Sunday, March 1, 2020 | 8:46 p.m.
RENO — A marijuana cultivator in Nevada has filed a lawsuit against the state accusing regulators of enforcing flawed regulations and imposing excessive fines.
The Reno-based Herbal Care LLC also claims the state illegally forced it to destroy inventory and continues to unreasonably drag out an investigation that began 17 months ago, according to the Reno Gazette-Journal.
The Nevada Department of Taxation suspended Herbal Care's license in September 2018 after it said it found violations including failed record keeping and improper packaging, labeling and plant tagging.
The company filed the lawsuit in Washoe County District Court on Feb. 21 seeking to compel the department to complete its disciplinary actions so the business can move forward. It's also asking for reimbursement for the inventory it was forced to destroy.
"I believe that this situation is going to expose what's going on at the Department of Taxation," said Joey Gilbert, attorney for Herbal Care. "It's a Pandora’s box. It is not pretty, it’s out of line and off the rails. People are going to be shocked at what’s been taking place."
The lawsuit maintains that the department has been unresponsive despite Herbal Care's efforts to pay $412,000 in fines and cooperate in the disciplinary process.
The Gazette Journal reports that an analysis of industry licensees in July identified Michael Mahoney as the other owner. The Department of Taxation has removed any current log of licensees.
Meanwhile, the department has continued to accept the owner's renewal fees, Gilbert said.
The taxation department opened its investigation of Herbal Care's cultivation facility in August 2018 after regulators said they discovered suspicious activity in some of the records. In addition to improper packaging and labeling, it said they found an infestation of spider mites, reports of marijuana consumption on site, use of unauthorized seeds and failure to maintain a 24-hour security system, court documents said.
"These violations, if proven, are sufficient in quantity and seriousness to result in the revocation of the certificate and license," the department reported at the time.
The department, however, did not revoke the license, though officials told the business that it would revoke the license if Herbal Care did not waive its right to a disciplinary hearing, according to the lawsuit.
The department thereafter illegally forced Herbal Care to destroy all of the inventory located at the facility before it had an opportunity to correct the violations, according to Herbal Care.
Eden Collings, the Taxation Department's public information officer, said in an email department officials don't comment on pending litigation.
Monica Moazez, spokeswoman for the Nevada Attorney General's office that will defend the department in the legal battle, said in an email to The Associated Press this week the office defers "to our clients for comments.”
The lawsuit alleges that many of the cultivator's issues stem from turmoil within the Department of Taxation, which is charged with overseeing the recreational and medical marijuana industry.
The department has been plagued by issues since the state debuted its recreational marijuana program in 2017.
The removal of a top program official, sudden changes in industry requirements and under-staffing were just a few indicators of the disarray of the state program.
"After months of rigorous research, hundreds of hours of work, we believe that the department is understaffed, unprepared, uneducated. They don’t have the resources to do their job," Gilbert said.
All businesses facing revocation of a license, for instance, are entitled to a disciplinary hearing, the lawsuit said.
"Herbal Care should not be penalized while this young industry awaits its transition to more adequate regulation by a more competent agency," the lawsuit said.
