The lawsuit names several Cookies employees, including CEO Berner.
The leaders of global cannabis brand Cookies have been using threats, violence and financial kickbacks to enrich themselves at the expense of company shareholders, according to a lawsuit filed by two of the company’s investors.
The suit, first reported by WeedWeek, was filed by two companies, BR CO I LLC and Nedco I LLC, that together claim to own a 10% stake in California-based Cookies. It was first filed in February, with an expanded version filed March 9.
The suit asserts that Cookies CEO Berner – whose real name is Gilbert Milam – along with President Parker Berling, CFO Ian Habenicht, board member Lesjai Peronnet Chang, and employees Michael Roberts and Omar Ortiz all “use the popularity of the Cookies brand to engage in pervasive self-dealing … and to strongarm and bully others into paying them millions of dollars in personal benefits and kickbacks.”
The suit lampoons a recent Forbes magazine cover that featured Berner. It claims the image created by the article is “far from the truth” and that Berner and company officials have been misappropriating company funds and resources for their own private “slush funds.”
“Third parties that dare to stand up to these demands or refuse to play Defendants’ game are threatened, including with physical violence and slanderous blasts on social media, and refused opportunities to work with Cookies (often to Cookies’ detriment),” the suit claims. “Defendants’ pervasive wrongdoing has caused their own pockets to be lined while causing massive losses to Cookies and its shareholders.”
The filing goes on to accuse Berner of accepting lavish gifts, including a $1 million piece of diamond jewelry, from clients and business partners without disclosing such gifts to shareholders.
It also alleges that Berner and associates were comfortable using threats and occasional violence to seal deals or to prevent deals from breaking apart.
“Berling and Milam often sent Roberts and Ortiz on their behalf to ‘negotiate’ with third parties by telling third parties that they needed to pay Parker, Milam, Roberts, Ortiz and/or their affiliate companies (including BiggerBizz, LLC, a company wholly owned by Milam) kickbacks or give them other personal benefits in order to do business with Cookies,” the suit claims.
“Often, third parties that refused were threatened by Parker, Milam, Roberts, and/or Ortiz that Cookies would not do business with them, defamed on social media blasts, and, in some instances, Defendants even threatened to, or did, cause property and bodily injury.”
The suit further alleges that Berner and Berling used their positions at the top of Cookies to negotiate side deals for multiple other companies they owned or had stakes in, when such deals should have benefited Cookies’ shareholders.
One such company, Mesh Ventures – which is one of the defendants in the case, and in which Berner, Berling, and others have ownership stakes – is alleged to have been a front for Cookies leadership to enter into “affiliate transactions” for their own benefit, such as paying off bad business debts held by other companies.
Berling, the suit alleged, required Cookies’ license partners to use his own brother’s construction firm, GCI, “for any construction work, even though GCI often costs more than double the cost of other contractors, so that he can take kickbacks from GCI for his own personal benefit.”
“If a licensor refuses to use GCI, Berling in turn refuses to allow Cookies to sign licensing agreements or do business with them,” the suit alleges.
Financial Concerns
Moreover, the suit claims Berner and Berling allegedly took on a recent $5 million loan from Entourage Effect Capital without proper approval from the board of directors, which it says is another indication of their “reckless spending that is out of proportion with (Cookies’) ability to pay, which leaves the company and its shareholders in a precarious position.”
Though the suit claims the investors asked Cookies’ leadership to investigate their concerns, the company instead “doubled down by purporting to enter into a Series A Preferred Stock Purchase Agreement” worth $23 million, including by selling “shares of Series A preferred stock” to some of the same companies that Berner and Berling had already been diverting company resources.
The suit asserts the sale “will result in yet further losses to Cookies.”
The real motive for the new stock sale, the suit contends, is to “dilute Plaintiffs’ interests in Cookies for Defendants’ benefit and so that Defendants can continue their pervasive self-dealing and other wrongdoing.”
Another Breach of Contract
The litigation follows another breach of contract lawsuit filed in January by a Florida licensee of Cookies intellectual property, Cookies Retail Products, which claimed in its own suit that Cookies executives attempted to force them to do business with particular vendors from whom Berling and others were receiving kickbacks.
It alleged, for instance, that when the Cookies Retail Products’ CEO complained that roughly $1 million worth of products had been damaged by Roberts’ team, Roberts told the CEO in a group text message to “eat a bowl of dicks.”
Berner was not named in that lawsuit, but Berling – along with CFO Habenicht and several other Cookies employees – were named as defendants. The lawsuit requests at least $38.6 million in damages, which is what it alleges wrongdoing by Cookies executives has cost the company.
Both suits are still pending. The lawsuit from the Florida licensee is slated for a June 22 hearing in Los Angeles Superior Court, and the other is scheduled for a June 28 hearing in the same court.
A Cookies spokesperson declined to comment, citing the pending nature of the litigation.
But Berner, who spent much of the past two years battling colon cancer, posted a statement Wednesday on Instagram that appears to address the suit.
“When I got sick, I think that a group of predatory investors saw a good opportunity to make a move on me and the leadership over at Cookies. And they’ve attempted to sabotage my name and everything I represent,” Berner said.
“These guys have made extremely false, harmful, damaging claims about myself that are completely just not true,” he said. “I really look forward to the day in court that we can prove that these claims are false, that they’re fucking bullshit.”
Berner said that some investors in Cookies are attempting to “starve us out.”
“Well, that’s not going to happen. This playbook has been ran on other people in this space, the loan-to-own model, and it’s worked a good amount of times, but it’s not going to work here,” he said. “The bottom line is they underestimated who they’re up against.”
“We’ve got a big fight ahead of us and I’m not scared of it,” he added. “I just beat cancer, and I plan on beating this the same way: By staying focused.” (Full Story)