Controversial Portland marijuana company Cura Cannabis has finally completed the sale of its recreational marijuana business, nine months after announcing the deal with Massachusetts-based Curaleaf.

The deal closed Saturday at a fraction of the billion-dollar price initially touted after a series of setbacks that included lawsuits, a record financial penalty and layoffs.

Cura had been under investigation by Oregon regulators for inaccurately claiming its flagship Select Elite products were 100% marijuana. The company settled the case Thursday, paying a record $100,000 penalty for not acknowledging additives in its products and an additional $10,000 for “dishonest conduct.”

Cura sold more than 186,000 vape cartridges that contained unlabeled additives last fall, according to last week’s settlement agreement, forcing the Portland company to recall the products and apologize to retailers. Documents show state regulators initially sought to suspend Cura’s license before negotiating a financial penalty instead.

The episode triggered a lawsuit filed Friday by Portland attorney Michael Fuller, first reported by Willamette Week, seeking class-action status and any profits Cura made from selling the mislabeled vape cartridges. Cura did not immediately respond to a request for comment on the suit.

Settling with regulators, though, cleared the way for Massachusetts-based Curaleaf to complete its deal for Cura’s Select brand. The all-stock sale was worth nearly $950 million when the companies announced their deal in May and briefly topped $1 billion amid investor enthusiasm for the transaction.

Curaleaf shares declined sharply in months since announcing the transaction amid a general downturn in marijuana stocks. Curaleaf then reworked the transaction in October, reducing the deal’s value by significantly more.

The deal is now worth a little less than $400 million, though Cura’s owners can potentially double that total if the Portland company’s Select marijuana business hits newly established sales targets this year.

When Curaleaf restructured the deal for Cura and Select, it blamed last year’s vaping health crisis for depressing sales. It also cited unspecified “internal factors within the operations of Select” that resulted in the Portland company “underperforming as compared to its stated business plan.”

"The close of the Select deal is a major milestone in Curaleaf's history and marks an unprecedented phase of growth for our company," Joseph Lusardi, Curaleaf’s CEO, said in a written statement Monday.

Cura CEO Cameron Forni is now president of the Select brand within Curaleaf. The companies said in May he would become join Curaleaf’s board when the deal closed; it wasn’t clear Monday if that happened -- Forni is not listed as a member of Curaleaf’s board.

Curaleaf did appoint a new board member Monday, however: Las Vegas orthopedic surgeon Jaswinder Grover. Grover has a long business relationship with Cura’s executive chairman, Portland investor Nitin Khanna, having been listed as a producer on documentary films on which Khanna also served as a producer.

Cura, which also went by the name of its Select recreational marijuana business, was Oregon’s largest cannabis company. It claimed sales of $117 million in 2018.

Cura’s sale closed following a spate of unannounced layoffs at Cura during the holiday season. The Oregonian/OregonLive confirmed the layoffs with multiple people who lost their jobs during the cutbacks but was unable to ascertain how many jobs the Portland company eliminated altogether.

Cura and Curaleaf did not respond to inquiries seeking details of the layoffs and an explanation of what prompted them. The job cuts took place even as the Oregon Liquor Control Commission, which regulates recreational marijuana in the state, was investigating Cura for mislabeling its products.

Cura claimed there was a breakdown in communication between its Portland manufacturing facility and the company’s marketing department. That apparently resulted in tens of thousands of Select Elite vape cartridges hitting the Oregon market labeled as 100% cannabis, when in fact they included other additives.

Public records show that Cura agreed to a recall, though some products remained on the market for weeks after the recall began. Regulators say it’s not clear whether the additives post any health risk to consumers.

Cura has a difficult past, marred by a real estate scandal, rape allegations, lawsuits and unusual executive hires.

Cura’s initial funding was diverted from Oregon retirees who had invested in a real estate investment firm called Iris Capital Partners. That company’s founder is serving a three-year prison sentence in Georgia, but several dozen Oregon retirees collectively lost about $1 million – and will recover none of that through Cura’s sale.

In 2018, women in the marijuana community highlighted rape allegations against Khanna, Cura’s chairman and former CEO. Khanna had previously faced allegations he had assaulted his wife’s hairdresser on the morning of his own wedding.

Khanna denied the claims and prosecutors declined to bring criminal charges, concluding that even though DNA evidence proved there had been sexual contact they couldn’t prove it was nonconsensual.

Khanna settled a lawsuit the woman brought in 2014 and Cura settled a separate lawsuit last year, in which the Portland company claimed a California rival had used anonymous social media accounts to highlight the rape allegations to undercut Cura’s business.

In 2019, Cura hired a new president – a man named Nick Sarnicola, who previously ran a business called ViSalus that sold protein powder for weight loss. Sarnicola and ViSalus had settled a string of lawsuits alleging they operated a pyramid scheme.

Cura never announced Sarnicola’s hiring and he left the company after The Oregonian/OregonLive reported on his background.

Though they have sold the business, Cura’s owners will be tied to Curaleaf for years to come. Curaleaf said last month that shares issued to complete the acquisition are subject to “lock up” restrictions that limit their sale to 5% of their holdings each quarter.

Restrictions are common after large stock transactions to prevent stock recipients from abruptly cashing out – which could reduce overall share prices. Curaleaf’s restrictions are especially tight, though. Previously, it had permitted up to 15% of shares to be sold each quarter.

Cura’s largest shareholders include Khanna, Forni and Portland attorney Nick Slinde, who acquired his shares in 2014 in exchange for doing legal work for Iris Capital – the fraudulent real estate firm that provided Cura’s initial funding.

The Oregon State Bar has been investigating Slinde since last spring over an allegation that he had a conflict of interest when he negotiated to send money from an Iris legal settlement into the marijuana business.

-- Mike Rogoway | mrogoway@oregonian.com | twitter: @rogoway | 503-294-7699

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