By Mike Baker and
SAN
FRANCISCO — At a restaurant meeting in California a few years ago, Brad
Hirsch and one of his law clients gathered over a meal with two
potential business partners: Andrey Kukushkin and Andrey Muraviev, an
investor who had flown in from Russia.
Mr.
Kukushkin and the Russian financier were hoping Mr. Hirsch could help
them build a stake in the state’s burgeoning cannabis market, Mr. Hirsch
said, and he helped them set up a real estate business that would cater
to marijuana operators. Over the span of just a few years, Mr.
Kukushkin would join or develop cannabis companies around San Francisco,
Sacramento, Los Angeles and Las Vegas, establishing a foothold in
everything from real estate and cultivation to retail and delivery.
There was a reason that people like Mr. Kukushkin, who was born in Ukraine and later worked at a Russian
investment bank, had a unique opportunity to get in on the ground
floor. Federal law still treats cannabis as an illegal substance, and
traditional banks have been wary of getting involved.
Wealthy financiers
have moved in to fill the void — including a growing cast of investors
from Russia and former Soviet Union countries who have helped shape the
industry's growth.
One of the nation’s
largest cannabis companies, Curaleaf, is led by one of Russia’s most
influential financiers and backed by another, allowing the company to
pursue rapid expansion and hefty acquisitions. Investment firms have taken their own stakes: A San Francisco-based venture capital fund
run by the Russian tech entrepreneur Pavel Cherkashin, backed largely
by investors from Russia and the former Soviet Union, has put $2 million
into Pure Spectrum, a Colorado-based business marketing CBD products.
“I
think there is a strong fear of missing out back in Russia,” Mr.
Cherkashin said. “It’s one of the most promising and rapidly developing
markets.”
Mr. Kukushkin and some of
his business partners appear to have gone a step further, funneling
political contributions to candidates in Nevada and elsewhere in a way
that has drawn the scrutiny of federal prosecutors. Earlier this month, a federal grand jury indicted
four men, including Mr. Kukushkin, in a scheme to use money from an
unnamed Russian to support politicians who could potentially help them
obtain retail marijuana licenses around the country.
The
indictment attracted widespread attention because two of the men
charged are associates of President Trump’s personal lawyer, Rudolph
Giuliani, and worked with Mr. Giuliani in the past to collect
potentially damaging information about targets of interest to Mr. Trump
in Ukraine.
They were accused in a
separate scheme to conceal the source of a $325,000 donation to a
pro-Trump super PAC, as well as other political contributions.
But
when it came to Russian money flowing into the United States,
prosecutors focused on its role in the Nevada marijuana business formed
by Mr. Kukushkin and the others. The case illustrates how Mr. Giuliani’s
allies were operating not just to advance the president’s political
interests, but to build a political network of their own that would give
them entree into one of the country’s more promising new industries.
Big Investors
The
reluctance of traditional banks to touch marijuana financing has
attracted private investors not from just Russia, but from China, Japan,
South America and from around the United States. Mr. Kukushkin,
according to the indictment, said he was trying to disguise the source
of the Nevada venture’s money because of the financier’s “Russian roots
and current political paranoia about it.”
Mr. Kukushkin’s lawyer, Gerald B. Lefcourt, declined to comment on the case.
Other
investors with Russian backgrounds have been public about their
involvement in the cannabis industry, and law enforcement officials do
not appear to have raised questions.
Curaleaf,
based in Massachusetts, is led by Boris Jordan, a businessman born in
the United States who went on to build the investment bank Renaissance
Capital in Russia, where he now leads the Sputnik Group, which has a
major private equity division. The company’s other major individual investor was Andrei Blokh, a Moscow businessman.
In
May, Curaleaf announced a $950 million deal to acquire the Oregon-based
Cura Partners in one of the industry’s largest deals ever. In July, it
followed up with an $875 million deal to acquire the Illinois-based
Grassroots Cannabis.
Vedomosti, a Russian business publication, reported earlier this year
that it had talked with eight investment funds of Russian origin that
were either considering cannabis investments or had already pursued them.
Some states, including Oregon and Maine, tried to reap the benefits of a cannabis industry by requiring that companies be locally
controlled. But that has been a struggle as the industry has pushed for
open markets in order to get access to funding, said Andrew Freedman,
who helped the lead the development of Colorado’s legal cannabis market.
“A
lot of these states are trying to keep the money and the ownership
interest within the four corners of the state,” Mr. Freedman said. “It
simply isn’t happening.”
Federal
prosecutors said the Russian money backing the business of Mr.
Kukushkin and others was helping lay the groundwork of a multistate
operation. The Russian partner, according to two people familiar with the case, was Andrey Muraviev — the man Mr. Kukushkin had brought to the meeting that day with Mr. Hirsch.
From Russia to California
Born
in the Ukrainian port city of Odessa when it was still part of the
Soviet Union, Mr. Kukushkin earned degrees at Odessa National
Polytechnic University in engineering and finance in 1992, then worked
in the Russian finance industry.
Even
before entering the cannabis world, Mr. Kukushkin, 46, was living a
comfortable life, with photos on Russian social media showing him
vacationing at the elite French resort of Chamonix. Mr. Kukushkin listed
himself as living in Ukraine, Russia and San Francisco.
In 2013, Mr. Kukushkin took up residence in a 1,400 square-foot condo a few blocks from San Francisco’s financial district.
Mr.
Muraviev, meanwhile, was born in Russia and partially educated in San
Francisco. He led a cement company in Russia before starting the
investment company Parus Capital.
Together, their first foray into the cannabis industry appears to have been in 2015.
Records
show that Mr. Kukushkin helped Mr. Muraviev steer a $1 million
investment into a California cannabis management company, Venture Rebel,
which helped run a San Francisco cannabis shop known as MediThrive.
Details of the venture, outlined in a lawsuit filed in San Francisco
County Superior Court, were first reported by McClatchy newspapers and Mother Jones.
Mr.
Kukushkin and Mr. Muraviev expanded next into the Sacramento area,
joining up with Mr. Hirsch, the lawyer who met with them in San
Francisco, and his client, Garib Karapetyan. Mr. Hirsch said he lost his
enthusiasm for the partnership when Mr. Kukushkin began to do things
like demanding new terms in the 11th hour of negotiations.
In
regulatory applications, another Kukushkin company, Oasis Venture,
proposed a large cannabis cultivation site east of San Francisco,
including a greenhouse that would have 22,000 square feet of cannabis
canopy and a processing facility on an estate with garage space for 12
vehicles and panoramic views of the nearby Alameda County valleys and
foothills.
In the last few months, Mr. Kukushkin has been pursuing a dispensary license in the Los Angeles area.
Sean
Maddocks, a legal consultant who has helped in that effort, said Mr.
Kukushkin approached him last year looking for guidance on where he
could get additional licenses.
He said Mr. Kukushkin never discussed anything like campaign contributions or any improper effort to get a license.
Political Contributions
Federal
prosecutors have seized on the issue of campaign contributions in the
Nevada case, and that is where Mr. Giuliani’s associates from Florida
entered the marijuana case: Lev Parnas, a native of Ukraine, and Igor
Fruman, originally from Belarus — both now American citizens who have
long lived in Florida — along with David Correia, another South Florida
resident.
In the summer of 2018,
according to federal prosecutors, those three men teamed up with Mr.
Kukushkin to develop a multistate cannabis business strategy.
Two
people familiar with the details of the federal case said the financier
was to be Mr. Muraviev, who did not respond to emails or phone
messages. Both Mr. Fruman’s lawyer, Todd Blanche, and Mr. Correia’s
lawyer, Jeffrey Marcus, declined to comment. The lawyer for Mr. Parnas,
Edward B. MacMahon Jr., did not immediately respond to a request for
comment.
Mr. Correia drafted a
document that considered between $1 million and $2 million of potential
political donations to help win marijuana retail licenses in Nevada and
elsewhere, according to the indictment. Though donations from foreign
nationals to American political campaigns are illegal, the indictment
says that the Russian arranged two wire transfers totaling $1 million to
Mr. Fruman that were intended at least in part for political
candidates.
Near the end of October
2018, the group apparently realized that the deadline for getting a
license in Nevada had already passed — “unless we change the rules,” Mr.
Kukushkin said, according to the indictment. They talked about needing
the support of a Nevada state candidate.
The
indictment does not name the candidate being discussed, but a week
later, records show, Mr. Fruman donated the maximum amount, $10,000, to
both Adam Laxalt and Wesley Duncan.
Both Republicans, Mr. Laxalt was the
state’s attorney general running for governor, while Mr. Duncan was
running to succeed Mr. Laxalt.
Mr.
Duncan and Mr. Laxalt both said through spokespeople that they were
unaware of any illegal activity and were returning the donations.
If
the contributions and support were intended to produce a result, they
failed. Mr. Duncan and Mr. Laxalt both lost their elections.
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