The Sweet Leaf employees gathered inside a marijuana cultivation warehouse for a celebration in late 2016 were higher on the sweet smell of success than they could ever get on pot. The company had just taken home three trophies from the Cannabis Business Awards, receiving honors for its branding, retail centers and executive leadership at the national industry event. It was on track to have ten dispensaries open in 2017, and managers boasted that the company was nearing $80 million in annual sales.
Sweet Leaf had come a long way from a single dispensary in northwest Denver in 2012.
When reporters asked Sweet Leaf owners and executives how they’d managed to grow so big so quickly, they pointed to a family-like culture that provided health-care benefits and a corporate structure that emphasized internal promotions. With over 350 employees in Colorado, Sweet Leaf was one of the state’s five largest dispensary chains and was expanding into Oregon, with plans to move into Illinois and Massachusetts.
But now that success has gone up in smoke. Today no Sweet Leaf dispensaries are open in Colorado, and the owners who once sought the spotlight are desperately seeking to avoid it.
“I’m never going to forget what was said during that party,” one former employee remembers. “All of the talk was about how we were one big family, but also this big company that was going to be worth $500 million. Something just felt a little off then, and now you can see why. We were pawns.”
The Sweet Leaf story turned sour on December 14, 2017, when police officers raided eight Sweet Leaf dispensaries in Denver and Aurora.
“I was welcoming three new team members to the job when police stormed in with machine guns pointed at us and then slammed down my laptop,” recalls a former cultivation manager.
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Notices from the Denver Department of Excise and Licenses sent to Sweet Leaf owners Anthony Sauro, Christian Johnson and Matthew Aiken announced that the licenses of the Denver stores had been suspended for alleged violations of Colorado’s retail and medical marijuana codes. Denver officials accused Sweet Leaf dispensaries of selling multiple ounces of cannabis to the same customers in a single day, in an act that’s known as “looping.” Under said state codes, dispensary customers are allowed to purchase no more than an ounce of cannabis at a time, with medical marijuana patients allowed to buy two ounces.
Denver Police Department officers had staked out Sweet Leaf locations for a year, obtaining hours of video evidence. They eventually arrested customers who would admit to purchasing pounds of marijuana in a day through single-ounce transactions from Sweet Leaf stores. Body-cam footage on undercover officers recorded them purchasing several ounces of marijuana within an hour from the same Sweet Leaf employees, leading to the arrest of eighteen former budtenders — but so far, none of its owners.
Christian Johnson, who’d studied engineering in college, had already tried his hand as a medical marijuana caregiver when he met Matthew Aiken, who worked in marketing for Phillip Morris and the hospitality industry.
According to former Sweet Leaf employees, the two hit it off and, in 2009, decided to max out their credit cards and buy an 8,000-square-foot grow in Denver in order to get in on Colorado’s burgeoning medical industry.
Shortly after starting the cultivation, they met Anthony Sauro, who was managing a hydroponics store at the time, and together they founded a cannabis investment firm, AJS Holdings, in 2011. Already owners of two medical dispensaries under different names, in 2012 the group bought a medical marijuana dispensary in northwest Denver called Sweet Leaf and renamed the other stores with that brand. AJS was soon awarded more cannabis businesses licenses, opening rec stores as soon as they became legal in Denver in 2014, and then moving into Aurora, Federal Heights and eventually Thornton. The three men also founded a cannabis consulting firm, Dynamic Growth Consulting, to work in other states, and opened their first out-of-state dispensary in Portland, Oregon.
Today that Oregon dispensary is the only one that’s still open.
After being suspended in December, all 26 of Sweet Leaf’s Denver business licenses have been revoked by Excise and Licenses director Ashley Kilroy, while the state Marijuana Enforcement Division has suspended Sweet Leaf’s remaining dispensary licenses in Aurora, Federal Heights and Thornton. The MED is still investigating Sweet Leaf for alleged marijuana code violations, according to MED communications director Shannon Gray.
In her July decision to revoke Sweet Leaf’s licenses, Kilroy also ordered the destruction of any remaining Sweet Leaf products in Denver, which were valued at millions of dollars. “Noncompliant behavior directly leads to results that weaken the robust system created by Amendment 64 and state and local laws designed to implement marijuana legalization,” Kilroy wrote in that decision. “Sweet Leaf’s looping scheme has been a company practice since June 2016 and has resulted in multiple customers obtaining several pounds of retail marijuana in violation of state possession laws.”
According to DPD records, one customer was found with three pounds of retail cannabis in his home; one medical patient reportedly spent over $577,000 on around 446 pounds of pot in 137 days between March and December of last year. Three Sweet Leaf medical dispensaries sold approximately 5,550 pounds to loopers between June 1, 2016, and December 13, 2017, records show.
During Sweet Leaf’s disciplinary hearing in March and April to determine the fate of its then-suspended Denver licenses, a city attorney told the hearing officer that one Sweet Leaf district manager believes that looping transactions accounted for 30 to 50 percent of overall sales for the company.
Despite those startling statistics, however, there’s still legal confusion over looping.
Sweet Leaf’s lawyers don’t dispute that the sales documented by the DPD took place; they argue that the sales were never illegal in the first place. The language specifically banning more than a one-ounce purchase in a single day didn’t officially go into effect until January 2018; the original wording in Amendment 64, which Colorado voters passed in November 2012, prohibited the sale of more than one ounce sold “per transaction.”
“We’ve never taken the position that looping was illegal. We never believed the budtenders were doing anything illegal, and I think the owners are two or three steps removed from that, anyway,” says attorney Rob Corry, who’s represented several of the budtenders charged and is now representing one of the Sweet Leaf owners, Christian Johnson. “Why would the law need to be changed if looping were already illegal?”
Corry and Sweet Leaf’s licensing attorney, Tom Downey, have consistently said that none of the sales documented before the December 2017 raids exceeded the one-ounce limit, so the transaction law was never broken.
Sam Kamin, professor of marijuana law at the University of Denver Sturm College of Law and expert witness on Sweet Leaf’s behalf during its licensing hearing, believes law enforcement overstepped its bounds. “The rules didn’t say no more than one ounce per day; it’s per transaction,” Kamin says. “There doesn’t seem to be any allegation that they sold more than one ounce to a customer during any transaction — so that leads to the question: How do they justify cracking down on Sweet Leaf and these budtenders?”
In response to such questions, prosecutors added complicity charges to the budtender cases earlier this year, claiming that by selling more than one ounce per day to customers, Sweet Leaf employees knowingly helped customers break Colorado laws that ban the possession of more than one ounce of cannabis per rec consumer and two ounces for medical patients.
But Kamin says he was “skeptical” about how the complicity theory could apply to the Sweet Leaf case, too. “You have to show there was intent — that for some reason, the budtenders wanted to facilitate possession that was illegal, which I doubt can be done,” he explains.
Sweet Leaf made an effort to clarify the intent of the law early on. E-mails obtained by Westword capture a 2016 conversation between then-Sweet Leaf vice president Nichole West and then-former MED compliance officer Renee Rayton — who was indicted in 2017 for her alleged participation in an unrelated marijuana trafficking ring — during which West asked for a clarification of the time frame between marijuana transactions.
Rayton’s response: “We are aware the statute says per transaction, which I (speaking for myself) take as a single sales transaction. According to ‘higher-ups’ at MED, if you do more than one transaction with an individual, you are sending them away with more than one ounce, which violates State Law of having more than one ounce on your person (even if that person has taken a transaction to their home or car). So...that is all the information I have regarding this rule.”
West then sent Rayton a picture of a leaflet that Sweet Leaf had started handing out to customers, which essentially put the onus on the buyer for possessing more than the one-ounce limit while advising that it could refuse service if employees feel “like you are abusing the system.” MED criminal investigator Kristin Moulton subsequently praised Sweet Leaf’s handout, telling West that it was “nice to know that there are businesses making an extra effort to uphold the laws and regulations.”
But the MED further clarified its stance on the single-ounce issue in May 2017, posting on its website that “sales structured as multiple, stand-alone transactions may be viewed by the Division as an attempt to evade quantity limitations on the sale of retail marijuana, resulting in recommendation for administrative action.”
And in the fall of 2017, when the MED was holding rule-making meetings, Colorado officials decided to make the language more explicit. The MED adopted rules effective January 1, 2018, “to further clarify the longstanding statutory prohibition on looping,” according to Gray.
Mark Bolton, who was Colorado’s marijuana policy director from 2016 to 2017, says that complaints about loopers was the “genesis of the rule change,” and that looping likely wasn’t confined to Sweet Leaf. “We heard about it from a variety of sources,” he says. “You’d hear complaints about looping from folks in law enforcement and people in the industry.”
Bolton left the state earlier this year and is now with powerhouse firm Brownstein Hyatt Farber Schreck. “There’s certainly an argument that the rule before January 1, 2018, allowed for successive transactions,” he says. “But to me, it’s fairly obvious that [looping] is contrary to the spirit of the law — and there was some notice to the licensees that the MED looked at the issue.”
But does the spirit of the law supersede its actual wording? While Sweet Leaf hasn’t been lucky with city and state regulatory decisions, criminal and district courts often have higher standards of proof.
And so far, Sweet Leaf and its ex-employees have been relatively victorious in those arenas.
Sweet Leaf is currently appealing Kilroy’s revocation of its business licenses in Denver District Court; in July, the court granted Sweet Leaf a stay of action on the destruction of its marijuana products during its appeal, going against her order in July to destroy any remaining inventory.
All eighteen budtenders arrested by the DPD — each of whom were facing misdemeanor or felony drug charges for selling to loopers — saw their charges dropped after a majority agreed to perform 100 to 200 hours of community service and donate $100 each to Mothers Against Drunk Driving.
“We’ve got a few things going for us,” says Corry. “This law is murky at best.”
Before taking on Johnson as a client, Corry represented a handful of Sweet Leaf budtenders, including Deann Miller, the only one who’d requested a trial rather than taking the DA’s offer. Three days before her August 6 trial date, however, Miller’s charges were dropped. In his written motion for dismissal, prosecutor Tim Twinning said he didn’t want her trial to “adversely impact the larger investigation into the criminal enterprise.”
Other than the eighteen budtenders, no other Sweet Leaf employees have been arrested in Denver, but on August 3, Denver District Attorney’s Office spokesman Ken Lane confirmed that there’s a grand jury investigation into the company. According to the DA’s office, Sweet Leaf owners Sauro, Johnson and Aiken and other upper-management employees could eventually be charged for their roles in the company’s sales practices.
“The Sweet Leaf ‘budtenders’ were the point-of-sale in the distribution and possession of illegal amounts of marijuana. The larger scheme involving Sweet Leaf remains under investigation and is being considered by the Denver County Grand Jury,” Lane says in a statement to Westword. “Since December 2017 we have learned more about the overall enterprise and scheme, and what roles various individuals played in this overall enterprise. We anticipate further criminal legal action.”
Corry says he’s currently having “preliminary” discussions with the DA about possible agreements with Johnson. “Sometimes a big negotiating chip is not even filing charges,” he says of those talks. “It’s not a normal process, but this does happen quite a bit. It’s hard to say what will happen...but at least we’re talking.”
And they may not be the only ones talking. While a majority of the arrested budtenders were eventually reimbursed for their legal fees by Sweet Leaf, not all of them are happy with their former employer — and neither are others who no longer have jobs at the company.
During Sweet Leaf’s licensing hearings in March and April, city attorneys suggested that the leadership instilled fear in retail employees. “They were encouraged by management to make those transactions,” City Attorney Emela Jankovic said, adding that during further interviews, employees said “they would be told to get on board or get a new job.”
Four former budtenders who ask to remain anonymous out of fears of reprisal say they felt either duped or intimidated into making extra sales or serving customers who made them feel uncomfortable.
In a 2017 Sweet Leaf employee training guide obtained by Westword, only one of the manual’s seventy pages touches on sales limits, and that section focuses on weight limits, not transaction periods.
“For many of us, this was our first industry job. We were just doing what was told [to] us,” says one former budtender. “If I was told about the MED’s statement [on looping], then I would’ve quit right there.”
From a high of over 300 employees, Sweet Leaf’s family quickly dwindled after the raids. Upper management ceased communicating with staffers after the raids, and workers report that their Christmas bonuses were taken out of their bank accounts after being deposited there. (Sweet Leaf representatives admit this happened, but say it was because law enforcement froze the company’s assets.)
Still, not all former employees take issue with the company. If her bosses felt like they were operating within the law, Miller says, employee anger should be directed at the DPD or the MED. “If Sweet Leaf knew they were doing something wrong, they would’ve stepped in and stopped it,” she says, adding that she never felt pressured to sell to repeat customers. But when she didn’t approve of a customer’s ID, she acknowledges, Sweet Leaf managers would step in and make the sale for her.
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Another former employee calls Sweet Leaf a “prosperous and welcoming environment,” and says Sweet Leaf’s ownership was very connected with daily operations. “I think they went above and beyond,” he adds. “One of our owners was driving a Toyota. They cared more about expansion than flash.”
In an article on Hightimes.com in 2016 sponsored by Sweet Leaf, Nichole West praised the tenacity and drive of Sauro, Johnson and Aiken. “These three gentlemen are living proof that the future belongs to the people who believe in the power of their dreams, and work relentlessly every day to attain them,” she wrote.
But days after the raid, West, who’d appeared in numerous media outlets and at events as a proud company ambassador, told Westword she was no longer with Sweet Leaf and did not want to talk to the media. Sauro, Johnson and Aiken, who were featured in such publications as The Oregonian, High Times, Marijuana Business Magazine and Cannabis Business Executive, among others, from 2014 to 2017, have all declined to talk with the media since December.
Growing from a single Sweet Leaf location to ten in a handful of years was a sweet success story. But with possible criminal charges on the horizon and a lengthy battle looming in district court over the future of their business in Denver, Sweet Leaf’s leadership could see all that success go up in smoke.