12679698 Canada Inc. v. Registrar under the Alcohol, Cannabis and Gaming Regulation and Public Protection Act, 1996, 2022 CanLII 92738

Licence Appeal Tribunal

Date: 2022-09-29

Appeal under section 14 of the Cannabis Licence Act, 2018, S.O. 2018 c.12, Sched. 2 from a Notice of Proposal to refuse a licence.

Between:

12679698 Canada Inc.

Appellant

-and-

Registrar under the Alcohol, Cannabis and Gaming Regulation and Public Protection Act, 1996

Respondent

DECISION

ADJUDICATOR: Laura Hodgson, Member

APPEARANCES:

For the Appellant: Panaram, W.

For the Respondent: Harari, A., Counsel; McVitttie A., Student-at-law

Heard by Videoconference: September 12 and 13, 2022.

BACKGROUND

112679698 Canada Inc. (the appellant) appeals from a notice of proposal (the NOP) issued on January 24, 2022, to refuse the appellant’s application for a cannabis retail operator licence (ROL). The NOP was issued by the Registrar (the respondent) on the grounds that there were reasonable grounds to believe the appellant will not conduct business in accordance with the law, with integrity, honesty or in the public interest and that false statements were made on the application.

2It is uncontested that the director and shareholders of the appellant company failed to disclose prior criminal and provincial charges and convictions. The appellant submits that any failure to disclose was a result of poor advice and misunderstanding the registration process.

3For the reasons that follow, the respondent’s NOP to refuse the appellant’s application for a cannabis retail operator licence is confirmed.

The Regulatory Framework

4The Alcohol and Gaming Commission of Ontario (AGCO) is the provincial agency responsible for regulating private retail sales of cannabis in Ontario. The Cannabis Licence Act, 2018, S.O. 2018, c.12, Sched. 2 (the Act) and related regulations set out the legislative framework. A retail cannabis operator must, among other things, apply for and be issued a ROL. Subsection 3 (4) of the Act sets outs the circumstances in which an applicant is not eligible to be issued a ROL.

5Here, the respondent proposes to refuse the application based on the following two grounds:

• Section 3(4)2: There are reasonable grounds to believe that the applicant will not carry-on business in accordance with the law, or with integrity, honesty or in the public interest, having regard to the past or present conduct of any of the persons referred to in subsection (5).

• Section 3(4)6: The applicant or an employee or agent of the applicant makes a false statement or provides false information in the application.

6Subsection 3 (5) of the Act specifies that, if the applicant is a corporation, paragraphs 1 to 3 of subsection 3 (4) apply to the directors, officers or shareholders of the applicant.

Agreed Facts

7At the outset of the hearing, the director of the appellant, Wisarn Panaram, indicated that he agreed to the following particulars set out in the respondent’s NOP:

• Wisarn Panaram, Khamphong Vonthongthip and Diana Panaram are officers/directors and/or shareholders of the applicant corporation.

• Mr. Panaram was convicted of the following, which he failed to disclose:

Conviction Date

Offence

Disposition

July 10, 2018 Montreal, QC

1. Production of Marihuana (x3)
2. Possession of Marihuana - Purpose of Trafficking (x3)
3. Conspiracy to Commit a Criminal Act

18 months incarceration

March 12, 2012, Montreal QC

1. Trafficking a Controlled Substance
2. Conspiracy to Commit a Criminal Act

18 Months incarceration plus 21 days pre-sentence custody, 10-year firearms prohibition

April 1995, Vermont, USA

Conspiring to Transport Illegal Aliens

Lifetime prohibition from entering USA

• Ms. Vonthongthip failed to disclose that she had been charged and acquitted of the following:

Date

Offence

July 2015, Montreal, QC

1. Production of Marihuana (x3)
2. Possession of Marihuana - Purpose of Trafficking (x3)
3. Conspiracy to Commit a Criminal Act

Appellant’s Application for an ROL

8On January 27, 2021, Wisarn Panaram applied on behalf of the appellant for a ROL. The application is comprised of various forms including Disclosure Reports for the corporation and for individual corporate officers and shareholders. Mr. Panaram signed a declaration agreeing, among other things, that omitting to provide information in the application or related documents could result in refusal of a licence.

9The corporate Disclosure Report dated January 27, 2021, indicated that Wisarn Panaram was a director and 50% shareholder, and his wife Khamphong Vonthongthip and daughter Diana Panaram were 25% shareholders.

10Questions number 2 and 8 of the Disclosure Report read as follows:

• Have you ever been charged, found guilty and/or convicted of any offence under any legislation in any jurisdiction? This includes any absolute and/or conditional discharges, withdrawn charges, suspended sentences, convictions, fines or guilty pleas.

• Have you* ever been involved in any capacity in the production, distribution or selling of cannabis and/or products containing cannabis?

This question applies to you* as:

• an individual;

• a sole proprietor, partner, general or limited partner in a limited partnership, director, officer, shareholder of an entity

• an individual who has had a direct or indirect interest in an entity.

11In their individual Disclosure Reports, Mr. Panaram and the two other shareholders, Khamphong Vonthongthip and Diana Panaram, all responded “no” to the above questions.

Application Review and Non-Disclosure

12Diane Pace, manager of the Cannabis Eligibility Department with the AGCO, testified that applications for a cannabis ROL are received through an online portal. The application and all related forms are then reviewed for completeness and accuracy. If a discrepancy or nondisclosure issue is noted, the application is forwarded to the Ontario Provincial Police (OPP) for further review. In the circumstances of this application, it was determined that there were undisclosed criminal and provincial charges and convictions.

13On April 6, 2021, the application was forwarded to OPP Officer Larry Culp, who conducts due diligence investigations for the AGCO. Through his investigation, Officer Culp determined that in 2015 Quebec police executed a search warrant on Mr. Panaram’s Montreal area residence. Police located 121 cannabis plants and 800 grams of cannabis in the garage of the home. Both Mr. Panaram and his wife, Khamphong Vonthongthip, were charged with three counts of production of a scheduled substance (cannabis), three counts of possession of a scheduled substance (cannabis) for the purpose of trafficking and conspiracy to commit a criminal act. Ms. Vonthongthip was ultimately acquitted of all charges. In 2018, Mr. Panaram was convicted and sentenced to 18 months incarceration.

14Officer Culp also determined that Mr. Panaram had criminal convictions in Quebec for trafficking cannabis and conspiracy to commit a criminal act in 2012. He was sentenced to serve 18 months in custody. Officer Culp had limited information about the circumstances of these offences.

15Through an “open source search,” Officer Culp established that in 1995, Mr. Panaram pled guilty in a U.S. court to the offence of “conspiring to transport illegal aliens”. According to the decision United States of America v. Simalavong, 924 F. Supp. 610 (D. Vt. 1995), Mr. Panaram and his co-accused transported “illegal aliens” within the United States. The court indicated that, because the two offenders were not U.S. citizens a probationary sentence would be imposed. According to particulars in the NOP, agreed to by Mr. Panaram, he is subject to a lifetime prohibition from entering the United States.

16Officer Culp also accessed Ontario Ministry of Transportation records. He determined that in 2003 and 2020, Mr. Panaram was convicted of speeding under the Highway Traffic Act, R.S.O. 1990, c. H. 8 (the HTA). Diana Panaram, his daughter, and proposed shareholder of the appellant company, also had a 2021 HTA conviction for speeding that was not disclosed.

17Mr. Panaram testified that when he and his family members completed the Disclosure Reports, they relied on the advice of a lawyer. Mr. Panaram was advised that criminal offences prior to October of 2018 did not need to be disclosed. He candidly acknowledged this was bad advice and that he made a mistake when completing the requisite forms. Mr. Panaram agreed with counsel for the respondent that the application and disclosure reports do not indicate any time frame with respect to relevant charges or convictions. Mr. Panaram repeatedly told the Tribunal that he made mistakes on the application because he had insufficient guidance.

Analysis

18The Act sets out the regulatory model for the responsible, safe and lawful sale of cannabis in Ontario. The Act requires that retail sales of cannabis be conducted with honesty, integrity, in accordance with the law and in the public interest. As part of this regulatory model, the Act sets out circumstances in which an ROL will not be issued.

19The NOP indicates that the respondent proposes to refuse the appellant’s application because its directors, officers and shareholders are not eligible for a licence based on subsections 3(4)2, 3(4)6 and 3(5) of the Act. As such, the issues to be determined are:

a. Does the past or present conduct of any of the directors, officers or shareholders of the appellant show that there are reasonable grounds to believe that the appellant will not carry on business in accordance with law, or with integrity, honesty or in the public interest?

b. Did the appellant or an agent of the appellant make a false statement or provide false information on the application, namely by not disclosing prior criminal and provincial charges and convictions of a director, officer or shareholder?

a. Conducting business in accordance with the law, integrity, honesty or in the public interest

20The respondent has established that the appellant is not eligible to be issued an ROL pursuant to subsection 3(4)2. There are reasonable grounds to believe that the appellant will not carry on business in accordance with law, or with integrity, honesty or in the public interest, based on past conduct of a director, officer or shareholder of the appellant.

21At the outset of the hearing, Mr. Panaram acknowledged his prior criminal record. This is a record for serious, industry-related offences. Mr. Panaram was not deterred by his first period of incarceration for trafficking a controlled substance and conspiracy to commit a criminal act in 2012. Soon after his release, he was arrested for the very same offences in addition to the offence of cannabis production. On both occasions (in 2012 and 2015), the offences were serious enough to warrant 18-month custodial sentences. It is also noteworthy that, while dated, Mr. Panaram also has a record for trafficking persons in the United States.

22Mr. Panaram provided no explanation of his past offences or evidence of subsequent positive conduct. This criminal history, which includes escalating drug related offences, provides a reasonable basis to believe that as director and shareholder of the appellant corporation, Mr. Panaram will not carry on business in accordance with the law or with integrity, honesty or in the public interest. There exists a nexus between the past conduct of Mr. Panaram and the appellant’s ability to conduct business in accordance with the Act or with honest, integrity or in the public interest.

23The very fact that this important information was omitted from the ROL application also speaks to Mr. Panaram’s—and by necessary extension, the appellant’s—integrity and ability to comply with the law. In the regulatory context, it is well established that an application form can be the first test of integrity: see 8017 v Registrar, Collection Agencies Act, 2013 CanLII 51149 (ON LAT). Applicants are expected to answer all questions fully and accurately so that the AGCO can effectively and efficiently assess the application. Further, an operator with a retail licence under the Act will be required to diligently comply with ongoing administrative and legal obligations in this heavily regulated industry.

24Mr. Panaram failed to honestly and accurately complete the ROL application. The two other shareholders also failed to properly disclose prior criminal charges/provincial offences as required. Mr. Panaram agreed that there was nothing on the application indicating that disclosure of offences prior to 2018 were not required. He also provided no explanation for denying prior involvement in cannabis distribution or production on the application. Mr. Panaram ultimately took no responsibility for these omissions.

25In all the circumstances, there exists reasonable grounds to believe that the appellant will not carry on business in accordance with the Act, or with honesty and integrity or in the public interest within the meaning of the Act. Given s. 3(5) of the Act, I base this conclusion on my findings respecting Mr. Panaram.

b. False Statements

26The respondent has also established on a balance of probabilities that the appellant is not entitled to a ROL pursuant to subsection 3(4) 6 of the Act. By not disclosing prior convictions, charges and involvement in cannabis distribution, an agent of the corporate appellant made false statements on the application. As noted above, making false statements on the application also impacts an assessment of the appellant’s integrity and ability to comply with the law under subsection 3(4)2.

ORDER

27Based on the above findings, pursuant to s. 3 (4) of the Act, the appellant corporation is not eligible for a licence. The Tribunal confirms the respondent’s proposal to refuse to issue the appellant’s application for a cannabis retail operator licence.