Out of the Emerald shadow: How legalized cannabis left would-be Northern California entrepreneurs bitter, broke and angry

“It (was) an opportunity to create generational wealth for small businesses, for families, small farmers and craft farmers.”

With considerable spending on marketing and infrastructure, Coulombe and his company stormed the scene.

“(Pacific Expeditors) came in so hard, and they were almost somewhat domineering of the distribution space,” said Nathaniel Pennington, whose Humboldt Seed Co. signed on with Coulombe’s company.

Within three years, Pacific Expeditors would close its doors after burning through close to $10 million in capital, and the Hagas would wonder if their business — and life savings — were next.

While Coulombe said he helped the Hagas and other farmers with marketing, consulting and other services, a lawyer for the Hagas sent demand letters to him for $122,204.76 they say they weren’t paid for product driven off in Pacific Expeditors’ vans.

Pennington, the Hagas and at least three other farmers The Press Democrat interviewed said they went unpaid for product they provided the company.

The problem of nonpayment is broader than one company and just one of many flaws in cannabis today. But for farmers, it’s a particularly devastating blow.

Distributors “over promised and under delivered and that cost a lot of people money,” said Natalynne DeLapp, executive director of the Humboldt County Growers Alliance. “It broke trust and removed financial resources from our legacy operators.”

On repeated occasions and with multiple companies, the Hagas have gone unpaid for product they provided, according to demand letters and invoices reviewed by The Press Democrat. The losses, they said, make it impossible for their business to succeed amid the high taxes and costly regulations imposed on cannabis growers by the state.

But onerous regulations and nonpayment damaged distributors, too.

Pacific Expeditors couldn't pay farmers because dispensaries weren't paying their own bills, Coulombe said.

High operating costs, some of which he said he took on on behalf of the business’s farmer partners, combined with the lack of cash flow from retailers to sink the company.

Lobbyists and advocates for farmers and distributors alike say nonpayment is a common problem, one regulators have so far failed to act on.

Coulombe drained his savings and retirement accounts as he tried to keep his company running, he said. “None of them lost more money than I did,” he said.

Public records show he still faces considerable financial consequences, with hundreds of thousands of dollars in state and federal tax liens on both the business and Coulombe himself.

Despite those financial woes, Coulombe would reinvent himself in a bold way.

Within two years of the collapse of Pacific Expeditors, he would mount an unsuccessful campaign for the U.S. House of Representatives as a Republican in hopes of challenging longtime incumbent Jared Huffman.

His bid for office angered the farmers who said Pacific Expeditors never paid them. But Coulombe said he ran to change a system stacked against small businesses in favor of big moneyed interests, in whatever industry.

He cast the regulatory system as designed to wipe out small farmers and small distributors.

“I understand why the farmers are upset,” Coulombe said.

“I'm the first step,” he said. “This is as far as they can see.”

A reclusive valley

The unincorporated community of Honeydew centers on a general store alongside the Mattole River, on the west side of Humboldt Redwoods State Park. The river cuts a valley toward the Pacific Ocean. Dirt roads to clandestine farms wend through the coastal mountains.

Marijuana growing has shaped the culture and land here for decades. Locals remember large camps as young workers of varied nationalities flocked to the area to trim black market marijuana buds for substantial cash salaries.

LaDonna Haga’s ancestors came to the valley long before that, in the 1890s. She and Gary Haga moved to the family land permanently 35 years ago. Gary Haga, a contractor, did a good trade and built many of the houses still standing in the Mattole Valley.

But the easy extra money from growing a few marijuana plants “was hard to resist,” Gary Haga recalled, especially when smugglers would drop into isolated Humboldt County’s slow-moving economy with pockets full of cash.

“We had a saying, ‘Never let money leave the valley,’” he said.

The Hagas are considered “old school” among growers with deep ties to the valley in the so-called “Emerald Triangle” of Humboldt, Mendocino and Trinity counties.

“They’re community minded,” said Dylan Mattole, whose father took the river’s name as a new, legal surname and whose own craft cannabis farm abuts the river west of the general store. “They’re your salt of the earth kind of people.”

To become legal operators, the Hagas estimate they spent around $500,000 to comply with environmental and business regulations and meet steep permit fees and taxes imposed by both local government and the state.

“They took this gamble, like, ‘I’m going to pay for the licenses and go legal because I believe it’s the right thing to do and I’ll ultimately get paid,’” said Lance Rogers, the Hagas’ Encinitas-based attorney.

They were among a wave of Humboldt County farmers, many with black market histories, rushing to get in early on the legal market. Emerald Triangle cannabis was already legendary. Cultivators who had secretly been perfecting the art of growing high-grade cannabis for decades saw themselves as the next version of breweries or small-scale vineyards.

“We had this grandiose idea that it was going to go legal, and we would have these cool craft businesses,” Mattole said.

The window for that vision now narrows with each passing month.

‘Tabula rasa’

After 16 years in the U.S. Army, Coulombe was working in Santa Rosa politics as a consultant in 2016. His first brush with legal cannabis was as a consultant for cannabis businesses operating in the area.

Coulombe described himself as a reluctant business executive who began a new distribution company at the behest of deep-pocketed investors. He declined to name Pacific Expeditors’ principal funders, but said he received less than $10 million in startup capital with access to further funds.

The company’s recipe for success would be sophistication in tracking and transporting marijuana and strict compliance with an ever-growing web of new state regulations.

“Our intent was to show up and be the most professional organization in the game,” he said.

Pacific Expeditors set up an expansive physical footprint. The company purchased a warehouse on Santa Rosa’s Industrial Drive where Coulombe engineered an intensive security system. He leased a sprawling office space nearby on Airport Drive.

To move marijuana from the Emerald Triangle into the rest of the state, Pacific Expeditors purchased seven armored vans, complete with cameras and bulletproofing sufficient to stop a .44 Magnum round. The vehicles cost $100,000 each.

Keeping them on the road pushed the business’s insurance bills to as much as $25,000 a month, Coulombe said, as insurers pushed steep premiums on the nascent industry.

Several people who worked in his company said they understood the investment money to have come from his in-laws. Public records bear that out, though Coulombe declined to confirm it. His immediate family put money into the business, as well, he said.

Coulombe said his company was well-run and efficient. But he burned cash, he said, as he tried to keep up with steep taxes, ever-changing regulations and testing requirements, and insurance and financial services companies demanding steep rates from a burgeoning industry.

Those concerns are widely echoed and cannabis businesses of all scales are suffering. But farmers and some of Coulombe’s employees question whether Pacific Expeditors overspent as the company rushed to show flash and grab market share.

“There was like five people in this massive office,” recalled Brian Gillespie, a former operations manager.

While adamant the structure of the industry made success impossible, Coulombe also conceded, in retrospect, “I would have started smaller.”

Coming together

On Nov. 3, 2017, Humboldt County cannabis farmers emerged from the shadows of redwood forests and mountain valleys and gathered in a Eureka auditorium. The event, called “Dating distro,” was put on by the trade association Humboldt County Growers Alliance.

DeLapp, the trade group’s executive director, recalled an optimistic gathering, but not without jitters. Growers wore nametags, and, though they’d been promised grace by the state, licensing was still in process.

At one point the Humboldt County sheriff dropped by, DeLapp said. Nerves in the room were “palpable,” she said.

Suddenly it was “’holy (expletive), what are we doing?’” she recalled. “We’ve all admitted that we are growing out of law.”

But overall, it was a bright moment, with an exciting new and legal world ahead.

Coulombe and Pacific Expeditors salespeople attended.

“It was awesome. I loved it,” he said.

They made inroads with farmers but also encountered skepticism. “Just out of habit a lot of people were very hesitant to deal with people that they had not already dealt with prior to licensing,” he said.

But the tall redhead’s demeanor impressed, DeLapp recalled.

“He’s wearing a suit, perfectly groomed hair, he had a team of well-groomed, business-forward people with him,” DeLapp said. “It looked very professional. It looked like what it was supposed to be.”

Farmers were desperate to get their product into dispensaries at the ground level. Distribution companies, meanwhile, were materializing out of thin air. It was an entirely new business field. Few, if any, operators had a history or reputation on which to be judged.

“There was no Better Business Bureau for this,” Delapp said.

Thirteen months later, in December 2018, Pacific Expeditors would make a bigger splash.

Like many of the industry’s players, the annual Emerald Cup has a long history that began in Emerald Triangle illegality. Today, it’s a showy annual party and cannabis product competition sponsored by large cannabis companies.

In late 2017, the festival seemed to be struggling to find a sponsor for its showpiece in Santa Rosa, Coulombe said. Organizers approached him with the opportunity to make his company the lead sponsor for $250,000, he said.

His investors backed the idea, and Pacific Expeditors cut the check.

The splashy sponsorship impressed farmers.

“We think they’re rocking,” LaDonna Haga said. “We think they’re solid.”

Pacific Expeditors was signing deals with farmers in the Mattole Valley and elsewhere around Humboldt and Mendocino counties. The company was targeting Northern California’s more remote farmers, Coulombe said, trying to bring people with a long legacy of cultivation into the market.

It was beyond a business partnership, he said.

“These guys have literally been on a mountain for a decade or whatever, not out in the market, on the hillside,” he said. “That's their love. That's their passion is to be cultivating, with the plant.

“Mine is operations. And it was basically us looking at each other and saying, ‘our values align, our interests align, let’s do something that's never been done before.’”

It wouldn’t take long for the “tabula rasa,” and the farmer-Pacific Expeditor partnerships, to lose their shine.

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