Scott Pack Indicted in Colorado Pot Biz's Largest Fraud Case Ever, Attorney Says

Scott Pack has been indicted by an Arapahoe County grand jury for what attorney Matthew Buck has called "the largest fraud case in the history of Colorado's marijuana industry." Buck, who filed a lawsuit in the matter earlier this year, says the grand jury's findings tie Pack to what prosecutors describe as a massive operation that grew marijuana for distribution outside Colorado and previously led to the indictment of sixteen people, including Pack associate Rudy Saenz. Among those reportedly indicted along with Pack is Renee Rayton, a former officer for the state's Marijuana Enforcement Division.

"There are potentially victims for as much as $10 million," Buck says. "Scott Pack's company is one of the larger marijuana companies in Colorado. They own a significant number of licenses, and through a series of shell companies, they hold the leases on many buildings across the state."

We've reached out to Pack, who is being sought by authorities at this writing; if and when he gets back to us about the indictment, we'll update this post. But in a statement he provided to us for our original report on this subject, published on April 20, he said, "We have structured our business abiding by the governing laws and regulations, and there is no reason why we would need to deceive our stakeholders, who still hold value in our company. We deny the allegations in this case, which will easily be proven false once facts and evidence are revealed in court."

Buck filed the lawsuit, accessible below, on behalf of Pierre and Christophe Raygot, a pair of investors who claim to have been bilked out of $500,000. Also named is Michael Pack, father of Scott and a wealthy real estate developer based in San Diego.

According to the complaint, Michael owned a warehouse property at 12555 East 37th Avenue associated with two other entities that Buck's clients are targeting, HGCO LLC and Harmony & Green LLC, as well as a home at 676 Monroe Street where Saenz was living. The latter address was raided during the investigation of the aforementioned marijuana trafficking ring allegedly led by Michael Stonehouse, another March indictee. Authorities reportedly found and seized more than 2,500 pounds of marijuana, worth an estimated $5 million, from Stonehouse's residence, located in Elizabeth.

Scott Pack met Pierre Raygot in 2010 at Nevada's Burning Man festival, the lawsuit states, and five years later, he approached Raygot about investing $100,000 to buy a 1 percent stake in Harmony & Green LLC, which was said to manage marijuana businesses in Colorado and California.

In June 2015, the suit continues, Raygot flew to Colorado to meet with Scott and Saenz at the Monroe Street home, where he was shown documents that said Scott had invested $2.5 million in Harmony & Green LLC and that Saenz's wife, Suzanne, had ponied up $4 million — assertions that Buck portrays as false. "That money's not real," he told us in April.

After being informed that investing money in Harmony & Green LLC would result in a healthy profit within one year, at which point he could choose to convert his note into company equity, Raygot transferred $100,000 to the firm, the lawsuit says — and the next year, he supplied $400,000 more to buy another 1 percent stake for himself and an equal share for Christophe, his brother.

Problem is, Buck explained for our earlier piece, HGCO LLC, the other firm named in the lawsuit, is the only one with real value: "It owns [fourteen] marijuana licenses, which are worth a lot of money. But Harmony & Green LLC, the management company, owns nothing. It's effectively a shell company they used to launder money."

Those weren't the only things wrong with the transactions, Buck believes. Neither Pierre nor Christophe are U.S. citizens, so they aren't allowed to make investments in a marijuana company under Colorado law. On top of that, Buck said in April, "all of these investments should have been disclosed to the MED [Colorado's Marijuana Enforcement Division]. They were not — and the investors should have been fingerprinted and badged, and they weren't, either, because in almost no instances were the investors Colorado residents, and at least three of them weren't citizens."

Pack countered this claim in our previous post by pointing out that Harmony & Green LLC, the company in which Pierre and Christophe purchased equity, doesn't grow, extract or sell marijuana. Instead, it's used as a brand for, and facility sub-leasor to, HGCO LLC. This distinction is reinforced by the Harmony & Green LLC website, which neither mentions marijuana nor includes typical cannabis imagery. On the site, Harmony & Green LLC is described as "a streamlined business support company set up to assist companies who specialize in agricultural cultivation, manufacturing, extraction, beautification, refinement & the wholesale & retail distribution of elite & unique specialty products."

Such distinctions don't appear to have convinced the grand jury that Pack's approach was on the up and up, and Buck concurs. "I understand this law probably better than anyone in the country," he says, "and I couldn't figure out a way that what he was doing was legal. This was Scott Pack attempting to prey on people who didn't have a sophisticated understanding of the law. And Scott Pack was sophisticated. He had a sophisticated understanding of how to use loopholes to get around state law."

In the indictment, Pack is accused of eleven felony counts, including conspiracy to distribute, possess or distribute fifty or more pounds of marijuana, securities fraud, money laundering, forgery and more.

Meanwhile, Buck says, the indictment "enhances our suit, because it's going to affect Scott Pack's credibility before the court. And this also gives us the opportunity to ask for criminal restitution — so civil restitution is not our only remedy. It effectively ensures that my clients will not have their money stolen from them."

Click to read the lawsuit against Scott Pack.