Damian Fagon, chief equity officer of the New York Office of Cannabis Management, left, and Chris Alexander, former executive director of the New York Office of Cannabis Management, second from left, at a legislative hearing in October. Fagon’s actions are at the center of a lawsuit filed on behalf of a Columbia County company that was crippled by regulators after the owner spoke out about N.Y.’s unlawful cannabis products.
ALBANY — A Columbia County cannabis processor has filed a lawsuit against the state of New York accusing the Office of Cannabis Management of using its regulatory authority to punish her after she spoke out publicly last year about unlawful conduct in New York’s marijuana industry.
The civil complaint filed Thursday in the state Court of Claims includes details about Jenny Argie’s dealings with the Office of Cannabis Management and Damian Fagon, the office’s chief equity officer, who has been on administrative leave since March as an investigation of his actions is unfolding.
Argie, owner of Jenny’s Baked at Home Company, had recorded a telephone conversation she had last August with Fagon in which he allegedly acknowledged being aware that numerous licensed cannabis operators were violating state regulations on a regular basis but refused to take action.
Fagon, who was appointed chief equity officer in 2022, told Argie during that phone call that he “felt bad for operators and would let them do what they need to survive,” later adding: “If I enforce regulations on licensed operators, I would have to close down half of them,” according to Argie’s lawsuit.
The allegations included that some brands were mislabeling their products and that cannabis with mold was still being sold despite regulators being aware of the violations.
Argie’s complaint says that Fagon also acknowledged during the call that “deep-pocketed” cannabis brands were helping “box out” smaller brands in the nascent industry, making it more difficult for companies like hers to succeed.
“Mr. Fagon admitted that OCM — the agency charged by New York state with developing and enforcing the guidelines of the cannabis marketplace — was allowing individuals and companies to violate the law to the detriment of other law-abiding business owners and the public,” the lawsuit states. “When Ms. Argie first started raising her concerns publicly, Ms. Argie wrongly assumed that OCM was unaware of the widespread nature of the illegal activity… (but) was appalled upon learning that Mr. Fagon knew — and admitted to her — that OCM was aware of, allowing, and thus encouraging, an unfair playing field in the adult-use cannabis marketplace.”
“In early September, Argie sent a series of emails to Fagon documenting some of the regulatory violations, including out-of-state products being unlawfully marketed and sold in New York. She also sent a letter on Sept. 10 to Chris Alexander, who was then the executive director of the state Office of Cannabis Management, informing him of a New York City shop selling California products falsely labeled as being produced in New York.
Her lawsuit said state officials did not respond to or acknowledge her emails or letter. The following month, in October, Argie appeared before the state Senate Subcommittee on Cannabis and raised many of the same concerns she had flagged for the cannabis regulators. A month later, an article in Syracuse.com reported details of Argie’s recorded conversation with Fagon — and within a week, an Albany cannabis store that was selling her products was raided by regulators and a recall of her products was issued. It was the first recall on record for a New York cannabis product.
“Clearly, the Albany raid was a targeted attack against Jenny’s and Ms. Argie, and purely retaliatory in nature for Ms. Argie daring to speak out publicly against Mr. Fagon individually, and OCM generally,” her lawsuit states. “Worse, on Dec. 12, 2023, OCM published a national press release … that Jenny’s product ‘did not undergo the required testing for consumer safety and product quality’ — falsely identifying Jenny’s product as contaminated and unsafe for consumption.”
The lawsuit says that other than one of Jenny’s products being “slightly underpowered by merely a fraction of a milligram,” there were no allegations that her products had failed to meet Office of Cannabis Management guidelines.
But the alleged retribution continued, according to the lawsuit. In March, after Argie had continued speaking to a reporter about her experiences, regulators conducted an unannounced inspection of her small manufacturing facility and cited her for using a nontoxic refrigerant to extract cannabis oil from cannabis flower. The refrigerant was not an ingredient in the cannabis products her company made.
On March 5, the office issued a stop-work order for Argie’s business and quarantined her products, including those that had been distributed to retail stores. Later that month, Argie filed a petition in state Supreme Court seeking a temporary restraining order and a preliminary injunction to block what her attorneys said was retaliatory regulatory action that was crippling her business. During a court hearing, attorneys for the state argued the refrigerant she had been using could be dangerous to the public.
But on the same day that the attorney general’s office had made those arguments in court, the Office of Cannabis Management had quietly added the refrigerant she had been using to its approved list of processing solvents. Argie’s attorneys allege that state officials never informed the court nor her that the solvent had been approved as they continued arguing in the proceeding that it was not and sought to keep her business shuttered.
“Rather than the truth setting Jenny’s and Ms. Argie free, the truth nearly caused the corporate demise of Jenny’s, and near financial ruin for Ms. Argie,” her lawsuit states. “The damage OCM inflicted on Jenny’s throughout the course of the past several months has been devastating to Jenny’s, its employees, and Ms. Argie. … (And) Jenny’s was forced to shut down its entire facility and furlough five employees.”
Argie, with many retailers falsely under the impression they could not sell her products, alleges she suffered irreparable financial harm and lost her footing in the cannabis marketplace at a critical time when the industry was taking off. Numerous shops that sold her products stopped doing so.
Her lawsuit includes claims for abuse of process, intentional interference with business relations and constitutional violations, and estimates she suffered more than $5.6 million in damages.
“Because Ms. Argie had the courage to speak out concerning the failures of the Office of Cannabis Management and its executives to do their job, OCM defamed Jenny’s with a bogus recall, and subsequently shut down the company entirely for months,” said Dean DiPilato, an attorney with Centolella Law Firm in Onondaga County. “During that time, Jenny’s was forced — time and again — to respond to inquiries and demands for information that OCM knew to be unnecessary. OCM’s goal was simple: to drive Jenny’s out of business.”
The investigation of Fagon is being conducted by the state inspector general’s office. Fagon had been tasked with overseeing the social and economic equity initiatives included in the 2021 law legalizing cannabis. He is a third-generation farmer with a background in international development and agriculture, according to his professional biography.
Fagon was placed on leave in March, a day after Gov. Kathy Hochul announced that she had tapped Jeanette Moy, commissioner of the state Office of General Services, to conduct a review of the cannabis agency’s operations — a direct response to the criticism leveled against the agency, including from Hochul.
That review led to a leadership shakeup at the cannabis agency after Moy’s report highlighted widespread problems with licensing and leadership within the office. Alexander, the office’s executive director, subsequently stepped down, along with other top officials in the office who have departed over the past several months.
Patricia Heer, first deputy general counsel; Nicole Rosa, director of health and safety; and Danielle Holmes, deputy director of licensing, are among the officials who recently have notified the Office of Cannabis Management they will be leaving.
“The Office of Cannabis Management respects staff confidentiality and does not give public comment on personnel matters,” said Taylor Randi Lee, a spokeswoman for the office. “Ms. Rosa, Ms. Holmes, and Ms. Heer have been incredible leaders at OCM and the agency deeply appreciates all of their contributions to its work and mission.”
State officials said the Office of Cannabis Management, under new leadership, has stepped up efforts to identify operational gaps and fill vacant positions. That includes filling 25 positions in the enforcement and investigations unit over the past few weeks, as well in the general counsel’s office and licensing unit.
H/T: www.timesunion.com
