NC Hemp Industry Still Tainted

The effort to grow a hemp industry in North Carolina began with mystery, including the involvement of a former drug kingpin and a Russian spy – and it seems that strange dealings continue to follow the industry.

In October of last year, we published a story about a license plate bill (introduced in March of 2015) for retired registers of deeds that mysteriously became the “Hemp Bill” on September 28, 2015 and was ratified the next day. All this, just two days before the end of last year’s eight-month, marathon legislative session. The bill, Senate Bill 313 (Industrial Hemp), made industrial hemp production legal in North Carolina.

Today another hemp bill (HB 992, Amend Industrial Hemp Program) is making its way through the short legislative session. This bill appears to make some positive changes to the 2015 legislation, though some would say not nearly enough.

Unfortunately, no matter how many changes the legislature makes to the 2015 legislation, there is one thing lawmakers can’t do and that is to disassociate industrial hemp in North Carolina from one Bruce Perlowin.

In October we described Perlowin this way:

Perlowin, on his resume, called himself an ex-marijuana kingpin. From 1974 to 1984, Perlowin was known for “organizing the largest drug smuggling operation in west-coast history.”  He claims to have smuggled more than 500,000 pounds of marijuana into California in that 10-year period. Perlowin was eventually arrested and served nine years of a 15-year sentence in federal prison.

No description of Bruce Perlowin would be complete without the mention of his wife, Svetlana Ogorodnikov, a Russian spy tried and convicted for espionage in 1985. Ogorodnikov was a KGB agent who seduced and flipped the first FBI agent ever to be charged with espionage – Richard Miller. While in prison, Svetlana met Perlowin and they later married. She is also one of Hemp, Inc.’s largest shareholders; Perlowin serves as CEO.

So, what does Bruce Perlowin have to do with Industrial Hemp in North Carolina? Regrettably, Perlowin is probably the major reason that the 2015 industrial hemp legislation passed in the first place. Hemp, Inc., of which Perlowin is CEO, was waiting in the wings for hemp to become legal in North Carolina. Hemp, Inc., purchased the largest natural fiber manufacturing and processing plant in North America at bankruptcy auction at an unknown date before May 2014 and moved it to a 70,000-square-foot warehouse in Nash County. It seems Perlowin’s plan was to be the center of hemp processing in the U.S.

Just in case you’re thinking that Bruce Perlowin might have turned his life around, from notorious drug dealer to respectable businessman, think again. We were alerted to the fact that on June 20 the Securities Exchange Commission (SEC) charged Bruce Perlowin and Hemp, Inc. with six counts of securities fraud.

The complaint describes a fraudulent scheme to sell to public investors millions of unregistered and purportedly unrestricted Hemp, Inc. securities that were, in fact, restricted. This fraudulent scheme dates back to at least 2011. Among many other allegations, the complaint makes the case that “Bruce Perlowin and Barry Epling connived to have Bruce Perlowin convey to Barry Epling’s and Jed Perlowin’s (Bruce’s brother) companies hundreds of millions of Hemp (Inc.) shares to be sold into the public market place.”

Alan Brochstein on Seeking Alpha’s website wrote that “since Hemp, Inc. was founded in 2011, it has “generated lots of press releases and additional shares but little in terms of revenue.” According to Brochstein:

The SEC filed civil litigation against cannabis penny stock Hemp, Inc., (OTC: HEMP) and several affiliates, including CEO Bruce Perlowin, on June 20th. The complaint alleges that Perlowin and the company engaged in a long-running scheme involving “phony gifting” of shares and “bogus consulting” agreements that allowed insiders to sell hundreds of millions of shares that were not properly registered and that should have been restricted. Further, the SEC alleges that Perlowin and the other defendants, which included his brother Jeb and Barry Epling, made false statements to broker-dealers, Alpine Securities and Scottsdale Capital.

This June 22, Insider Financial column titled “Get Out of Hemp Inc. While You Can” gets straight to the point. Alex Carlson wrote “Perhaps no other name has personified the pot stock boom and bust more so than Hemp, Inc. (OTCMKTS:HEMP) CEO Bruce Perlowin.”  Carlson continued:

Well, it seems he never outgrew his old ways as the SEC charged Hemp, Inc., Bruce Perlowin, and others with a “long-running and profitable scheme resulted in the sale of hundreds of millions of unregistered and purportedly unrestricted Hemp shares to public investors. The execution of this scheme involved, among other things, purported gifts and consulting agreements that do not appear to have been bona fide and fraudulent statements made to Commission-registered broker-dealers.

Carlson also speculated that Perlowin will most likely be banned from the industry and it will be a battle to collect funds from him.

The SEC complaint should make us ask: Was Perlowin really serious about the hemp industry in North Carolina, or is the decortication plant in Spring Hope just part of his world-class scam?

While the SEC complaint is new, this type of behavior is nothing new for Perlowin. In this April 2014 Forbes article by Nathan Vardi, “Inside the Pot Stock Bubble,” the author traces the pot stock frenzy to Perlowin.

Unfortunately, industrial hemp’s association with Bruce Perlowin will probably taint the work surrounding hemp in North Carolina for the near future at least. Time will tell what impact this turn of events surrounding Perlowin and Hemp, Inc. will have on North Carolina’s industrial hemp future. We can only hope that the legislature and Department of Agriculture will have their eyes opened and begin a new approach to hemp in North Carolina. Get-rich-quick schemes are never good business.

The bill (HB 992) sitting in Rules Committee would increase the too-small five-member commission by four, hopefully raising the qualifications of the commission as a whole. It also establishes an industrial hemp research program to be directly managed and coordinated by state land-grant universities. This is definitely a positive addition to the legislation and a step in the right direction, but more needs to be done to legitimize hemp in North Carolina and to distance our industry from Perlowin, Hemp, Inc. and all their family, cronies and subsidiaries.