Unrivaled Brands Files Suit Against Frank Kavanaugh, Jay Yadon, and Bernard Steimman for Fraud Related to the Acquisition of People’s First Choice LLC

Rhea-AI Summary

On November 7, 2022, Unrivaled Brands, Inc. (OTCQX: UNRV) filed a cross-complaint against Frank Kavanaugh, Jay Yadon, Bernard Steimman, and People’s California, alleging fraud and negligent misrepresentation related to the acquisition of the People’s First Choice dispensary in November 2021. The complaint alleges over $5 million was siphoned off through backdated accounting entries and that Unrivaled assumed over $4 million in IRS tax debt. Newly appointed Interim CEO Sabas Carrillo indicated further claims may arise as investigations continue.

Positive

• Unrivaled is committed to aggressively defending against fraud, which may restore shareholder confidence.
• The investigation may uncover additional claims leading to potential recovery of losses.

Negative

• Unrivaled assumed over $4 million in IRS tax debt from the People’s Dispensary.
• The company was required to pay $17 million in cash before the deal closed, impacting liquidity.
• Allegations of fraudulent activities could damage the company's reputation and shareholder trust.

SANTA ANA, Calif., Nov. 07, 2022 (GLOBE NEWSWIRE) -- Unrivaled Brands, Inc. (OTCQX: UNRV) (“Unrivaled” or the “Company”), a multi-state vertically integrated cannabis company with operations in California and Oregon, filed a cross-complaint on September 20, 2022 against Frank Kavanaugh, Jay Yadon, Bernard Steimman, and their company, People’s California, LLC (“People’s California”), for Fraud and Negligent Misrepresentation related to the sale of the dispensary People’s First Choice (the “People’s Dispensary”) and other assets to Unrivaled in November 2021. People’s California lists Fort Ashford Funds, BRP Ventures, and People’s, LLC as Managers/Members on filings with the California Secretary of State. Fort Ashford Funds is a privately held investment firm that lists Frank Kavanaugh, Susan Kavanaugh, and Andrew Krajacic as Managing Directors on its website. BRP Ventures is a consulting firm listing John Yadon as a Manager/Member.

Unrivaled alleges in the Cross-Complaint, among other things, that around the time of the sale, Kavanaugh, Yadon, and Steimman, through an entity New Patriot Holdings, Inc., siphoned away over $5,000,000 from Unrivaled through backdated accounting entries and write-offs related to the People’s Dispensary.  

“One of my first tasks as Interim CEO was to investigate the events and circumstances related to the acquisition of People’s California assets. I had grave concerns about the transactions and the significant red flags surrounding the deals. The more my team digs into the facts, the more we find,” said newly appointed Interim CEO Sabas Carrillo. “In addition to our Cross-Complaint for fraud based on what my team and I had found after only a few weeks at Unrivaled, we expect additional claims will have to be made in the near future as we continue to investigate,” Carrillo continued.

According to the Cross-Complaint Unrivaled assumed over $4,000,000 in IRS tax debt accrued by the People’s Dispensary while under the leadership of Kavanaugh, Yadon, and Steimman. In addition, the Cross-Complaint alleges that $17,000,000 in cash was required to be paid by Unrivaled before the deal had even closed. The Cross-Complaint notes that part of the substantial up-front cash payment was demanded because Kavanaugh, Yadon, and Steimman required funding for a pending project in Salinas, California.

“We want our shareholders, the city of Santa Ana, and the entire California cannabis community to know that we are committed to aggressively defending Unrivaled from fraud,” said Carrillo.

About Unrivaled Brands

Unrivaled Brands is a multi-state vertically integrated company focused on the cannabis sector with operations in California and Oregon. In California, Unrivaled Brands operates three dispensaries with direct-to-consumer delivery, two cultivation facilities, and several leading company-owned brands. In Oregon, we operate a state-wide distribution network, company-owned brands and outdoor and greenhouse cultivation. Unrivaled Brands is home to Korova, the market leader in high potency products across multiple product categories, currently available in California, Oregon, Arizona, and Oklahoma, as well as Sticks and Cabana. 

For more info, please visit: https://unrivaledbrands.com.

Cautionary Language Concerning Forward-Looking Statements

Certain statements contained in this communication regarding matters that are not historical facts, are forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, known as the PSLRA. These include statements regarding management's intentions, plans, beliefs, expectations, or forecasts for the future, and, therefore, you are cautioned not to place undue reliance on them. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise, except to the extent required by law. We use words such as "anticipates," "believes," "plans," "expects," "projects," "future," "intends," "may," "will," "should," "could," "estimates," "predicts," "potential," "continue," "guidance," and similar expressions to identify these forward-looking statements that are intended to be covered by the safe-harbor provisions of the PSLRA. Such forward-looking statements are based on our expectations and involve risks and uncertainties; consequently, actual results may differ materially from those expressed or implied in the statements due to a number of factors.

New factors emerge from time-to-time and it is not possible for us to predict all such factors, nor can we assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. These risks, as well as other risks associated with the combination, will be more fully discussed in our reports with the SEC. Additional risks and uncertainties are identified and discussed in the "Risk Factors" section of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other documents filed from time to time with the SEC. Forward-looking statements included in this release are based on information available to the Company as of the date of this release. The Company undertakes no obligation to update such forward-looking statements to reflect events or circumstances after the date of this release.

Contact:

Jason Assad
LR Advisors LLC.
jassad@unrivaledbrands.com
678-570-6791

FAQ

What is the reason behind Unrivaled Brands' cross-complaint against Frank Kavanaugh and others?

Unrivaled Brands filed the cross-complaint due to allegations of fraud and negligent misrepresentation related to the acquisition of the People’s First Choice dispensary.

How much money does Unrivaled Brands claim was siphoned away from them?

Unrivaled Brands claims that over $5 million was siphoned away through fraudulent activities by the previous owners.

What financial liabilities did Unrivaled Brands assume in the acquisition of People's California?

Unrivaled assumed over $4 million in IRS tax debt and was required to pay $17 million in cash prior to closing the deal.

Who is the newly appointed CEO of Unrivaled Brands?

Sabas Carrillo is the newly appointed Interim CEO of Unrivaled Brands, overseeing the investigation into the acquisition.