An Oregon cultivator lost his cannabis business license after he sought financial help from a man who had surrendered his own license because of track-and-trace violations.
The Oregon Liquor & Cannabis Commission on July 18 canceled the cultivation license held by Augusto Aranha and his business CJ Operator in Cave Junction, Ore. The commission found that he violated an agreement he signed in April 2022 as a condition of obtaining his license that he would not allow former licensee Matthew Portnoff “to take any part in the operation or management of the business.”
Aranha’s attorney, Kevin Jacoby of Jacoby Law LLC, told CRB Monitor News he planned to appeal the decision to the Oregon Court of Appeals this week and will request a stay on the seizure and destruction of Aranha’s crops.
Portnoff had owned and held a cultivator license for Takilma Road Operator. The OLLC found that in 2019, Portnoff had hired a contractor who had removed marijuana from the business that was untracked and therefore went to an unknown destination, according to a September 2021 settlement agreement. They also found that cameras were not operating as required, that the licensees or their employees did not enter data into the Metrc Cannabis Tracking System (CTS) on two separate occasions, and other violations.
Portnoff was in the process of selling the business and agreed to surrender his license upon transfer of ownership or by December 23, 2021, whichever came first.
He sold his business for zero dollars to Aranha, who had previously worked for him, according to findings of fact in the July 23 final order for Aranha and CJ Operator. The deal included the existing infrastructure and licensed premises at 3862 Takilma Road. However, through a limited liability company, Portnoff maintained ownership of the six-acre property, which also included a separate licensed cultivation business, PNW Operator, owned by Aranha’s brother, Lucas Aranha.
Despite Portnoff’s continued financial interest in the business bought by Augusto Aranha, rather than deny the license, the OLCC decided to enter into a stipulated agreement with Aranha in April 2022 that required him to not allow Portnoff to take any part in CJ Operator or be an employee or agent of the business. It also required Aranha to not allow Portnoff onto the licensed premises of his own property.
On May 2, 2022, the OLCC approved CJ Operator’s license pending payment of the licensing fee.
Portnoff funds startup costs
With only $7,500 in self-funded capital at the time of his application, Augusto Aranha went to Portnoff and asked to borrow $5,750 for the licensing fee. Portnoff paid the fee on his own credit card on May 5, 2022.
Aranha also gave Portnoff access to his Metrc CTS. Aranha’s licensing attorney, Amy Margolis, testified at a hearing on the allegations that it was common for property owners to gain access to cannabis business’ track-and-trace systems to review licensee records and monitor compliance with OLCC’s rules.
Arahna then started planting cannabis and realized he would soon need Metrc tags. Short on cash and with no bank account, he discussed the matter with his brother who suggested asking Portnoff for help. Lucas Aranha’s license did not restrict him from doing business with Portnoff, and Portnoff had also financed his tags.
So Augusto Aranha gave Portnoff permission in July 2022 to access his CTS account as an employee, the OLCC said. Portnoff paid $2,545 to buy the tags. Aranha then cancelled him out of the system, but added him back in a month later to buy another $516 worth of tags. The funding was intended to be a loan, but “the evidence regarding the loans’ repayment was conflicting and failed to establish that the loans were, or have ever been, repaid,” the final order said.
An OLCC regulatory specialist learned about the purchases in October 2022 and spoke with Augusto Aranha, who then revoked Portnoff’s access and privileges in his CTS account.
Administrative law judge upholds violations
The OLCC served Aranha with a notice of proposed license cancellation and seizure and destruction of marijuana items last year.
On Jan. 17, 2024, an administrative law judge (ALJ) on summary judgement dismissed a violation for allowing Portnoff to pay the licensing fee because the payment occurred before the stipulation went into effect. Following a full hearing in February, another ALJ allowed other allegations of allowing Portnoff to be an agent of the business to stand.
The OLCC held a hearing July 18, taking into consideration the ALJ’s proposed order and Aranha’s challenges.
Jacoby said there was a lot of discussion among commissioners about whether to cancel Aranha’s license.
Jacoby argued Aranha misunderstood what the restriction meant. The question was whether Portnoff, whom he said was a victim of a contractor he hired who “went rogue,” was acting as a landlord or providing a service.
He said it’s not uncommon for landlords to provide startup costs to new cannabis businesses. Licensees often go through a “duct tape and bailing wire routine to obtain the first round of Metrc tags,” he said. Aranha thought he could rely on the landlord.
But the OLCC didn’t find that argument persuasive and voted 6-2 in favor of cancellation.
Jacoby said that if Aranha had not purchased the tags, the violation would have been in a lower category and he may have been only fined.
“It’s ironic his license was cancelled because he was trying to be compliant with Metrc tagging,” said Jacoby.
When asked by CRB Monitor News why the OLCC issued a license to Aranha given his close connection to Portnoff and only having $7,500 in startup capital, OLCC spokesman Mark Pettinger provided the following emailed response from the commission:
“The OLCC issued this restricted license when there was a moratorium on cannabis licenses; this approach is a way for OLCC to both regulate who is involved in Oregon’s regulated cannabis industry and to support individuals who are new entrants into the state’s legal industry.
“OLCC believes it was reasonable to issue the license to Augusto Aranha with these restrictions. OLCC made Augusto Aranha aware of the restrictions and he could have sought financial or other support for his business from any other individual or entity besides Matthew Portnoff.”
The cancellation of the license is effective Sept. 6. Jacoby said he requested the delay so he could appeal the decision in court and prevent Aranha from losing his crops. His harvest is scheduled for next week.
