Legal cannabis promised a lucrative industry for Northern California growers and distributors. It never materialized

If distributors had power over cultivators, dispensary owners wielded even more sway in the nascent industry, Coulombe said.

State regulations had given local governments the power to approve or deny dispensary licenses. Many municipalities throughout the state were either rejecting the businesses, imposing infeasible taxes or fees, or simply dragging their feet on licensing.

Farms, on the other hand, had flooded into operation, leading to an abundance of product but limited access to consumers.

Dispensary owners would demand steep discounts and if a distributor or their farmers wouldn’t accept the terms, someone else desperate to unload product would, Coulombe said.

When Pacific Expeditors approached one dispensary hoping to stock its shelves, the owners said they would do it, under certain conditions.

They wanted him to buy the store a skateboard halfpipe. Pacific Expeditors rejected the offer. Max Hamerman, a Pacific Expeditors salesman, recalled gifting one San Francisco dispensary owner a pair of shoes from his prized collection of Nike Air Jordans.

That owner never paid for the cannabis Pacific Expeditors provided him, and later went out of business, Hamerman said.

“We had weeks when we were doing no sales and we were literally just collecting,” Hamerman said, “or trying to collect.”

Other distributors with more capital were offering enormous discounts, free product or simply cheaper marijuana than Pacific Expeditors’ small craft farmer partners could offer. Coulombe wanted to push craft cannabis from small farms with histories like the Hagas, but he lacked a standout strain or brand to drive sales, Hamerman said.

Meanwhile, legal action against dispensaries behind on payments or dodging Pacific Expeditors’ attempts to collect meant attorney costs that were unrealistic given the scope of the problem, Coulombe said.

He sought, instead, to focus attention on the policy and regulatory flaws that were creating choke points in the supply chain around dispensaries by limiting access to customers.

“The retailers are not the problem,” he said. “The system is the problem.”

A July 2022 survey by the Cannabis Distribution Association, which represents distributors at the statehouse and elsewhere, indicates Coulombe wasn’t alone in struggling to collect from dispensaries.

Five of the state’s largest distribution companies reported carrying an average of $20.8 million in unpaid debt. An average of $12 million was past due.

The companies polled are established firms, according to Lauren Coté, the group’s president, with annual revenue between $150 million to $300 million.

But with unpaid debt piling up alongside the ongoing steep taxes and costs, “no one is making money,” she said.

Coulombe was a founding member of the distributors trade group but stepped away when he closed his business in 2020.

“I’ve always thought of (Coulombe) as someone who has high integrity,” she said. “It sent shock waves when Pacific Expeditors made the decision to go out of business.”

But the unpaid debts that sunk Pacific Expeditors — and helped sink its suppliers — have worsened, she said. “The issues you’re seeing across the industry now are exacerbated versions of what Pacific Expeditors went through,” she said.

From that perspective, Coulombe and his investors “got out early,” she said.

“The industry as a whole is struggling and that means the cash flow is not strong across the industry,” said Ross Gordon, policy director for the Humboldt County Growers Alliance.

“Distributors want accountability from retailers, and farmers want accountability from distributors,” he said.

But, “it’s very clear that there is no direction to any of these state agencies to police payments in supply chains at all,” Gordon added.

Rogers, the Hagas’ attorney, filed a complaint against Pacific Expeditors with the California Department of Food and Agriculture. An investigator from the agency’s enforcement branch responded in April 2020.

The agency “has no jurisdictional authority to pursue your allegations,” investigator Hardeap Badyal wrote. “Cannabis is not a California farm product enforced by (the department).”

Badyal had reached out to the two agencies regulating cannabis at the time, CalCannabis and the Bureau of Cannabis Control. Neither agency would accept the complaint, Badyal wrote.

“It appears this may be a case that would need to be pursued civilly,” he wrote.

Coté’s association is pressing for a state credit law, similar to enforcement mechanisms used in the regulation of the alcohol industry. She also said cannabis regulators could create a trade enforcement unit, as California Alcoholic Beverage Control has done.

So far, she said, regulators haven’t been enthusiastic.

A spokesperson with the Department of Cannabis Control (known as DCC among industry players) declined to comment on the credit law proposal.

“The DCC does not regulate contractual disputes between private businesses,” Deputy Director of Public Affairs Maria Luisa Cesar wrote in an email. Cannabis business operators could turn to existing California law to settle their disputes, she said.

In July 2021, California consolidated three previous agencies involved in regulating cannabis under a single roof, the Department of Cannabis Control.

Under the California Public Records Act, The Press Democrat requested investigations into Pacific Expeditors or complaints made against the company from that agency.

In response, officials stated they “located compliance and investigatory records that are responsive to your request.” But the department declined to provide the records, citing exclusions in public record statutes for a law enforcement agency’s investigative materials.

Records indicated the state revoked the company’s license in July 2020, just before its provisional license expired. Coulombe did not seek to extend the license, he said.

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By mid-2019, Coulombe could see Pacific Expeditors would not survive.

While the industry was riddled with problems, it also remained flush with new capital or investment groups buying failing cannabis businesses, he and others said. Those who had bought into legal cannabis continued to believe sales would flow.

“It was like this is going to happen. It’s going to be hard for six months or a year but we’re gonna get some scale and move some product and the market is going to open up … and quarter after quarter you just don’t see it come,” said Joe Plaugher, who worked for Pacific Expeditors as a consultant.

Coulombe abandoned the office space he’d used to impress potential clients and moved his entire company into his warehouse.

With the writing on the wall, Coulombe and his investors chose not to inject more capital into the company, he said. Hamerman and others said they believed the investors pulled out.

While traditional businesses can file for bankruptcy protection, the federal government still considers marijuana illegal, so it has yet to recognize the cannabis trade as legitimate, meaning cannabis-related businesses don’t have that option.

Coulombe sold his armored vans. Several farmers told The Press Democrat they considered trying to seize one of the fancy vehicles in lieu of payment. “He could’ve offered us one of those,” Gary Haga said.

Coulombe said some proceeds from the sales of the vehicles and other equipment did go to farmers.

“Basically what we did is we paid who we felt we could with whatever was going to come in,” he said.

Coulombe said he kept his warehouse open to allow some farmers, including the Hagas, to recover their product or move it to another distributor. The Hagas confirmed they did recover a batch of pre-rolled joints from Coulombe, but said it was a fraction of a shipment and the joints were expired.

After the company folded, ownership of the warehouse passed to John Alexander Duncan, according to property tax records. Duncan has a Boulder, Colorado, address that matches the listing address of an LLC registered to Coulombe’s ex-wife.

Duncan declined a telephone interview. In a text message to The Press Democrat, he said Pacific Expeditors failed because of “terrible implementation of the new cannabis laws in California (we spent an enormous amount of money to stay current with laws that were never enforced), stupid high taxes that has kept 90% of cannabis business in the illegal space (less now, but still over 75%, which is huge compared with other states that have legalized cannabis), and mismanagement.

“Good management or not, nobody in California is making money,” he added

Coulombe still believes his company was well run and efficient, he said, just not enough to overcome the odds.

“I put everything in to try and keep it alive, to keep the farmers alive,” he said. “I started with … a retirement and a savings account and zero debt. I have no savings and I have no retirement.”

Growers in the Mattole Valley are less forgiving.

“That wasn’t him, that was the farmers,” LaDonna Haga said of Coulombe’s business.

The Hagas had lost hope of recovering what they were owed and moved on, trying to stay afloat as prices continued to plummet. During an August visit, Gary Haga showed Press Democrat journalists hundreds of pounds of marijuana at risk of spoiling while he waited for a buyer to offer the right price.

The Hagas were still rankled about a day last spring, when the mail reached their porch and its view of forested hills with no other home in sight. LaDonna Haga opened a voter information guide for the June primary elections.

There was Coulombe, running as a Republican for U.S. Congress.

Endorsed by the Sonoma and Mendocino county farm bureaus, his platform for a long shot bid against Rep. Jared Huffman was built on a fierce defense of small businesses. His campaign literature touted his experience in cannabis, though not the name of his company.

“That’s a hard no,” LaDonna Haga said.

DeLapp, the Humboldt County Growers Alliance director, said the campaign caught the county’s farming community by surprise.

“(Pacific Expeditors) just sort of disappeared,” she said. “There was a certain irony when (Coulombe) just this last year ran for Congress.”

Coulombe raised $40,000 from donors and loaned his own campaign $5,000, according to federal election filings. He finished the June primary 605 votes short of what he had needed to challenge Huffman in November.

Huffman, an incumbent with a rising national profile, went on to trounce Douglas Brower, of Ferndale, with nearly 69% of the vote.

Coulombe has not ruled out another campaign for office. He was driven to run in part by Pacific Expeditors’ failure and his desire to defend small businesses.

“You see what's happening, you're going to do something about it or you're going to watch it continue to eat people alive,” he said.

While Coulombe said he would pay farmers what they were owed for their product if he could, the Hagas aren’t convinced.

“He can use any excuse he wants,” LaDonna Haga said.

But to her, the businessman in the suit failed to keep his word — an unpardonable sin for the former outlaws.

You can reach Staff Writer Andrew Graham at 707-526-8667 or andrew.graham@pressdemocrat.com. On Twitter @AndrewGraham88.