despite knowing about the problem the previous winter.
  • The company did not cease production during the mold outbreak, nor the remediation efforts.

As part of the settlement, Holistic must, for six months, submit product for testing to a third-party lab agreed to by both the state and the company.

Employee whistleblowers

Holistic’s alleged mold problem became public knowledge in 2021, thanks to employee whistleblowers who leaked word of the situation to local media as well as state regulators.

That year, an independent investigation found “significant” mold contamination “throughout the facility” in Monson, according to a report anonymously leaked to the Daily Hampshire Gazette and other media outlets.

At the time, Jamie Ware, a senior vice president at Holistic, blamed a December 2020 power outage for a “high-humidity event” and said the company found mold in June 2021 after a “pervasive smell” appeared.

Large, privately held MSO

Headquartered in Washington, D.C., Holistic Industries also operates cultivation facilities in Maryland, Massachusetts, Michigan, Oregon, Pennsylvania and West Virginia.

The company operates 15 adult-use stores and medical marijuana dispensaries under its Liberty brand in California, Maryland, Massachusetts, Michigan and Pennsylvania.

In news releases, Holistic describes itself as “among the largest” privately held MSOs in the country.

The company also scored a marketing coup when it secured the rights to sell cannabis using the name and likeness of Grateful Dead front man Jerry Garcia.

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Massachusetts and safety

The alleged mold outbreak in Monson is one of several incidents to involve employee and consumer safety in the Massachusetts cannabis industry.

In January 2022, a 27-year-old cultivation worker employed by Florida-based MSO Trulieve Cannabis Corp. died after collapsing at the company’s former grow operation in Holyoke.

As part of its settlement in that matter, Trulieve paid a $14,502 fine and agreed to fund a study about the hazards of ground cannabis dust.

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