On October 14, 2019, the Colorado Marijuana Enforcement Division announced that plant samples from Bonsai had failed mold and yeast testing. Flower, shake, pre-rolls and extractions made from Bonsai material were subject to a recall affecting up to 144 dispensaries and eleven extraction facilities across the state, the MED noted, making it one of the widest recalls in Colorado history up to that point. But the recall was just the tip of the iceberg, according to an agreement between Bonsai and the state licensing authority.
The MED was the second government agency that year to look into Bonsai, which had been founded in Denver in 2015. About two months earlier, the Denver Department of Public Health & Environment had opened an investigation into the growing operation after a "series of failed test samples" for mold and yeast during a citywide assessment of retail marijuana, the MED settlement notes.
According to a 2020 show-cause order from the Denver Department of Excise & Licenses, the city's marijuana licensing authority, a 2019 DDPHE inspection found a "discrepancy" in Bonsai product samples after subsequent testing of Bonsai flower. Bonsai had provided testing results claiming that 86 straight product samples had passed mold and yeast tests — yet in the DDPHE's own evaluation of Bonsai samples, 24 of 25 had mold and yeast limits above state limits.
The DDPHE's findings led to the 2019 recall as well as further investigations by the DDPHE, Denver Police Department and the MED. More digging into the cultivation determined that Bonsai was "manipulating marijuana samples to achieve process validation" by covering flower, shake or trim with hydrogen peroxide and then treating it with a UV light and ozone machine in order to kill mold or yeast, according to Denver licensing officials. (While UV light and ozone machines are now accepted forms of mold remediation in Colorado, they weren't allowed until 2021, and now their use must be documented and approved by the MED.)
Bonsai general manager Roger Schaefer told Denver Health investigators that the 86 testing samples with peroxide and machine remediation had been produced in a single day in 2019. Bonsai CEO Thomas Stevenson also said he was aware of the production adulteration.
"Following the treatments described above, the Test Samples were then kept in a Tupperware container in Schaefer’s desk drawer outside the Limited Access Area prior to submission to a Testing Facility," the MED settlement reads. "As a result of this adulteration, the Harvest Batches associated with these Test Samples were not subjected to the same treatments and the Test Samples were therefore not representative of the Harvest Batches."
Bonsai did not respond to requests for comment regarding the settlement, but Stevenson, a co-founder of the company, is still listed as CEO, and Schaefer is still employed by Bonsai, according to MED and online records.
Although Bonsai quickly resurfaced in dispensaries across Colorado after the 2019 recall, the company and state licensing officials didn't agree to a settlement over the alleged infractions until February of this year. The settlement, released by the MED in March, reveals that Bonsai had to pass a state-approved sampling process to continue operating and pay the state a $20,000 fine — but that wasn't the only fine Bonsai had to pay to stay in business.
Under a 2020 settlement with Excise & Licenses, Bonsai paid a $150,000 fine to the City of Denver for the same infractions, and its license was put on probation for two years. Schaefer was allowed to remain an employee as long as his work responsibilities didn't include marijuana testing, data tracking, tracking compliance and management, product curing and testing submissions, according to that settlement. Through it all, though, Bonsai was allowed to continue operating.
Until the release of the settlement, none of the investigations or disciplinary actions against Bonsai after the 2019 recall were announced publicly by state or city authorities. In an emailed response to questions from Westword, the MED responded:
"It’s not the Division’s practice to issue announcements regarding administrative action resolutions with specific licensees. However, information regarding these resolutions are subject to the Colorado Open Records Act, and when an administrative action has concluded, we publish final agency actions on our website. Division investigators are responsible for inspecting facilities and documenting alleged non-compliance with marijuana regulations. Division investigators do not have the authority to suspend or revoke a license. The State Licensing Authority ultimately determines if violations occurred following the issuance of an Order and opportunity for licensees to request a hearing. During that process the Division may evaluate whether the matter can be resolved through a negotiated settlement, which must be presented to the State Licensing Authority for final approval. Unless a Licensee is subject to a summary suspension (issued by the State Licensing Authority), a Licensee may continue operating throughout the Division's investigation and until a final agency action is issued."
In the past, Excise & Licenses has allowed dispensaries to remain open after business owners have committed infractions and crimes ranging from illegal drive-thru sales to diverting their own product to the black market. According to Excise & Licenses communications director Eric Escudero, about 93 percent of the Denver department's disciplinary summons end in a settlement, and the city's goal "is to not revoke or suspend" business licenses.
"Our goal is to achieve compliance," Escudero adds. "In most cases, only when a business license holder repeatedly violates rules and regulations and makes no effort towards compliance is the city left with no choice but to revoke or suspend a license."
Marijuana's mold problem
Marijuana contamination, whether from mold or illegal pesticides, has been an ongoing occurrence since recreational pot sales began in Colorado. The DDPHE was the first government entity to begin inspecting and punishing offending cultivations in 2014, and began a citywide assessment of dispensary flower in 2018. A Westword investigation into city health inspection reports revealed that around 80 percent of dispensaries surveyed at the time of the 2018 assessment were stocking marijuana that would have failed state mold testing. At the time, the Marijuana Industry Group argued that the state's testing thresholds were too high, a sentiment still shared by some marijuana growers. The DDPHE stopped marijuana business inspections in 2020, leaving the responsibility to the MED, and still hasn't released the final report for its 2018 assessment.
According to the MED's most recent statewide market update, around 15 percent of marijuana flower, shake and trim failed microbial testing in 2020.
Marijuana remediation techniques were approved by state regulators in 2021, with ozone machines a popular approved choice. However, growers and extractors aren't required to notify consumers of remediation on packaging — and peroxide, a chemical antiseptic, is not an approved remediation.
Even with the new remediation rules, grower compliance isn't perfect. The MED has issued over twenty marijuana recalls since 2022, with the majority connected to mold, yeast and improper testing procedures, and rumors of shady practices employed to pass testing continue to bounce around the pot industry.
Last October, members of the Colorado Attorney General's Office warned marijuana industry representatives about a growing number of contamination cases involving potentially adverse health effects for dispensary shoppers. Assistant Attorney General Ross Hoogerhyde didn't share specific details in his warning, citing open investigations, but told a board of marijuana stakeholders that "every member of my team has more than one [marijuana] testing case, including testing cases with adverse health effects for consumers."
Renee Grossman, owner of Colorado dispensary chain High Q, provided more insight at that meeting when talking about potential expiration dates on dispensary products: "Adding more testing requirements doesn't help public safety when people can use radon lights, microwaves or dip their buds in hydrogen peroxide to pass [contaminant] testing," she said.
In a legislative hearing earlier this year, state Representative Marc Snyder pointed to a gap in MED enforcement that allows contaminated marijuana products to end up in consumers' hands.
""I think we're going to be looking at a shaking-out period over the next few to several years, and a lot of the companies that are on the margins right now might have increasing pressures to keep their company viable," Snyder said. "I think we have a wonderful [marijuana] industry. I know a lot of the people who have worked really hard to comply with all of the hoops and rules we put them through, but when economic pressure becomes overbearing, the opportunity to cut corners becomes even greater."
Snyder introduced a bill that he believes will give the MED "a little more teeth" to embargo or destroy marijuana products that are deemed unsafe to the public, similar to how the Colorado Department of Public Health & Environment regulates food and drink. That measure was passed by lawmakers and signed by Governor Jared Polis in March.
According to Snyder, he was asked to run the bill by the Colorado Department of Revenue, which oversees the MED.
