Following a raid from state police, Michigan’s Cannabis Regulatory Authority revoked an adult-use cultivator’s four licenses owned by HongRui Enterprises Inc., for allegedly growing untracked cannabis plants and failing to adhere to state security requirements.
The CRA said that inspectors observed a total of 10,738 plants onsite, when the allowable total was 6,000. The agency also reported a series of lapses in security requirements, such as non-functioning surveillance systems, unsecured grow rooms and unsecured loading doors.
Following a series of formal complaints last summer, the CRA officially shut down HongRui Enterprises on Jan. 19 and placed the company and two owners, Kevin Sea and Connie Zhao, on the state’s cannabis license exclusion list.
Neither Sea, Zhao nor anyone from HongRui returned emailed requests for comment.
HongRui Enterprises was operating out of a facility in Albion, Mich, that was permitted to grow a total of 6,000 cannabis plants.
Sea is also affiliated with Oklahoma cannabis cultivator and processor K&Y Enterprise, according to the CRB Monitor database.
Michigan maintains an exclusion list of individuals and businesses who are no longer permitted to take part in the state’s legal cannabis market. As two of just nine individuals on Michigan’s voluntary exclusion list, Sea and Zhao are permanently banned from obtaining any new cannabis licenses in Michigan and having any ownership or managerial control of a Michigan cannabis business, or even being employed by one.
Thousands of untagged cannabis plants found
Michigan State Police raided the facility on Aug. 24, 2023, according to the CRA’s initial complaint.
Police were following a suspicious driver who claimed during a traffic stop that he was driving from Oklahoma to Michigan, according to Crain’s Detroit. The state police reportedly found a property covered in filth with thousands of untracked cannabis plants. The police seized the surveillance equipment and security data.
An Oct. 3, 2023, ruling from the state’s Court of Appeals found that illegal cultivation of cannabis is a misdemeanor regardless of the scale, as per the Michigan Regulation and Taxation of Marihuana Act, which legalized adult-use cannabis in 2018.
The day after the police raid, CRA regulators arrived at the Albion facility.
Michigan cannabis regulation requires operators to tag every individual plant for the state’s Metrc seed to sale program. During the Aug. 25 visit, investigators identified 3,171 untagged and untracked plants, including mature cannabis plants. Those untagged plants were in excess of the 6,000 plants the operators were authorized to grow.
The CRA followed up a week later and found that the security system had still not yet been replaced.
The CRA conducted another inspection on March 27, 2024, and said that inspectors found that although there were fewer unregistered plants, the property was still improperly unsecured with unlocked doors and an inactive surveillance system.
Subsequently, the Bureau of Fire Services said it identified numerous building code violations on April 5, 2024. These allegedly included unsafe electrical wiring, blocked emergency exits and no working fire protection system.
The CRA announced formal complaints against Hongrui Enterprise’s four cultivation licenses on Aug. 15, 2024, citing allegations that the company disabled its own security system and failed to replace it at the same time that untracked cannabis plants and an unsecured facility were identified by state regulations agents (RA).
“The RAs observed several garage doors near the loading dock area that were partially open and not secured with commercial-grade locks. Respondent admitted that the unsecured doors were points of entry into the business and used for transferring marijuana product,” said the complaint. “The RAs noted several containers of chemicals on pallets scattered throughout the grow area. These chemicals were not secured in a locked storage area.”
In the last couple of years, growers in Michigan have struggled with a saturated market and flower prices that are among the lowest in the country. More recently, state authorities have been contending with numerous instances of cultivators coming under legal scrutiny for potential illegal activity.
