Ex-NHL team owner and felon Peter Pocklington is trying to raise $12.5M to grow marijuana in the valley

Amy DiPierro | Palm Springs Desert Sun

Show Caption Hide Caption What's it like to grow pot for a living? Jeff Homolya, Cultivation Manager at Canndescent in Desert Hot Springs, Calif., talks about what it's like to grow pot for a living.

In April, the Securities and Exchange Commission charged Peter Pocklington – a Palm Desert resident, convicted felon and former owner of the Edmonton Oilers hockey team – with fraud.

Three months later, Pocklington is planting the seeds for a new local business: Growing cannabis.

The SEC sued Pocklington and related entities on April 5, alleging the group defrauded investors while raising money for Nova Oculus Partners LLC, an Indian Wells-based medical device startup developing a treatment for macular degeneration.

Pocklington has faced accusations of securities fraud before. In 2013, the Arizona Corporation Commission ordered him to pay $5.1 million restitution in a settlement related to a gold mining venture, Crystal Pistol Resources LLC. And in 2010, he pleaded guilty to felony perjury.

Now the one-time sports franchise owner has emerged at the center of a new venture seeking to put down roots in the Coachella Valley: Magic Dragon Realty LLC, a company setting out to grow cannabis at an undisclosed location in the Coachella Valley.

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On June 12, the company filed a document with the SEC showing it intends to raise as much as $12.5 million from investors – and identifying Pocklington as Magic Dragon’s manager.

Magic Dragon has also launched a website, www.themagicdragonrealty.com, where it outlines plans to wholesale medicinal cannabis throughout California. It projects annual revenue will exceed $55 million in five years.

But according to cannabis industry data as well as interviews with marijuana growers and consultants, Magic Dragon’s financial predictions appear overly optimistic. The company could also face substantial regulatory hurdles – both in financing its project and obtaining cannabis business licenses – because of Pocklington’s prior felony and securities fraud charge.

Magic Dragon representative John McNeil, said by phone the company was too early in its development to discuss its plans, and would not answer further questions. In an email, Pocklington referred questions about Magic Dragon to Damian Gerry, the company's Vice President and Co-Founder.

Gerry defended Pocklington as “an amazing individual” dedicated to finding a cure for macular degeneration through his company, Nova Oculus.

“Everybody who’s in their 70s, especially with being a businessman, is going to have a crazy past,” Gerry said.

Gerry said Magic Dragon will raise $2 million from investors immediately and an additional $10.5 million in the future – all of which would go toward funding company investments and operations. He said the company’s financial projections simulate a “worst case scenario,” assuming a wholesale price of $2,000 per dry pound of cannabis flower.

Gerry declined to answer follow-up questions.

According to its website, Magic Dragon plans to grow 20,000 plants concurrently in a 20,000-square-foot facility.

Mike Rowe, a Director of Business Development at MSA Consulting Inc., which has managed the development of over 35 cannabis cultivation projects, said the plan doesn’t make logistical sense.

“There’s no way you’re going to get that many plants into a room,” Rowe said. “Not all at once.”

Rowe and George Verstraete, a cannabis grower in Desert Hot Springs, are also skeptical of the company’s financial projections, because they think the company is underestimating expenses.

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And according to cannabis industry data, Magic Dragon’s $2,000 per-dry-pound price assumption is likely too high.

Data by Cannabis Benchmarks shows the nationwide weighted average for indoor cannabis was $1,451 per pound as of the week ended July 13. John Kagia, Chief Knowledge Officer for cannabis industry research firm New Frontier Data, said prices are likely to drop significantly as more cannabis comes on the market.

“Even if that’s where (the price) starts late this year, that is certainly not where it’s going to be a year from now or two years from now,” Kagia said.

The first step for Magic Dragon will be collecting investments.

Documents submitted to the SEC in June show Magic Dragon estimates it will use $1.25 million raised from investors to pay officers like Pocklington and Gerry, including a “one-time management fee equal to 7 percent of the gross proceeds of the offering” to the company’s majority member.

The offering is filed under Regulation D, a provision of federal securities law allowing companies to sell securities without disclosing financial statements and other facts to the public.

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Keith P. Bishop, a corporate and securities attorney at the law firm Allen Matkins, said he’s surprised Pocklington would file a new offering under the exemption. The SEC lawsuit in April alleges Pocklington is a “bad actor,” which would disqualify Magic Dragon from claiming the exemption in the first place.

"They list Pocklington as an executive officer, which is amazing because the complaint says he's a bad actor and he's disqualified,” said Bishop, who served as California Commissioner of Corporations from 1996 to 1997. “I don't know what their theory is that they expect they can do this. It's rather blatant."

Pocklington’s association with Magic Dragon could also jeopardize its future applications for cannabis business licenses.

If Pocklington has an ownership interest in the startup, he will have to disclose his prior conviction to local and state authorities weighing whether to grant the company a license.

Ryan Kocot, a Sacramento-based attorney specializing in criminal and cannabis law, said state and local authorities are willing to look past prior felonies, especially for nonviolent offenses or charges that are not recent.

But Kocot thinks state and local agencies would see a record like Pocklington’s – a felony in 2010, a state securities charge in 2013 and pending federal securities charges this year – as a potential “pattern of dishonesty” that could derail Magic Dragon’s license applications.

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John R. Armstrong, an attorney with Horwitz+Armstrong in Lake Forest, said a city or county might reject Magic Dragon’s application for a local cannabis business license before the company can even advance to seeking a state license.

“What cities or counties are looking for is good character and truthfulness,” Armstrong said. “It would be a hard sell for a city, with that kind of criminal conviction, to be like, ‘We’re going to trust you with the keys to the kingdom.’”

Pocklington has a 40-year history in the desert. Over that time, he has hobnobbed with President Gerald Ford, joined the exclusive Vintage Club in Indian Wells and invested in GolfGear International, a golf club manufacturer he relocated to Rancho Mirage.

But Pocklington’s business dealings have landed in court repeatedly. In the 2000s, he faced lawsuits from GolfGear shareholders as well as Naomi Balcombe, the founder of a health products company he had agreed to buy.

In July 2008, Balcombe won a court order to raid Pocklington’s Indian Wells home, and Pocklington filed for bankruptcy the following month, declaring assets of $2,900 and debts in excess of $19 million.

The discrepancy between what Pocklington owed and what he owned raised alarms in court.

Pocklington was indicted for bankruptcy fraud in March 2009. He pleaded guilty to making false statements under penalty of perjury – a felony – in 2010.

In the past eight years, Pocklington has continued to explore business ventures in the Coachella Valley and beyond, including the Arizona mining project and Nova Oculus, which also goes by the name the Eye Machine.

In a July 5 motion to dismiss the SEC complaint, Pocklington and co-defendants called the charges “a baseless attack” and said Nova Oculus “has made great progress in the development of its device to treat macular degeneration.”

Amy DiPierro covers real estate and business news at The Desert Sun in Palm Springs. Reach her at amy.dipierro@desertsun.com or 760-218-2359.