Arizona Medical-Marijuana Lawsuit Ruling Exposes Ugly Side of Business | Phoenix New Times

Arizona Medical-Marijuana Lawsuit Ruling Exposes Ugly Side of Business

The blunt realities of the state’s medical-marijuana industry are exposed in a remarkable ruling on a lawsuit between business partners that features allegations ranging from a "lack of financial controls" to a shady seed deal in a parking lot. The lawsuit's between the two partners of Uncle Herbs of Payson,...
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The blunt realities of the state’s medical-marijuana industry are exposed in a remarkable ruling on a lawsuit between business partners that features allegations ranging from a "lack of financial controls" to a shady seed deal in a parking lot.

The lawsuit's between the two partners of Uncle Herbs of Payson, one of the state’s notable licensed medical-marijuana dispensaries. Andrew Provencio, a retired senior captain with the Anchorage Fire Department in Alaska and partner Tiffany Young have been engaged in a vicious civil war since late December over a company worth millions.

Now, following Superior Court Judge Randall Warner’s ruling, Young has been found in contempt and has one week to turn over nearly $50,000 in funds allegedly spent on ultra-high-quality cannabis seeds in a transaction that occurred in a parking lot.

Warner wrote in his ruling that Young, featured in an October 13, 2013 New Times cover story, “is free to dispose of the seeds in any lawful manner she deems appropriate.”

The battle between Young and Provencio resulted in a receiver's appointment earlier this year to run the dispensary’s parent company, Desert Medical Campus. Warner’s most recent court ruling preserves the partnership and daily operations at the dispensary, which serves thousands of patients in central Arizona. Its infused marijuana food products are sold not just at the dispensary, about 90 minutes northeast of Phoenix, but also are sold legally around the state at other licensed dispensaries.

Warner's ruling leans strongly against Young.

She was found in contempt for her unilateral purchase of the seeds and a $169,000 sale of marijuana products to a Tempe dispensary. The ruling also suggests that Young forged Provencio's signature in a 2011 document in which he allegedly approved the company's sale of private stock.

Young blames her partner for most of her troubles. She tells New Times today that she’s given “binders” of information to the FBI about the business and that state agencies are investigating.

“We’re so deep in it now,” she claims. “This is going to be bad.”

“We’re so deep in it now,” Young says. “This is going to be bad.”

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Her contentions can’t be confirmed. But Warner’s September ruling is like a bad trip for the medical-marijuana world, revealing the chaotic business style and sometimes-mischievous operations of Uncle Herbs.

Provencio could not be reached for comment.

Sal Rivera, his attorney, tells New Times that "there's absolutely nothing" to Young's implications about his client..

"There's no evidence whatsoever that Andy took any money or did anything wrong in this case," Rivera says, adding that Young admits as much in court records.

Among other things, the ruling states:

* Young took $47,274.46 in cash out of DMC in defiance of a February court order that instructed her and Provencio to make no moves without the other’s approval. After making the cash withdrawals sometime between March 24 and April 6, Young testified, she met with someone “in a parking lot” and exchanged the cash for marijuana seeds. She told the court she “did not know the seller’s name.”

* The dispensary wanted to buy hydroponics supplies at wholesale prices, but suppliers prefer that dispensaries pay more. So Uncle Herbs set up two hydroponics-supply companies in large part to “obtain growing supplies for DMC at wholesale prices that it could not obtain on its own . . . Mr. Provencio testified that his cousin played no part in the company but rather allowed his name to be used so that DMC could circumvent the supplier’s prohibition against supplying wholesale to marijuana dispensaries.”

* In April, Young had DMC sell about $169,000 in “products” to Harvest of Tempe at a 90 percent discount. The Tempe dispensary “is a company in which an attorney who represented Ms. Young in another court action has an ownership interest... Mr. Provencio did not agree to this transaction.”

* Young was ordered to return a cannabis-resin extraction machine to Provencio.

In a previous ruling in March, Warner described how Young claims Provencio signed a consent form in 2011 allowing the company to sell stock. A handwriting expert testified the signature in question was not Provencio's. Warner ruled that Young's claim was not believable. Referring to the company’s bylaws – Warner declared that Provencio and Young “envisioned their venture” as one in which neither could control the business without the other.

Young tells New Times the breakup is “like a divorce” and that she doesn’t think she’ll be able to work with Provencio again.

Warner’s ruling requires that Young pay back by October 15 the $47,000 in seed-purchase money and that the partners and their lawyers figure out how they’ll handle the dissolution of DMC — if that’s what they choose to do. They also need to determine when the court should schedule a trial on the main issue of the lawsuit: money — namely, who owes whom how much and what damages each may owe the other.

"There's no evidence whatsoever that Andy took any money or did anything wrong in this case." — Attorney Sal Rivera, speaking of his client, Andrew Provencio

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Two years ago, Young and Provencio were featured in the Payson Roundup for their infused ice cream products and for offering a "unique" dispensary with a “garden, kitchen, and dispensary floor under one roof.”

New Times visited the dispensary a month before our October 13, 2013, cover story, “Half-Baked: Medical-Pot Edibles Are Legal, but Prosecutors and Cops Aren’t Backing Off.”

In telling the tale of the cannabis extracts used for medicinal tinctures, food products, and concentrates, like hashish and “shatter,” the article related how Young — as the front-person for Uncle Herbs — talked about how the business uses only the highest-quality strains of marijuana and precision techniques in its process of extracting resin from marijuana plants, before mixing them into baked products and other medicinal food sold by the business. As we described her and the business:

Young's in her 30s, talks fast, and has a get-it-done attitude. She's an expert in real estate short sales who used to help run her husband's family business in Alaska putting utility lines underground.

The Youngs have $1.5 million of their own money invested in the dispensary and no outside investors, which Young says allows them the freedom to follow their own interests. One of these interests is making medibles, which the Youngs see as a more healthful alternative to smoking marijuana.

Her husband's family also ran an "unofficial business" in Alaska, she says, making edible medical-marijuana products for their many extended family members.

"Everyone had years and years of experience baking with medicine," she says. "We know the recipes and techniques, what works and doesn't work."

There actually was an Uncle Herb involved in the Alaska operation — he died from cancer.

The Youngs moved to Arizona after the passage of the 2010 law, ready to try their hand at operating a legitimate medical-marijuana business, with an emphasis on medibles. Food products make up half their sales.

Longtime friends from Alaska, Young, her husband Matt, and Provencio formed an LLC under Arizona law in 2011. After obtaining a state license, the dispensary opened in September  2013. Records in the lawsuit state that Provencio claims he provided "between $1.2 and $1.4 million in loans to the venture" while Young "testified that most of the money provided was hers."

Provencio launched the lawsuit in January, alleging that Young was operating the company without him and asking the court to stop her. Young had also begun paying herself a salary equivalent to $150,000 a year, records state.

Warner granted the motion in February and followed up with the March ruling that ordered the partners to work together for the time being. As mentioned, Warner later ruled that Young defied that order.

Young says the dispensary will survive the legal “disaster,” but more ramifications are likely for her and her partner. The state Department of Revenue and Attorney General’s Office are investigating the company, she claims.

Meanwhile, she plans to sell the high-quality seeds she acquired to qualified patients and dispensaries through a new company called BeansnSprouts, which should have an operational website soon, she says.

Rivera, Provencio's lawyer, says his client has put up to $1.4 million of his own money into the business and can prove it, Rivera says. 

See rulings below:
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