Where does Florida medical marijuana giant Trulieve go from here?

TALLAHASSEE — This should be the best of times for Trulieve.

The medical marijuana company sold more than half of all the smokable cannabis distributed to patients in Florida last month. It’s recorded 14 straight profitable quarters. The company pulled down more than $215 million in revenue in the last quarter alone. It’s on the verge of acquiring another medical marijuana firm, Harvest Health & Recreation — a transaction that would transform Trulieve into the largest and most profitable national cannabis player in the country, the firm has projected.

But this summer, Trulieve also had its first major public relations crisis. In August, J.T. Burnette, the husband of CEO Kim Rivers, was convicted of five of nine federal corruption-related charges in a highly publicized trial.

Burnette had to answer questions on the stand about a tape-recorded conversation he had with undercover FBI agents in which he bragged about helping lawmakers craft the 2014 law that paved the way for Trulieve to enter the Florida market. One of those lawmakers, former state Rep. Halsey Beshears, is the brother of a Trulieve board member. Rivers herself was subpoenaed in the case for information, although that inquiry was about a different business venture, not Trulieve.

The company’s stock fell about 29 percent from the start of the trial through Wednesday.

Still, if Trulieve was dealt a blow by the Burnette case, Florida industry insiders said they don’t expect the company to be staggered for long.

“Nobody talks about J.T. Burnette when they talk about Trulieve. They talk about Kim Rivers,” said Ben Pollara, a political consultant who helped craft the Florida constitutional amendment that led to a massive expansion of the medical cannabis program in 2016. “The only people who talk about J.T. Burnette are other people in the industry engaging in wishful thinking.”

Steve Vancore, a Trulieve spokesperson, noted that other large cannabis firms have also seen their stocks fall in recent weeks. Curaleaf, for example, was down 15 percent from mid-July through Wednesday.

However, there was a time that Burnette’s case looked to pose a threat to Trulieve’s top executive. The company wrote in a Jan. 21 Securities and Exchange Commission filing of potential consequences for Rivers if the CEO was implicated in her husband’s case.

“In the event the Agency investigation results in any allegation of wrongdoing or otherwise further targets Ms. Rivers, Ms. Rivers may be unable to continue serving as our President and Chief Executive Officer and a member of our board of directors,” the filing read.

As the company emerges from the trial, Rivers looks to be in command. Vancore said there is no legal risk for the company or Rivers.

“Burnette is not affiliated with Trulieve operations, and this situation has no bearing on Trulieve or Kim Rivers as its CEO,” Vancore said.

On top from day one

On the second-to-last day of the 2014 legislative session, House lawmakers ripped up, then recreated a bill allowing marijuana that had been essentially stripped of its main psychoactive ingredient to be grown and sold to a small number of seriously ill patients. Their changes would ultimately decide the fate of the industry.

An amendment crafted by then-state Rep. Matt Gaetz erected significant barriers for entry into the medical marijuana marketplace. The original Senate version of the bill allowed Florida’s Department of Health to create an application process limiting the number of companies eligible for a license. The application would be open to out of state businesses. The Gaetz amendment passed by the House allowed only some of the state’s largest farms to get in on the medical marijuana business. A nursery had to have been in the state for at least 30 years and cultivate at least 400,000 plants to qualify for a license application.

The state would issue five of those early cannabis licenses, one for each of five regions in the state. In 2015, three nurseries combined forces to apply for one of those licenses under the name Hackney Nursery. They won a license, and the company eventually became Trulieve.

Today, the company is incorporated in Canada, but its corporate headquarters are in Quincy, a town of about 7,000 northwest of Tallahassee. Trulieve operates in six U.S. states, and the firm is set to open stores in Georgia next.

During last month’s trial, prosecutors asked Burnette about the comments he made to undercover FBI agents suggesting he and his longtime friend, Rep. Beshears, helped shape the legislation.

“Well, Halsey and I worked through it,” Burnette told the federal agents in 2016, according to the Tallahassee Democrat.

Beshears’ brother, Thad Beshears, owned one of the farms that went in on the initial Hackney Nursery license application. Thad Beshears now sits on the board of Trulieve. SEC filings from earlier this year show he owns about 20 percent of its stock. The value of his stake in the company fluctuates with its stock price. As of late August, it was worth about $390 million.

On the witness stand, Burnette told the jury his past statement to the FBI was untrue. He was falsely taking credit for something that happened years prior, he said.

When asked whether any future Trulieve executives or their spouses had a hand in crafting Florida’s early marijuana law, Vancore said “no.”

Gaetz, who is now a U.S. congressman, told the Times/Herald that he does not believe he’s ever met Rivers or Burnette. They had no role in shaping his bill all those years ago, he said. The 30-year nursery requirement and the 400,000-plant threshold were inserted into the bill to win over conservative Republican farmers, who were crucial to the bill’s passage, Gaetz said.

“When I wrote Florida’s first cannabis law, there was substantial resistance to cannabis,” Gaetz said. “I was dancing on very thin ice to obtain a majority vote to pass the bill.”

Beshears, who most recently served as the top official at Florida’s Department of Business and Professional Regulation, declined to comment. Gaetz, a Fort Walton Beach Republican who was close with Beshears when they served together in the Legislature, noted that lawmakers like Beshears had no role in the Department of Health’s decision to award Hackney Nursery its initial license.

Gaetz is reportedly under federal investigation for sex trafficking — allegations which the congressman has denied.

First to market

As Florida politicians and voters expanded the state’s medical cannabis industry, Trulieve was allowed to expand the array of products it offered customers.

The firm was grandfathered into the state’s 2015 program to sell marijuana complete with its psychoactive ingredient to terminally ill patients. Other companies who sought licenses from the state were caught up in expensive litigation while Trulieve aggressively invested in its growing and retail operations.

By 2016 — before voters had even approved a major expansion of Florida’s cannabis program — Trulieve had opened its first dispensary.

The firm prides itself on its record of outpacing its competition, Vancore said. Trulieve was the first to cultivate medical cannabis and the first to offer delivery. When Gov. Ron DeSantis signed off on a bill allowing smokable cannabis for the first time, Trulieve was first to market there, too.

The firm attributes its vision to the energy of its CEO, Rivers, Vancore said. The company did not make Rivers available for an interview.

While it was expanding, the company enlisted the help of several construction companies. One of them was Burnette Construction, a firm J.T. Burnette founded, and in which he owns a minority stake. Trulieve has downplayed this link between Burnette and the marijuana company for years. In 2019, company officials wrote to investors that the business arrangement is “completely separate” from the FBI’s case against Burnette. Trulieve went so far as to sue the research firm Grizzly Research for libel after it suggested Trulieve had extensive ties to Burnette’s case. That case’s outcome is pending.

Gaetz said he has no financial stake in the Florida cannabis industry, but he watches it closely. In his opinion, Trulieve has succeeded because it invested early in cannabis as a product.

“Trulieve commoditized marijuana faster than the other original players in the market,” Gaetz said.

A new deal, and a new day

Trulieve’s latest conquest could put the company before more customers than ever before. But they might need some help from the state.

The company announced in May that it had reached an agreement to buy Harvest Health & Recreation Inc., another of the just 22 medical marijuana treatment centers licensed by the Department of Health. Harvest also has a substantial presence in four other states.

As a part of the deal, Harvest will auction off its state-issued license. The bidding process is already underway. That license is almost certain to sell for tens of millions of dollars.

The state would have to approve a change in ownership for Harvest. But initial signs are good, according to an Aug. 11 letter written by Christopher Ferguson, the director of the state’s Office of Medical Marijuana Use. Ferguson wrote it appears the change in ownership “would be acceptable” as long as Harvest sells the license to a company that meets state regulatory requirements.

Florida Agriculture Commissioner and Democratic candidate for governor Nikki Fried has about a $130,000 investment in Harvest, her 2020 financial disclosure shows. She’s pledged to sell that stake should she win the governor’s race in 2022.

But even while Trulieve eyes its latest acquisition, a bigger prize awaits. The firm continues to position itself for a day when Florida legalizes marijuana for recreational use.

Campaign finance records show that over the years, the firm has given $33,500 to a political committee promoting a state constitutional amendment ballot initiative to legalize recreational cannabis. The initiative, backed by Sensible Florida, also allow Floridians to grow the plant at home. In June, the Florida Supreme Court found that the language of that effort was unconstitutional, dealing a significant blow to legalization.

Still, Trulieve’s record in other states with legal cannabis shows that it could be well positioned once Florida — or the federal government — makes marijuana legal. Earlier this month, the firm started offering cloned cannabis plants to customers in Massachusetts that they can grow and harvest at home.

And the company is well connected politically. Nick Iarossi, a powerful Tallahassee operator who has close ties to DeSantis, is the firm’s lobbyist. Those who watch the industry say Trulieve has the money and the power to get where it wants to go.

“I think it’s a very strong company, I think they’re not going anywhere, and I tell you this based not on information that I’ve gotten from representing them, it’s information I’ve gotten because I follow the industry closely,” said attorney Jonathan Robbins, who has represented the firm in the past. “If you were to interview 50 attorneys, cannabis lobbyists, or anyone else who is familiar with the cannabis industry…I don’t think anybody would tell you any different.”