A Winnipeg-based licensed cannabis producer under investigation for selling unapproved product has removed company executives and brought in third-party management to review what went wrong.

Health Canada released new details Friday into its investigation of Bonify. On Thursday, Manitoba's Liquor, Gaming and Cannabis Authority announced Bonify cannabis was seized from the province's retailers and delisted, after two Bonify strains were recalled in Saskatchewan last week over contamination issues.

Manitoba also suspended the sale and distribution of all Bonify products. A fuming Premier Brian Pallister went so far as to call the products "illegal" at a news conference Thursday, but did not elaborate on what he meant.

Bonify announced Friday it has hired a consultant, RavenQuest Technologies Inc., to oversee its cannabis production, but refused to comment on the removal of company executives, as reported by Health Canada.

The federal health agency also confirmed late Friday afternoon that none of the products that were part of the recall were sold in Manitoba. The product was sold in three shops in Saskatchewan.

Contamination issues

On Dec. 7, Health Canada issued a recall notice for two of Bonify's cannabis strains sold in Saskatchewan — Cherry Lime Pie and Warlock Kush — which had not met some "microbial and chemical contaminant limits."

In a statement Friday, Health Canada said it received an emailed complaint about Bonify on Nov. 23 and decided to investigate further during a planned inspection on Dec. 6.

The agency decided to conduct a "far more extensive inspection of the company's premises" after Bonify voluntarily recalled two lots of products sold in Saskatchewan that it said did not receive laboratory testing.

The review of Bonify's Winnipeg production facility took place from Dec. 11-14.

Jeff Peitsch tours the media through his firm's Winnipeg production facility in 2017. He was CEO of Bonify at the time. (Holly Caruk/CBC)

"During this inspection, Health Canada inspectors identified concerns with the internal records regarding the purchase of eight lots of cannabis products held in inventory, including the two lots that were recalled."

Federal officials learned at that time that company executives were removed and a third-party management company was enlisted, it said in a statement. Health Canada did not specify how many executives were removed, or when.

Bonify, which has declined interviews, only commented Friday through a news release, in which it announced that industry consultant RavenQuest Technologies Inc. would provide "operational direction and oversight" over the company's 320,000-square-foot cannabis production facility in Winnipeg.

The company's board is working proactively to ensure compliance with Health Canada's rules and improve its production standards going forward, said Jeffrey Dyck, chairman of Bonify's board.

Full compliance sought

"We have complete confidence in RavenQuest's ability to implement industry best standards of operation and production," he said in a statement.

"We take organizational culture very seriously and aim to emerge from this review process as a fully compliant and highly reputable producer as we move forward."

Kristianne Dechant, spokesperson with the Liquor, Gaming and Cannabis Authority of Manitoba, said the province seized all 20 grams of Bonify cannabis from the few Manitoba stores carrying its products.

The LGCA says anyone who has bought Bonify cannabis products should return them, in their original packaging, for refund to the store where they were purchased.

'Black day' for legal cannabis?

Matt Maurer, a lawyer who specializes in cannabis legislation, thinks seizing Bonify's Manitoba product may have gone too far.

"On one hand, it doesn't surprise me that the province wants to take a proactive and, perhaps, preventative approach," said Matt Maurer, vice-chair of the cannabis law group at Toronto law firm Torkin Manes.

"On the other hand, if the products in question were only sold in Saskatchewan … then it might be a little bit unnecessary to recall everything in Manitoba."

Of the two strains recalled from Saskatchewan, roughly 52 packages, each containing 3.5 grams, were sold at three locations — Cannabis Co. in Regina, Spiritleaf in Moose Jaw and the Pot Shack in Saskatoon — from Nov. 20 to 30, Health Canada said.

On Friday afternoon, Pallister said the province wasn't overreacting by prohibiting further sale and distribution because it doesn't know the extent of the problem.

"Look, I'm not about finger-pointing, but I am about protecting the health and well-being of people who want to buy pot," the Manitoba premier said.

"And if it's not healthy and it's not safe, we should know that and we should know that right away, not in a delayed manner."

He said it was premature to speculate on when the suspension may be lifted.

On Thursday, Pallister suggested it was "a black day for the distribution of legal cannabis."

[The recall is] not a good thing for the industry, but is it a huge blow? Let's wait and see what the reason is. - Lawyer Matt Maurer

John Arbuthnot, founder of the cannabis producer and retailer Delta 9, hopes people don't lose faith in the regulation of legal cannabis.

He said producers like his company are required to keep meticulous records, conduct lab testing and face unannounced inspections from the regulators.

"As much as the entire industry needs to work on the messaging around exactly what it is that we do and what the safety protocols are, I don't think this speaks to the broader cannabis market," he said.

Maurer said it remains to be seen how the recall will affect the cannabis industry.

"There's been other recalls [in Canada] — some very innocuous, some a little more serious," he said.

"It's not a good thing for the industry, but is it a huge blow? Let's wait and see what the reason is [for the Bonify recall]."