A scam CBD operator has received a three-year prison term and must repay his victims more than $2 million, under federal sentencing handed down last week.
Rahsaan Jackson Garth, 49, Atlanta, pleaded guilty earlier this year to commodities fraud in a case that affected farmers in South Carolina, North Carolina and Georgia.
The U.S. Attorney’s Office for the District of South Carolina said Garth’s company, Verde Leaf, helped farmers obtain hemp planting licenses and “assisted farmers with their hemp crops.” But the company misrepresented third-party deals it told the farmers would bring them crop returns “above fair market value.”
Garth told farmers his company had contracts in place with distribution networks, and companies operating in several CBD-adjacent sectors. The deals turned out to be bogus and farmers were left with unsold harvests, the government said.
While the indictment in the case said losses resulting from the scheme exceeded $5 million, Garth was ordered to pay less than half that amount – $2,130,262 in restitution.
SCDA distances itself
The U.S. Attorney’s Office recalled in a press statement that Verde Leaf held a hemp workshop in conjunction with the South Carolina Department of Agriculture (SCDA) Feb. 19, 2020 to promote hemp farming.
“During the workshop, Garth represented that Verde Leaf had distribution networks and deals with food companies, pet companies, and pharmaceutical companies,” according to the statement.
“However, Verde Leaf was unable to consummate the deals referenced at the SCDA meeting to distribute or sell products. Therefore, Verde Leaf was unable to process the hemp or pay most of the farmers for their crops and had to declare bankruptcy.
“As a result of the false statements that lured the farmers into doing business with Garth, the farmers suffered great financial harm,” the Attorney’s Office said.
The SCDA said it leased space to Garth for the meeting, but it did not sponsor the workshop, according to the South Carolina newspaper The State.
The scenario is one that was repeated in many parts of the U.S. by sketchy middlemen who looked to cash in on the CBD craze that started after the 2018 Farm Bill legalized hemp and its downstream products at the federal level.
Some farmers jumped into deals absent any due diligence. If those who signed on with Verde Leaf had checked, they would have found that Garth had a past record as a fraudster. He was convicted in 2015 of healthcare fraud in a scam that faked the results of allergy tests that patients’ doctors had ordered from his company, Polaris Allergy Labs Inc., according to the U.S. Attorney’s Office.
In that case, “(Garth) placed the pursuit of his own prosperity ahead of the well-being of patients, many of whom were children and the elderly,” according to the U.S. Department of Health and Human Services, Office of Inspector General in Atlanta.
Garth was ordered to pay $250,000 in restitution and sentenced to 46 months in federal prison, but was released from prison early, in 2017.
“The District of South Carolina is committed to prosecuting schemes that target South Carolina farmers and small business owners,” United States Attorney Adair F. Boroughs said of the Verde Leaf case, which was investigated by the FBI. “We appreciate the hard work of the FBI and their continued efforts to investigate these crimes.”