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Sunday, May 31, 2020  Spokane, Washington  Est. May 19, 1883
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Judge approves sale of Cip Paulsen’s downtown Spokane marijuana-growing license

UPDATED: Wed., April 15, 2020

Cip Paulsen talks about his marijuana business in Spokane in this March 2017 photo. A judge has given preliminary approval for the sale of Paulsen’s license to grow legal marijuana after several investors successfully sued to take away control of his company for unpaid debts last year. (Kathy Plonka / The Spokesman-Review)
Cip Paulsen talks about his marijuana business in Spokane in this March 2017 photo. A judge has given preliminary approval for the sale of Paulsen’s license to grow legal marijuana after several investors successfully sued to take away control of his company for unpaid debts last year. (Kathy Plonka / The Spokesman-Review)

A prospective pot grower based in Western Washington is seeking to buy the business stripped from Clarence “Cip” Paulsen III, a former federal inmate who established a legal marijuana enterprise in a former Spokane Costco building.

A Spokane Superior Court judge has approved the sale of Growstate One, Paulsen’s indoor marijuana growing operation, and all its equipment to Bing Cannabis, a corporation headquartered in Tukwila with a listed agent as Wenbing Huang. The sale price is $175,000, according to court records.

Neither Paulsen nor his attorney responded to requests for comment on the sale. Reached by telephone on Wednesday, a representative of Bing Cannabis who identified himself as Huang’s son declined to answer questions about the sale, citing ongoing legal activity surrounding the transfer of the license.

The courts appointed a third party, known as a receiver, to oversee Growstate after several early investors filed a lawsuit against Paulsen in November 2018. They alleged Paulsen had failed to make payments according to a loan agreement that followed their combined investments of more than $600,000.

Paulsen argued that he’d begun pouring his own money into the venture, which hadn’t been profitable due to an excess of marijuana in the marketplace. He also said he hadn’t had time to find professional legal counsel to fight the loss of his business, licensed to be among the largest producer/processors in Washington’s legal cannabis market.

Spokane Superior Court Judge John Cooney disagreed last January, leaving the company in charge of the court-appointed receiver. In October, Cooney authorized the receiver to cease the company’s marijuana-growing business, and the request to sell the license followed in January.

The sale will require a review of the license applicant by the Washington Liquor and Cannabis Board, and does not include the 130,000-square-foot warehouse at the corner of Third Avenue and Conklin Street. That building is owned by an Idaho corporation headed by Paulsen’s father, according to court records.

Brian Smith, a spokesman for the Liquor Cannabis Board, said via email Tuesday that the agency had yet to receive an application from Bing’s Cannabis for the transfer of the license. Once it does, officials will review the applicant for eligibility that will require financial and criminal history disclosures.

Paulsen’s former investors argued in court that he should be stripped of his license because of new criminal charges in Spokane and Idaho. Paulsen had previously spent time in federal prison for his involvement in trafficking cocaine, part of a regional drug bust called “Operation Doughboy.”

State administrative codes prevent those with criminal convictions from obtaining an interest in a licensed cannabis business based on a point system. A felony conviction in the past 10 years disqualifies a potential applicant, prompting fears from Paulsen’s investors that he would not be relicensed after facing multiple felony drug charges in Spokane County and misdemeanor drug charges in Kootenai County stemming from a pair of arrests in early 2018.

The new drug charges in Spokane were dismissed in September, according to court records. Paulsen pleaded guilty to a single charge of driving under the influence in Kootenai County in March 2019, but prosecutors say he didn’t file the necessary paperwork showing completion of drug treatment as part of his probation in Idaho. A court hearing is scheduled for June.

A marijuana producer/processor license is not bound to a geographic location, Smith said. That means if Bing Cannabis is awarded the license through a court-approved sale, the business could move from the Costco location to elsewhere in Washington state.

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