On Friday, a class action law suit was filed against former Bluegrass BioExtracts owners Gerald Edds and Bruce Peters in the United States District Court Western District of Kentucky Owensboro Division.
The foundation of the complaint was filed by attorneys Ronald Johnson and Sarah Emery of Fort Wright-based Hendy Johnson Vaughn Emery, PSC and Bryan Bishop of Bryan N. Bishop Attorney at Law, PLLC.
The suit alleges a breach of contract, fraud, negligent misrepresentation, violation of the Racketeer Influenced Corrupt Organizations (RICO) Act and unjust enrichment.
The complaint also names California-based DTEC Ventures, LLC (Edward Vrab, Todd Owen, Christopher Martin and Leonard Chartraw), Bluegrass BioExtracts, LLC (owned by DTEC) and Omny Management (Nathan Yates and Joseph Gomez) as defendants.
Passed in 1970, RICO is a is a federal law designed to combat organized crime in the United States. It allows prosecution and civil penalties for racketeering activity performed as part of an ongoing criminal enterprise. The nature of the complaint definitely fits with RICO allegations, said Johnson.
“We have to say that there was a conspiracy involving more than one entity,” he said. “This is clearly what this is. It is a transaction in terms of not selling at arms length. It was about them (Edds and Peters) getting out of the liability and acting in a way that is adverse to the limited liability company. Rather than honoring the contracts when the market changed, they dumped the company and walked away from the whole thing and the company (BBE “purchased” by DTEC) refused to honor those contracts and Edds and his buddies walked away and left these farmers holding the bag. It was a scheme to avoid honoring contracts and a conspiracy that involved one or more actors; we think it meets the requirements.”
In January, hemp farmers, formerly contracted with Edds and Peters, raised alarm bells about potentially inaccurate heavy metal and pesticide test results being given by BBE under the ownership of DTEC and management of Yates.
On Jan. 21, Edds, on behalf of his partners, filed a $69-million lawsuit in Jefferson County Business Court against DTEC, alleging that after taking ownership of Owensboro-based BBE, an industrial hemp processing facility at 931 Wing Ave., DTEC “unequivocally failed to honor their obligations under the Purchase Agreement and the Royalty Agreement.”
Essentially, DTEC failed to pay a “single penny,” to the original owners and instead “diverted” assets, including cash and equipment, against the purchase-agreement, according to the January complaint.
Through this suit, Edds pointed out that Leonard Chartraw’s son, Daniel Chartraw, and Yates had histories of less than stellar business practices. That suit was settled by mid February, reverting control of the hemp processing equipment to Edds and Peters with no “monetary gain,” Edds said in a February interview. His plans were to start a new company, Precision Biotech LLC, but that plan was shelved in late February, shortly after he announced an auction of BBE equipment.
Filed on behalf of plaintiffs Michael Lovell, Robert Huff and Harold Murphy individually and as the representatives of “a class of growers of industrial hemp floral material who entered into a processing agreement with Bluegrass BioExtracts for the 2019 crop year,” the complaint seeks an award of compensatory and punitive damages at their maximum. For those farmers involved, there is much to answer for, said Huff.
“Had they been honest, that is my biggest issue, had they told us the truth up front that they couldn’t pay $4 a CBD point, but met at $2 or a $1.50, we could have still made money,” Huff said. “I had options to get rid of mine with a different buyer, but these guys were adamant about wanting the material and told me not to sell to anyone else; they told me that ad nauseam. That is what is frustrating; they kept us on the hook and we could have sold before the market completely bottomed out. How it all went down is too convenient, like they (DTEC) did them a favor. It seems fishy and too convenient of a way out.”
Lisa Lovell, wife of Michael Lovell, grew roughly 36,000 pounds of hemp with a 20,000-pound deal signed with BBE to be paid on Feb. 15 as well as a 50/50 tolling contact for 16,000 pounds. She was forced to take her crop out of state, she said.
“We did everything right,” she said. “We did it all by the book and have nothing to show for it. I’m hoping that we can recover some of our money and I hope that they (the defendants) are held accountable. I hope more farmers join this lawsuit because we aren’t the only ones in this situation. People like Bluegrass (BBE) should not be able to open up under another name and get a license. There has to be better vetting. I feel like we were lied to through the entire process and I don’t think they ever intended on processing anything. As far as I am concerned, I want nothing else to do with hemp. I have never been in an industry and met so many people that are willing to screw you.”
Along with his fellow plaintiffs in the complaint, Huff hopes that this suit will “normalize the curve.”
And even if they aren’t awarded monetary damages, he also hopes that farmers will take a lesson and that it will shed light on those individuals that are hurting farmers and the state’s hemp industry.
For Bishop, the story alone was compelling enough to meet with these farmers, via Beaver Dam hemp farmer-pharmacist John Fuller, and aid them.
“I grew hemp this year and know the trials and tribulations,” he said. “These people were not told the truth by these processors, that was compelling enough for me. When you look in their faces, there is just disappointment and frustration through no fault of their own. They were misrepresented, lied to and their agreements weren’t honored. I am confident that a conspiracy took place; the characters involved and the timeline in which the company was sold by Edds and Peters. There are a number of factors that show conspiracy and a RICO claim here, and the evidence will show that.”
Jacob Mulliken, 270-228-2837, email@example.com