A lawsuit filed Thursday claims former Jackson County Commissioner Doug Breidenthal accepted cash payments for marijuana consulting while still in office and bilked an elderly couple out of $150,000 to help finance his cannabis store.
“We put up the house for it,” said 81-year-old Larry Nelson of Prescott, Ariz. “We’re sitting in a spot where he thinks he owns the whole business. We were supposed to be partners.”
Another investor, Greg Allen, said he paid Breidenthal $13,500 in cash from August through December 2016, while Breidenthal was still a commissioner and voting on cannabis issues, to act as a marijuana consultant and to help establish the American Cannabis Co. in Medford.
Allen claims he invested a total of $79,000 in money, personal property and inventory for the business at 2131 W. Main St. Breidenthal has received a license from the state to operate there, but has not yet opened the doors.
“His hypocrisy knows no bounds,” 53-year-old Allen said of Breidenthal. “This guy’s a shape-shifter. He’s self-serving, and he talks a good game.”
The lawsuit by Allen and the Nelsons, filed in Jackson County Circuit Court, claims elder abuse and breach of fiduciary duty and seeks restitution for the money lost. Through their attorney, Chris Hearn of Ashland, the investors ask the court to appoint a receiver and freeze American Cannabis Co.'s assets. The Nelsons and Allen together claim they invested $229,000 in the business. The suit asks for triple damages for the Nelsons, or $450,000, under Oregon’s Elder Abuse Statute.
In total, the suit asks for $529,000 from Breidenthal, who could not be reached for comment despite repeated attempts by phone and email.
As these allegations come to light, Breidenthal remains under criminal investigation by the Oregon Department of Justice over questionable expenses charged to a “Friends of Doug Breidenthal” account set up under the Association of Oregon Counties that was designed to help him campaign for an office of the little-known Western Interstate Region. Among the expenses under scrutiny is a $1,000 campaign contribution Breidenthal sent to current county Commissioner Rick Dyer, when Dyer was running for the office in 2015.
Portland attorney David Griggs, who represents Breidenthal in the DOJ investigation, said he isn't representing Breidenthal in the investors' lawsuit.
Allen said he contacted the Department of Justice about the allegations detailed in the lawsuit. The DOJ would confirm only that the investigation is still ongoing.
Allen, who has been involved in marijuana ventures in Arizona since 2009 and in Rogue Valley Remedies LLC in Medford, said he approached Breidenthal last spring because he needed someone local who could introduce him to others in the cannabis industry and who could negotiate the bureaucracy of establishing a recreational cannabis business. At the time, Breidenthal was on the Oregon Liquor Control Commission’s 15-person marijuana rules advisory committee.
American Cannabis Co. was almost ready to open early this month when Allen and the Nelsons confronted Breidenthal and began examining business documents at the store. Alarmed at what they found, they said they had a meeting with an attorney to resolve the issues but the situation worsened.
“Doug locked us out,” Allen said.
Allen said red flags were raised in his mind after reading a Mail Tribune article on Feb. 6 that reported Breidenthal was the only name involved in two business entities associated with American Cannabis Co: Marigold Enterprises LLC and Capital Pacific Advisors Inc. Breidenthal’s name is also the only one listed on an Oregon Liquor Control Commission license for the cannabis store.
Allen said the business was supposed to be a partnership and he thought Breidenthal was someone he could work with and trust with the money he and the Nelsons were investing.
“If you can’t trust somebody, you don’t go into business with them,” he said.
The Nelsons, who celebrated their 60th wedding anniversary on the day the lawsuit was filed, also said they came away with a good impression of Breidenthal initially.
“I thought he was such a nice man,” 84-year-old Mary Nelson said.
She said that part of the motivation for her and her husband to invest in American Cannabis Co. was to involve their 21-year-old grandson in the business.
Her husband said he thought Breidenthal was personable when he first met him and felt comfortable making the investment, particularly because their friend Allen appeared to be on good terms with Breidenthal.
“The way he talked, we thought we were doing good,” Larry said.
The couple has been going through a difficult time dealing with the fate of their money, but they try not to think about it too much.
“Certainly, I’m worried about it,” Larry said.
"It's a low blow," Mary said.
Despite the worries about their investment, Mary said, “We feel right will turn out to be right."
In May 2016, Allen said, he first approached Breidenthal to discuss Jackson County's regulations regarding marijuana operations. At the time, Breidenthal expressed an interest in starting a recreational marijuana business, Allen said.
On Aug. 13, 2016, Allen said, he began giving cash payments of $1,000 a month to Breidenthal, whose annual salary was $100,318. Allen said he asked Breidenthal whether he was able to accept the money while he was a county commissioner, and Breidenthal told him he had checked with his counsel at the county, who told him he could do it. Allen claims he gave $45,000 to Breidenthal, plus another $34,000 in personal property and inventory to open American Cannabis.
Jackson County Counsel Joel Benton said he couldn’t comment on any communications he may have had with Breidenthal because of attorney-client privilege.
A Mail Tribune review of minutes of all commissioner meetings in 2016 in which marijuana was discussed found no mention of Breidenthal disclosing his marijuana business interests. Oregon law prohibits public officials from using office for financial gain and requires them to disclose any economic conflicts of interest.
On Sept. 23, 2016, Breidenthal formed Capital Pacific Advisors, and on Nov. 9, 2016, he formed Marigold Enterprises LLC, based on information from the Oregon Secretary of State.
The Nelsons wrote a $150,000 cashier’s check to Capital Pacific on Nov. 9, 2016, according to the lawsuit. On the same day, Breidenthal applied for a recreational marijuana license from the OLCC and deposited the money into Rogue Credit Union, the lawsuit states.
The lawsuit notes Breidenthal failed to disclose to the OLCC that there were other partners involved in the marijuana enterprise. Allen said he learned in early February that Breidenthal had misrepresented to the OLCC where the $150,000 in capital to start the business came from.
Mark Pettinger, spokesman for the OLCC, said, “We, the OLCC, are aware of the complaint against American Cannabis Co., and we are investigating.”
He said the OLCC license is still active.
In their lawsuit, the Nelsons and Allen raise questions about $34,640 in expenses Breidenthal paid using the Marigold Enterprises account.
They allege Breidenthal charged a three-day stay, Dec. 12-15, 2016, at the iconic Hotel Del Coronado in San Diego to a Visa credit card belonging to Marigold Enterprises. The bill was $968.43.
The hotel stay came after Breidenthal had been in Tallahassee, Florida, for a Rural Action Caucus Symposium, held Dec. 7-9 at the Hilton DoubleTree, to discuss how counties are combating chronic poverty. According to flight records obtained by the Mail Tribune, Breidenthal flew out of Tallahassee three days after the conference, on Dec. 12, and arrived in San Diego that afternoon. On Dec. 14, $750 was paid out of the Marigold account to Seaforth Boat, a San Diego company that rents out boats.
A total of $2,447.76 was paid on Jan 23-24 to Whistler Platinum Co., which provides rentals in Whistler, British Columbia. Other unexplained expenses itemized in the suit include $12,050 to a “B Gutches” and $4,000 to the OHA, which could be the Oregon Health Authority.
The suit also alleges Breidenthal drew $5,800 from the Marigold account on Jan. 25, without documenting the purpose of the draw. Another debit transaction of $5,500 on Dec. 23, 2016, has no information or receipts, according to the suit.
Breidenthal also paid Griggs Law Group $2,000 out of the Marigold account. Griggs Law is also listed as an agent of Hillcrest Enterprises LLC, another company Breidenthal formed on Dec. 1, 2016.
After a Feb. 13 meeting between Allen and Breidenthal, the suit alleges Breidenthal “either froze or withdrew the remaining funds in the business accounts at Rogue Credit Union, changed the locks on the American Cannabis Company’s business premises at 2131 West Main St., and notified the security company and others that the plaintiffs (Allen and the Nelsons) were to no longer have any access to the business premises.”
— Reach reporter Damian Mann at 541-776-4476 or firstname.lastname@example.org. Follow him on www.twitter.com/reporterdm.