Eleven Ontario cannabis retail lottery winners have filed a legal challenge against the Alcohol and Gaming Commission of Ontario (AGCO) for disqualifying them from the lottery process, arguing the AGCO’s decision was “fundamentally wrong” and reached by a “procedurally unfair process.”
Seven of those eleven lottery winners — chosen on Aug. 20 — used addresses linked to legal cannabis retailer HighLife Cannabis Co. on their applications.
A Financial Post investigation days after the lottery draw found that over 100 different individuals used 14 HighLife-linked addresses to submit more than 650 applications to the AGCO, emerging with seven out of 42 lottery wins.
All seven of those winners, and an additional four, were subsequently disqualified by the AGCO for allegedly not submitting a $50,000 letter of credit by the deadline required to receive a Retail Store Authorization licence.
The 11 winners have now filed a notice of application for judicial review of the decision, saying that they did, in fact, submit letters of credit within the deadline, complying with AGCO lottery rules, according to a copy of the winners’ statement of claim that was filed in an Ontario court on Sept. 6.
The winners — John Reynolds, Carl Ignatius, Ekrem Usunova, Elbahlul Bara, Ilim Usunova, Olga German, Peter Greco, Ravido Junaev, Ronen Ackerman, Sofia Kuliev and Varant Kichian — further argue that the AGCO denied them an opportunity to provide evidence that would “conclusively prove” that they had complied with the deadline.
All 11 winners, represented by Bay Street law firm Brauti Thorning LLP are asking the court to “quash” the AGCO disqualifications and issue Retail Operator Licences and Retail Store Authorizations to each of them. They are also seeking an interim order by the court that would halt the decision of the AGCO to give those 11 spots to lottery applicants that were on a waitlist, and for the AGCO to cover the legal costs associated with the judicial review.
The winners’ legal challenge is premised on the notion that they were not notified by the AGCO about winning the lottery within 24 hours of the lottery draw, a violation of rule 14 of the AGCO’s own rules related to the cannabis lottery. The regulatory body publicly announced the lottery winners in the early afternoon of Aug. 21, within 24 hours of the lottery taking place.
But the 11 winners say they only received official notice from the AGCO from Aug. 22 onwards, and submitted all necessary documentation, including the $50,000 letter of credit within five business days from the date they received official notice from the AGCO that they had won.
“The emailed Notification Letters were sent out on either August 22, 2019 or in the case of one of the Applicants (Peter Greco), on August 23, 2019. The couriered Notification Letters were sent out at the end of the business day on August 22, 2019 and were physically received by the Applicants on subsequent days, beginning on August 23, 2019,” the statement said.
For instance, one of the winners, Olga German, claims she received an official notification from the AGCO on Aug. 27 and submitted all necessary documentation by Aug. 30, but was still disqualified by the AGCO for missing the deadline. Another winner, Ekrem Uzunova, received notification on Aug. 22, and submitted all documentation including a letter of credit by Aug. 29, five business days later, and was subsequently disqualified.
When contacted by the Post, the AGCO acknowledged the judicial review, adding that it was the “right” of the disqualified candidates to do so, but would not comment on details in the statement of claim.
“The AGCO will not make any further comment while the proceedings are ongoing,” spokesperson Ray Kahnert said in an e-mailed statement.
The second round of Ontario’s cannabis lottery has been ridden with problems, most of which have stemmed from the AGCO’s rule allowing one address to be used multiple times by different applicants, which led to groups of applicants like those linked to HighLife submitting hundreds of applications to the lottery in order to increase their odds of winning.
The AGCO will not make any further comment while the proceedings are ongoing
spokesperson Ray Kahnert
A number of entrepreneurs and lawyers involved in the cannabis industry have said that some lottery winners are demanding up to $6 million in exchange for a licence and retention of control over a future cannabis store in the province, the latter of which is a requirement the AGCO insists on. Cannabis retail chain Fire and Flower Holdings Corp. said on Friday it would no longer seek to partner with any of the lottery winners due to “impractical and unrealistic requests for partnership.”
“The perception that companies in the national cannabis industry have endless access to funding is false and public markets are not reflecting that sentiment,” said Trevor Fencott, CEO of Fire and Flower late last week.
Ontario is still lagging behind other provinces, especially Alberta, in terms of the number of legal cannabis retail stores. The latter province has now close to 300 stores, while Ontario has just 24 stores in operation, with 51 more set to open by the end of this year.