California

Indicted Ukrainian gained solid foothold in Sacramento pot world. Mayor wants new audit

A pot storefront and a marijuana delivery business.

A cannabis cultivation facility and a pair of consulting firms.

Andrey Kukushkin, the Ukrainian-born businessman who was arrested in the campaign-finance scandal tied to President Donald Trump’s attorney, has established a significant foothold in Sacramento’s legal cannabis industry, new records reviewed by The Sacramento Bee show.

Now Kukushkin’s involvement — along with a looming FBI investigation into potential corruption and The Bee’s reporting on consolidation of the industry — is causing turmoil in the Sacramento pot industry.

On Tuesday Mayor Darrell Steinberg called for top city staffers to “urgently” examine the city’s permitting process that allowed one investor, Garib Karapetyan, to gain control of nearly one third of the city’s 30 coveted retail pot permits. The mayor also said he wants the City Council to consider an ordinance to “at a minimum temporarily prohibit ownership transfers of our cannabis dispensaries while we audit and examine our processes.”

Citing The Bee’s reporting, he said: “The goal of our cannabis permitting process was to protect consumers and operate a well-regulated and safe legal cannabis industry for the benefit of our city. These stories raise serious questions about whether our rules, as currently written, are accomplishing that goal.”

He asked City Auditor Jorge Oseguera to examine whether permitting rules should be changed “to safeguard against over-concentration of permits with one individual or group.” The auditor’s office will comply with the request, and will provide a report in the coming weeks, Oseguera said.

Steinberg’s request, at an afternoon City Council meeting, comes only two years after a city audit found significant problems with Sacramento’s marijuana licensing system. The audit found that some dispensaries had failed to provide the city with financial and membership documents and may have been under-reported their sales.

The presence of Kukushkin adds another twist to the drama that’s suddenly gripped the city’s pot business.

As the Sacramento Bee reported Sunday, Kukushkin is an officer and permit holder in a Fruitridge Road retail pot dispensary, Twelve Hour Care or THC. That shop is controlled by Karapetyan, a Sacramento man who’s the permit holder on eight of Sacramento’s 30 retail pot storefronts and is the undisputed leader in the city’s marijuana industry.

City officials are laboring to understand how Karapetyan could accumulate so many storefronts in spite of a city ordinance designed to discourage consolidation.

Separately, The Bee has reported that the FBI is investigating whether any Sacramento pot business owners bribed public officials to gain favorable treatment on licensing or other matters. The FBI probe began several months ago, pre-dating Kukushkin’s arrest in the campaign finance case.

Attorney Brad Hirsch, who represents Karapetyan and four of Karapetyan’s business partners — told The Bee that he wants his clients “to formally disassociate” themselves from Kukushkin in the wake of the indictment. But to date, he has not.

“What I don’t want to do is run afoul and make a business move that the U.S. Attorney looks at and says, ‘Oh look you’re trying to hide something.’ Anything I can do to get them away from them, I’m going to do,” Hirsch said Monday. “That’s me talking; that’s not any action my clients have yet taken.”

The attorney added that he’s worried not only about the Karapetyan pot-dispensary licenses, but also about FBI agents and the Justice Department going after his clients because the sale of cannabis for recreational use, while permitted in California, is still considered illegal by the federal government.

“They’re doing federal investigations, and my clients are engaged in a business that’s not legal federally,” he said. “They’re not inclined to give much sympathy to my clients along the way.”

Nevertheless, he said about Karapetyan’s dealings with city regulators: “Everything we did was above board and done with the blessing of the city.”

Ties to Giuliani associates

The link between Kukushkin and Karapetyan’s pot empire have thrust Sacramento into the burgeoning scandal involving Trump’s personal lawyer, Rudy Giuliani.

Two other men arrested in the campaign-finance scheme last week, Lev Parnas and Igor Fruman, have been described as Giuliani associates and reportedly helped him investigate former Vice President Joe Biden, who is running for president, and his son Hunter Biden. The attempt to find wrongdoing by Joe Biden is at the heart of the impeachment inquiry against Trump.

kukushkin (1).jpg
Ukrainian-born businessman Andrey Kukushkin and three others were indicted Thursday, Oct. 10, 2019 in an intricate scheme to funnel foreign campaign donations to American politicians. Kukushkin is an officer in a Sacramento cannabis dispensary operated by a local businessman who controls a considerable share of the regionâs pot business, records show. ok.ru

Last week federal prosecutors in New York announced they were charging Kukushkin, Parnas, Fruman and a fourth man named David Correia with planning to funnel up to $1 million from a Russian citizen to political candidates in Nevada and other states in order to gain entry into the pot business.

Documents filed in Nevada show that Karapetyan and four of his business partners — Joe Karapetyan, Gayk and Grach Serobyan and Gevorg Kadzhikyan, all of Sacramento — have founded a business called Kolas Holdings Inc. “Kolas” is a brand name that the Karapetyan group has used to market the Sacramento dispensaries.

The Russian was identified only as “Foreign National-1” in the indictment.

But McClatchy has reported that Kukushkin, as part of a lawsuit against managers of a San Francisco dispensary over his purported $1 million investment in that business, has now acknowledged that he never invested in the San Francisco venture. Instead, he said in court papers that it was a wealthy Russian businessman named Andrey Muraviev who invested $1 million into the business.

Muraviev has been a partner with Karapetyan and Kukushkin in two consulting businesses, Legacy Botanical Company LLC and KKMC Management LLC, according to documents filed with the California secretary of state. The Legacy Botanical business had its state business license suspended, according to the secretary of state.

Although Karapetyan has donated to several area politicians — including Steinberg, City Councilman Jay Schenirer, Sheriff Scott Jones and Democratic Assemblyman Kevin McCarty — there’s no evidence that any foreign money has been used to make the donations. Nor is there any evidence of foreign money being invested in the Sacramento pot industry. Karapetyan and Kukushkin are U.S. citizens.

Karapetyan and Kukushkin are involved in the marijuana industry in multiple ways. Besides the retail dispensary and consulting businesses, they are connected to a pot-delivery business to be based from a building on Fruitridge Road, a few feet from the Twelve Hour Care dispensary — the outlet on which they co-own the city permit.

City records show that Karapetyan, as owner of a company called Next Phase Holdings, succeeded in getting a conditional use permit earlier this year to run the delivery business from the Fruitridge location. Next Phase’s filing with the secretary of state in April lists Kukushkin’s name but not Karapetyan’s. The delivery business has not yet received final city permits to open.

In addition, Kukushkin and Karapetyan are partners in a marijuana cultivation business called 88th Street Inc., according to documents filed with the secretary of state.

City and state records show Karapetyan, 35, has made a fortune in the pot business. He bought a $1.1 million condominium unit last year in the Kimpton Hotel adjacent to Golden 1 Center.

Tax liens

At the same time — like many other pot entrepreneurs — he has struggled at times to pay his taxes on time.

Because cannabis remains illegal under federal law, dispensary owners operate in a legal climate that makes it hard for them to pay their taxes on time.The result is that many pot dispensaries and their owners are frequently hit with liens for delinquent taxes.

Karapetyan and several of his business partners, as well as the dispensaries they control, have been hit with liens for delinquent taxes totaling several million dollars in recent years. Karapetyan was slapped with a $1.25 million federal income tax lien last year. Records show he paid off the lien a few months later, and his lawyer Hirsch said Karapetyan “filed his returns without any action or notifications from the taxing authorities.”

The IRS filed tax liens CC101, a storefront dispensary controlled by Karapetyan on Florin Perkins Road, totaling $204,000 last year. The liens were paid off a month later.

Alternative Medical Center on Blumenfeld Drive, another dispensary controlled by Karapetyan, has been wrestling with thousands of dollars worth of state tax liens in recent years. In late 2017, for example,it paid off a $5,333 lien filed by the state four years earlier.

One of Karapetyan’s business partners, meanwhile, had a protracted legal fight with Sacramento County officials after he was arrested on charges of unlawful possession of marijuana for the purposes of sales in 2015, a year before California voters legalized recreational use and sale of marijuana by approving Proposition 64.

While the criminal charges against Gevorg Kadzhikyan were dropped in 2017, court records show he surrendered $63,000 in cash that was seized at his home in Citrus Heights and at Cloud 9, a dispensary that Kadzhikyan controls on Florin Perkins Road.

Kadzhikyan and Karapetyan are two of the five permit holders for the Cloud 9 location. Documents filed with the California secretary of state say Kadzhikyan is the chief executive of Cloud 9 and Karapetyan is on the board of directors.

2017 City of Sacramento audit of pot dispensaries

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Dale Kasler covers climate change, the environment, economics and the convoluted world of California water. He also covers major enterprise stories for McClatchy’s Western newspapers. He joined The Bee in 1996 from the Des Moines Register and graduated from Northwestern University.
Theresa Clift covers Sacramento City Hall. Before joining The Bee in 2018, she worked as a local government reporter for the Pittsburgh Tribune-Review, the Daily Press in Virginia and the Wausau Daily Herald in Wisconsin. She grew up in Michigan and graduated from Central Michigan University.
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