Why Israel's biggest medical marijuana firm doesn't have a license to operate in the Country

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It’s Israel’s biggest and oldest medical marijuana company, but until this week, when a court issued an interim order allowing it to resume sales of cannabis flowers, it had been effectively banned from the market.

As of Tuesday morning, Tikkun Olam had resumed sales at its retail shops in Tel Aviv and the Galilee town of Safed as well as by mail order. But Israel’s police and the Health Ministry still refuse to give the company’s Kfar Yehoshua farm an operating license, and the two sides are continuing to fight it out in court.

Why they are still refusing isn’t entirely clear, but they pointed a finger in court at Tzachi Cohen, Tikkun Olam’s founder and controlling shareholder and a global medical marijuana entrepreneur who made $255 million in a mergers and acquisitions deal last year.

“There exists significant intelligence regarding Cohen that raises fears concerning the safety and security of the public,” the ministry and policer told Judge Eli Abravanel of the Central Administrative Court.

The intelligence, gathered since March 2018, was outlined for Abravanel in a closed session, which Cohen’s lawyer agreed to keep confidential to protect his client’s privacy. Whatever it was, however, it appears the court has not been convinced for the time being.

Industry sources point to an incident that may have aroused official suspicions. Last March, thieves broke into a vault at a Tikkun Olam farm in the Biriya Forest near Safed to steal the marijuana stored there. The company said the thieves left empty-handed because the marijuana had been moved to its other facility two weeks earlier, but police aren’t convinced and suspect that the marijuana entered the black market.

In another case, a former security official asserts that the police discovered three years ago a tunnel excavated under a Tikkun Olam farm, which may have been used to smuggle 30 kilograms of cannabis into the black market. The company denies the incident ever occurred.

“There was never a tunnel in any company installation and there was no theft of 30 kilos of cannabis from a Tikkun Olam facility,” it said.

In any case, the police continued to work with the company and its security officials after the alleged incident.

Medical marijuana is an up-and-coming industry in Israel, which has a long history of research and development in medical cannabis. The government first approved exports of medical marijuana in April.

The company’s Kfar Yehoshua farm was developed at a cost of 15 million shekels ($4.2 million) to serve the overseas markets that Israeli companies like Tikkun Olam are now allowed to sell to, if licensed.

But the excitement over the prospects for export markets shared by the government, which sees the industry as a way of creating jobs and generating tax revenues, has been dampened by worries that criminals will infiltrate the industry. Police concerns have held up export approvals.

Police vet industry employees for suspected criminal connections. It’s a simple process whereby a candidate’s identity or passport is checked against a computer database and comes back with a binary yes or no answer, with no explanation and with no right of appeal for those who are rejected.

The system aims to prevent criminal organizations from inserting their people in key positions at medical marijuana companies to help them, for instance, launder money or sell marijuana on the black market.

Tikkun Olam, which began as a non-profit when Israel first allowed medical marijuana use under highly regulated conditions, had controlled half the local market, fill prescriptions for 15,000 patients. The company claims it has paid the government 200 million shekels in taxes over the years.

Cohen’s marijuana business is not confined to Israel; associates say he spends most of his time in the United States and Greece. Seven years ago, he cofounded a Canadian medical marijuana company called MedReleaf with local partners. MedReleaf merged in May 2018 with another Canadian company in the medical cannabis industry’s biggest M&A deal ever. Cohen, who held 13% of MedReleaf’s shares, got stock worth $255 million in the merged company.

Given Cohen’s extensive marijuana business in Israel and abroad, it isn’t clear why he was denied a license for the Kfar Yehoshua farm. Tikkun Olam was also hit hard by the government’s refusal to renew its license. The company was allowed to continue selling marijuana oil, but the market for that was about 2,100 patients.

Last month, Tikkun Olam’s attorneys warned that barring permission to resume selling its medical marijuana, the company was at risk of collapse and would have to dismiss its 130 employees.

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