GenCanna owes companies more than $13 million in unpaid work performed in constructing its plant, north of Mayfield. Administrators say the hemp processor remains financially strong and that payments will be made soon, however.

Since Sept. 6, companies have filed 19 liens against the property where GenCanna is building its hemp processing plant on U.S. 45. Although some companies have filed more than one lien, the unduplicated total of the amount they say they are owed for supplies, materials and labor is more than $13 million. All the liens are on file in the Graves County Clerk's Office.

At the same time, GenCanna has filed a federal lawsuit saying the company paid more than $2.9 million to Jenco Industrial Sales and Services and Edward J. Sieja for industrial equipment it either never received or that did not work.

GenCanna Global chief executive officer Matty Mangone-Miranda and Gencanna Global USA President Steve Bevan granted The Mayfield Messenger a wide-ranging phone interview that took place over more than an hour. GenCanna requested and was provided questions in advance, other than follow-up questions that arose during the interview.

Financial stability

Both Mangone-Miranda and Bevan stated unequivocally that the company is not in danger of bankruptcy. "Absolutely not," Mangone-Miranda said. "Those are ridiculous rumors."

Bevan said that for business reasons the company did not want to give specific financial information but added, "We are in a very strong position. We are excited about how we have conducted ourselves in the past and about the future. We are in a position where we are adding (processing) capacity. We're able to handle the harvest in a great way, and we think we've made some pretty incredible projections in terms of output and future projections."

The company has had some recent changes, however. MariMed, which owns six marijuana dispensaries in states where it is legal to do so, has purchased one-third of GenCanna, according to a June filing with the Securities and Exchange Commission. Both Mangone-Miranda and Bevan said that purchase would not affect GenCanna's mission in hemp and CBD oil at all.

GenCanna announced Sept. 23 that it has engaged Goldman Sachs & Co., LLC, as a financial adviser and "to assist the Company in evaluating an initial public offering and other strategic alternatives." The company declined to provide other details of the business relationship, including what the alternatives are.

Also, although the City of Paducah gave approval in September 2018 for a building GenCanna bought at 322 N. 3rd St. to become a light industrial operation, including warehouse space and retail sales, GenCanna has not filed construction permits to do so. Paducah City Manager Jim Arndt has previously said GenCanna has held off doing so until completing the Mayfield plant.

Federal lawsuit

The federal lawsuit GenCanna filed Sept. 23 against Jenco and Sieja also indicates GenCanna is out $2,290,166 for equipment that either was not delivered or does not function. According to the complaint, GenCanna contracted with Jenco to buy three chillers and six distillation units from Jenco and Sieja, whom it believes to be Jenco's only employee.

"When Defendants made this promise, they had no intention of performing it," GenCanna's lawyers wrote in the complaint. "Rather, Defendants were engaged in a scheme to dupe GenCanna and string it along for months, fraudulently inducing GenCanna to make millions of dollars of payments for equipment that Defendants would never deliver in any functioning form."

The complaint does not include any statements on behalf of Jenco. A summons in the court file shows that Jenco and Sieja have 21 days to file an answer to the lawsuit after receiving the summons or risk default judgment from the court.

Eventually, after GenCanna made numerous payments, Jenco delivered one chiller and one distillation unit, according to the complaint. GenCanna contends they didn't work and that Jenco has not provided information to return them or refunded the company.

GenCanna also says in the complaint that it learned after going into business with Jenco that Jenco's business address appears to be the home where Sieja lives in Alexandria, Louisiana, and that it did not realize at the time it contracted with Jenco that Sieja had been arrested in 2016 on a charge of felony theft of police property.

Media reports at the time indicated Sieja, a part-time police officer in the town of Ball, Louisiana, purchased a surplus police car from Georgetown, Louisiana, in January 2016 with a promise he would take the car to have the police equipment removed within a few days. Reports state he did not do so for eight months before police filed the charge against him, resulting in his arrest. No phone number was publicly available for either Jenco or Sieja to seek a response.

In the complaint, GenCanna's lawyers say the lawsuit will affect its business during the current harvest season.

"As a result of Defendants' failure to deliver the equipment they had promised, GenCanna will be unable to process millions of dollars of CBD during the current harvest season," they say. "It is now too late for GenCanna to obtain the equipment from another source because of the long lead time required to manufacture and/or procure the equipment, which is in high demand."

However, both Mangone-Miranda and Bevan said that statement is not accurate in regard to business in western Kentucky. In fact, both said the lawsuit does not involve the Mayfield plant at all.

"The equipment was not intended for Mayfield," Mangone-Miranda said. "GenCanna has projects all over the nation. We are not just centralized here." He later added, "It has no relation or bearing to Mayfield or our west (Kentucky) farmers."

It was not clear in the lawsuit where the machinery was intended to be placed. However, the lawsuit was filed in the United States District Court's Eastern District of Kentucky and more specifically the Lexington region. GenCanna also owns and operates an existing hemp processing plant in Winchester, Kentucky.

Mayfield plant construction

The property the Mayfield plant is being built on is owned by The Industrial Authority of Mayfield-Graves County and leased to GenCanna Global USA, according to a memorandum of lease filed in the Graves County Clerk's office. The lease term is from Feb. 11, 2019, when the Industrial Authority bought the property, through Dec. 31, 2034. The memorandum says a lease agreement spells out conditions under which GenCanna could buy the property outright, but the lease agreement is not on file and is not a public document, as it contains private financial information.

According to the deed for the property, the industrial authority bought the 34.379 acres at the intersection of U.S. 45 and Ky. 1276/ Key Bottom Road for $739,148.50, cash in hand. Two mortgages were later filed involving Community Financial Services Bank. One was for $15,200,724.37 and the other for $1 million. Both mortgages were later released, meaning the Industrial Authority of Mayfield-Graves County owns the property free and clear.

It appears GenCanna may have provided the money for the property purchase. One of the liens, filed by Shawn Jones Masonry, LLC, says, "The Authority acquired the Property for GenCanna's benefit through funding provided by GenCanna, who is solely responsible for the development of the property, and the costs thereof." It also notes that no public funds were used or committed on the acquisition and development of the property. The Graves County Fiscal Court did accept a $1 million community development block grant to Graves County Economic Development to buy equipment for GenCanna, however. GCED leases the equipment to GenCanna, and GenCanna agrees to pay back the cost to GCED over time.

Graves County Economic Development President Ryan Drane had no comment on any of the issues involving GenCanna, but referred comment to Ryan Toombs, attorney for The Industrial Authority of Mayfield-Graves County. Toombs' office said he was out of the state, and messages left at the office requesting a call back were not immediately returned Thursday.

The companies involved in filing the liens have nondisclosure agreements with GenCanna, so they could not be approached to ask the reasons for the filings, other than the nonpayment amounts stated in the liens. Legally, liens protect a company by ensuring that if the property were sold, the creditors would get proceeds of the sales. If the property were not worth the amount of liens filed against it, state law defines which companies are paid in part, based on the order in which they filed liens.

According to Kentucky law, such liens expire after one year and cannot be extended. However, liens are sometimes the opening move before a lawsuit is filed later. In a lawsuit, a company could ask a judge to award a property's sale.

GenCanna has every intention of completing the Mayfield plant and, in fact, is spending more money than previously announced. For all design phases of the Mayfield plant, Bevan and Mangone-Miranda said GenCanna is spending a total of $150 million. On top of that, they said, they have spent $100 million as part of farming operations in Kentucky.

This year's western Kentucky hemp crop will either be received at the Mayfield plant or baled and transported directly from farms, as is appropriate, both men said. As for the Mayfield plant's construction, "It will be operational for 2020 for the phase one part," Bevan said. "We think we might be able to start on the next phase as it becomes available."

Mangone-Miranda added, "Mayfield will set the bar (in the hemp industry) for quality and cost."

They continued to say that the reasons for a delay in constructing the Mayfield plant, ultimately, are because new technology has brought about design changes that mean instead of building the plant in three distinct phases -- drying; extraction and refinement; and food, fiber, finished goods and value added products -- parts of the phases will now intermingle and be less segmented.

"We will be drying, baling and extracting on the front end," Mangone-Miranda said. Again, the men said, they did not want to get into specifics because of GenCanna's proprietary process, because of confidentiality agreements with others protecting their patents, and because of competition from other hemp processors.

However, Bevan reiterated, GenCanna's future is tied firmly to Mayfield. "Our expansion plans are all centered on western Kentucky in Mayfield," he said. "We literally are bringing some of the very best minds from Silicon Valley into Kentucky."

Payment expectations

As for when contractors will be paid, Bevan said, "We're working through everything. We're kind of caught between a lender and the resolution of the situation. We've had our hands tied in this regard. We expect a very quick and positive resolution."

When asked specifically about GenCanna's status in obtaining a lender to complete the construction of the plant, he said, "We expect a very positive announcement in that regard in the next little while. We're unable to provide other than very positive information flow at this point in time. We're not ready to say it's all done."

Mangone-Miranda added, "We will have a very, very strong announcement, and that's what we've been messaging to builders. That's what we've been messaging to everyone. Very soon."

When pressed more about the timeline for that announcement, Bevan said, "We would anticipate an announcement before the end of the month."

As with the builders, farmers doing business with GenCanna are also under strict nondisclosure agreements, they have said when approached over the last month by members of the media from multiple organizations, including The Mayfield Messenger. Mangone-Miranda and Bevan both said, however, that all farmers contracted with GenCanna have been paid on time.

"They've all been compensated already as per contract, and they will be compensated according to their contract terms," Bevan said.

The contracts are staged to provide farmers with funding throughout the growing process, he said. He added that he was not going to discuss a farmer's private matters, generally or specifically. Bevan and Mangone-Miranda both urged those who have questions about GenCanna to look first to the company's track record, including its progress in the hemp field for the past six years.

They said they are grateful for the faith and confidence of the farmers working with GenCanna.

"There have been a lot of really excellent things happening," Bevan said, "and it's unfortunate that not everybody wants to focus on the positive."