A convicted marijuana kingpin. Allegations of a conspiracy to steal a pot dispensary and its Sacramento city license. And a man in a clown suit accused of assault with a beer bottle on Halloween night.
These are keys in an ongoing lawsuit over the ownership of the Sacramento pot dispensary Twelve Hour Care Collective, or THC, which is co-owned by indicted Ukranian-born businessman Andrey Kukushkin.
Kukushkin’s dispensary ownership – and his business ties to Garib Karapetyan, permit holder for eight dispensaries, including the THC dispensary on Fruitridge Road – have led to a wholesale review by city officials of how Sacramento has awarded its 30 permits for operating pot shops.
An FBI probe of the city’s marijuana permitting also is underway, with sources telling The Bee agents are investigating whether any bribes have been made to public officials.
The resulting controversy – and the fact that Kukushkin was indicted on campaign finance charges along with associates of Rudy Giuliani, President Trump’s personal attorney – has brought fresh scrutiny to the city’s management of its pot licensing procedures, as well as criticism of how the legalization of marijuana in California is working out.
“I thought they promised us legalization would end the black market,” said one law enforcement source who asked not to be identified.
Long before the current controversy erupted, there was a massive legal battle brewing over ownership of THC and how Garib Karapetyan became an owner of the shop. A pending lawsuit in Sacramento Superior Court alleges Karapetyan stole the dispensary and license out from the previous owner, something Karapetyan’s lawyers have denied as fantasy.
But the lawsuit offers a rare look into the cannabis industry in Sacramento, and the ease in which some dispensaries have been apparently allowed to change hands under the city’s watch.
The story begins with a Stockton man named Matthew Rowan Davies, a Santa Clara University MBA graduate, restaurateur and onetime medical marijuana dealer who built a $10 million empire starting in 2009.
Davies, now 41, once employed 100 people in seven pot dispensaries he owned in the Stockton and Sacramento areas, including THC on Fruitridge Road, which he purchased for $75,000 in July 2011 from men named Ethan Laver and Charles Roll, the lawsuit alleges.
At the time, Laver and Roll “owed substantial back taxes” and “would have been forced to close the cannabis dispensary” if Davies, who fashioned himself a turnaround artist for such businesses, had not come along, court records say.
Matt Davies, right, whose multi-million dollar medical marijuana business was raided by federal and local officers, with his wife, Molly and their 10-week-old daughter, Rebecca, in Stockton, Calif., Jan. 3, 2013. Davies, a 34-year-old father of two, now faces years in prison in a case that highlights the growing clash between the Federal government and states that have legalized marijuana for medical or recreational use. (Jim Wilson/The New York Times) JIM WILSON NYTAnd then Davies’ troubles began.
Davies, who could not be reached Wednesday, was indicted by a federal grand jury in Sacramento one year after purchasing THC and charged with two counts of manufacturing marijuana at two of his locations in Stockton.
Eventually, he would face 10 counts of conspiracy, manufacturing and dispensing marijuana. He accepted a plea deal in May 2013 that led to a five-year sentence.
At the time, THC was a “viable and successful cannabis dispensary business operating in compliance with state and local laws,” Davies’ lawsuit against Karapetyan claims.
“Unfortunately, Davies encountered certain legal problems unrelated to the 12-Hour Care Collective business which led to his temporary incarceration,” Davies’ lawsuit says.
While he was in prison for those “certain legal problems,” Laver and Roll assumed control again “although they had no legal right to do so,” the lawsuit says.
Laver and Roll could not be reached for comment Wednesday; Davies’ lawsuit says the two, who are not defendants in the current case, “have not appeared for their depositions, have not participated in discovery proceedings and have been actively evading and avoiding service. …”
Karapetyan’s lawyers dismiss the claims.
“My personal legal opinion about his claims is that they are extraordinarily far fetched,” attorney Brad Hirsch told The Bee Monday. “If for no other reason than what he claims is his entitlement, he couldn’t fulfill his end of the bargain behind the bars, if that was in fact the consideration.”
“Davies is — boy, I’m afraid to say anything — is erratic,” Hirsch said.
‘Seized … the dispensary’
The lawsuit contends that Laver and Roll reopened the dispensary in August 2015 – while Davies was in prison – without his knowledge, and that when he found out he sent them cease-and-desist letters.
This is when Karapetyan moved in, Davies’ lawsuit claims. He alleges that Karapetyan met with Laver and Roll and “concocted a scheme” to take over the business.
“He learned of Davies’ vulnerable state, and seized the opportunity to take over Davies’ cannabis dispensary operation for his own benefit,” Davies’ suit says, then proceeded to use the same location and acronym “THC” in what the suit says was a “deliberate effort to deceive the public and confuse city officials into issuing defendants’ permits without any inquiry.”
City records show the shop has cycled through several people over the past decade. The 2011 permit lists Laver and Roll as the owners. In 2014, Laver and a man named Grigor Msryan were listed on a city application for a permit; on the form, someone crossed out the word “owner” and replaced it with “director.”
Applications filed with the city show Karapetyan and Laver listed as the sole business owners in 2016. The next year’s application lists Karapetyan and Kukushkin, the indicted Ukrainian-born businessman who is set to be arraigned Thursday in Manhattan, as the owners.
Hirsch declined to make Karapetyan available for an interview, but another attorney for him who is defending Karapetyan against Davies’ lawsuit says Davies violated the original purchase agreement for THC when he became a felon.
“In short, Matthew Davies is not a victim, but an opportunist who is maliciously abusing judicial process to obtain something that is not his by any measurable standard,” Dublin attorney Robert Finkle argued in court filings.
Finkle also argued that the original contract Davies signed to buy the dispensary from Laver and Roll was itself “an illegal transfer” because city code prohibits the sale or transfer of dispensary permits.
“Therefore, this court should dismiss plaintiff’s entire lawsuit as premised on an illegal and unenforceable contract,” Finkle wrote.
Dressed as a clown
Davies since has gone on to focus his career on the affordable housing market, heading up a Stockton company that operates manufactured housing communities.
But he is facing other legal challenges stemming from an incident on Halloween night in 2018, when he was accused of attacking a man with a beer bottle while dressed as a clown.
Matthew Davies, 41, was arrested by the Stockton Police Department on Friday March 1, 2019 on suspicion of assault with a deadly weapon stemming from an Oct. 31, 2018 incident. Stockton Police Department“Davies struck the victim on the head causing an eight-inch laceration to the face,” according to documents filed in federal court in Sacramento charging that the incident violated the terms of his supervised release on the marijuana conviction. “This assault transpired during Halloween festivities in front of a residence in Stockton.
“The victim stated Davies had scared his child by yelling, pushed his wife, and then, when the victim intervened, Davies struck him on the head with a beer bottle.”
That matter is set for hearing on Nov. 8, but in the meantime Davies was sentenced on Oct. 9 in San Joaquin County Superior Court after pleading guilty to a felony count of assault causing great bodily injury and a misdemeanor count of battery.
“Due to the severity of the injuries to the victims in this matter and other factors, the people argued for a prison sentence at the October 9th hearing,” Assistant District Attorney Kristine Reed wrote in an email to The Bee.
Reed said the court sentenced Davies to 364 days in county jail on the felony charge, with 60 days consecutive on the misdemeanor charge; 5 years of formal probation; restitution to the victims in this case; as well as additional conditions for the felony plea.
“Our office is appreciative of the victims’ cooperation and participation with the prosecution of this case involving an unprovoked attack last Halloween.”
Davies was ordered to report to jail on Nov. 18.