Corporate Finance

KPMG Withdraws Two Audits for CannTrust

The Canadian cannabis company is embroiled in a scandal over an unlicensed grow facility.
Lauren MuskettAugust 9, 2019

KPMG is withdrawing its report on the consolidated financial statements of CannTrust Holdings, a licensed producer of cannabis in Canada, saying its reports for 2018 and for the March 2019 quarter should no longer be relied on.

The announcement comes after Canadian regulators found the company was operating an unlicensed grow facility and placed a hold on 5,200 kilograms of the company’s cannabis product.

“KPMG was not aware of the information recently shared by the company when it issued the KPMG reports and had relied upon representations made by individuals who are no longer at the company,” CannTrust said.

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On July 12, CannTrust announced it was halting sales and shipments of cannabis products after being notified by Health Canada that the regulator had discovered a manufacturing facility in Ontario that operated between October 2018 and March 2019 without the proper license.

The company also set up a special committee of its board of directors to do its own investigation.

On July 25, the company announced chief executive Peter Aceto and president Eric Paul were leaving the company after media reports showed the senior executives were aware of the illegal facility and that some cannabis had been illegally exported to Danish partner Stenocare.

CannTrust shares fell 13% on Friday morning on the news, but then rebounded some.

“We will continue cooperating with our auditor and regulators, and take whatever steps are necessary to restore full trust in the company’s regulatory compliance. Our medical patients, customers, shareholders, and employees deserve nothing less,” CannTrust interim chief executive officer Robert Marcovitch said.

The special committee investigating the episode is being chaired by Marcovitch. The committee retained Greenhill & Co. Canada as its financial adviser to assist in a review of strategic alternatives, including a possible sale, strategic investment, or business combination.

KPMG remains CannTrust’s independent auditor.