Investor Ross Weintraub is suing cannabis REIT Innovative Industrial Properties Inc (NYSE:IIPR) over failed due diligence in its Kings Garden investment.
The plaintiff claims IIP failed to be truthful to investors about its business dealings with Kings Garden, writes Green Market Report's Debra Borchardt.
In January, another shareholder group sued IIP over failed due diligence in its Kings Garden investment. Those plaintiffs said IIP misled investors, was incompetent and broke securities laws.
What Happened
According to the complaint, IIP repeatedly informed its investors that it conducted due diligence on all its business partners. However, when issues were raised regarding Kings Garden by third-party entities, IIP maintained that the company was not problematic.
The lawsuit filed in Maryland by Weintraub points out a report by Blue Orca Capital, which revealed that Michael King, associated with Kings Garden, had a history of fraud and theft allegations, as well as litigation. The report was available as early as 2019 before IIP entered into a contract with Kings Garden.
"The Report detailed that IIPR had purchased properties at far higher prices than the sellers they entered into sale-leaseback transactions had paid for the properties and that by recording the fair value of the properties as the purchase price, IIPR was hiding its true financial condition by overvaluing its assets," per the complaint.
According to Weintraub, IIP disputed the accuracy of the Blue Orca report, claiming it contained false and misleading information, and continued to support Kings Garden and Michael King.
However, in July 2022, IIP changed its stance and announced that Kings Garden had not paid its rent for July 2022 under any of its leases.
The complaint alleges that IIPR filed a lawsuit against Kings Garden, King, and affiliated parties, citing fraud, theft and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). "In that lawsuit, IIPR acknowledged it never did a thorough investigation of Kings Garden or King. In fact, IIPR did not even do a rudimentary background check on King."
More details here at Green Market Report.
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