CHICAGO — A colorful Denver businessman and City Council candidate schemed to monopolize the new medical marijuana industry in Illinois, according to a lawsuit that has joined a parade of legal challenges from competing marijuana business applicants in the state.
Medponics Illinois filed the lawsuit Monday in Lake County.
It claims Kayvan Khalatbari and his Denver companies have controlling interests in more than three Illinois cultivation centers.
If true, that would violate Illinois regulations. But some industry insiders say Khalatbari has played by the rules and, while he’s an owner in one Illinois company, he’s merely a contract consultant for another — a much lower level of involvement.
“That’s not gaming the system. That’s staying within the letter of the law,” said Kris Krane, a cannabis consultant who is familiar with the Illinois industry and is not involved in the lawsuit.
Messages seeking comment on the lawsuit from Khalatbari and Denver Relief Consulting were not returned immediately.
Khalatbari founded a Denver pizza chain called Sexy Pizza and has been an outspoken advocate for legal and regulated marijuana.
This month, he lost an election for an at-large Denver City Council seat.
The new lawsuit alleges Denver Relief Consulting and founding partner Khalatbari entered into agreements with two Illinois companies — Cresco Labs and Progressive Treatment Solutions — “in a scheme to control and profit from more than three different cannabis cultivation centers,” said attorney Kathleen McDonough, who represents Waukegan-based Medponics.
Between them, Cresco and Progressive now hold four cultivation permits and are in the running for a fifth.
“He calls himself different things,” McDonough said. “He was the front man for Progressive … much more than an adviser. And he’s the CEO of Cresco Labs, which has three permits.”
Progressive Treatment Solutions won one permit and plans to build a cultivation center in East St. Louis. It’s in the running for another permit in a region that includes Lake County.
The Illinois Department of Agriculture is still reviewing applications in the Lake County region.
