A south city alderman is being sued over an alleged scheme to exclude investors from a cannabis operation and refuse to issue the investors their rightful shares.
The lawsuit filed in St. Louis County Court last week alleges Alderman Bret Narayan and his brother, Rahm Narayan, tricked two cannabis entrepreneurs into contributing their money and expertise into Occidental Group Inc., a Missouri cannabis operation created by the Narayans.
Two of the four plaintiffs, Brian Ruden and Naser Joudeh, are based in Colorado and are the principals of several Colorado companies operating under “Star Buds” brand names, which are owned by Star Brands. They originally filed the suit in Colorado, but it was dismissed based on a lack of personal jurisdiction.
Bret Narayan, an attorney, represents the 4th Ward on the St. Louis Board of Aldermen. Occidental Group Inc,. the Narayans’ cannabis venture, operates two dispensaries in the St. Louis area. One is in University City and the other in Festus.
In a phone call with the RFT, Bret Narayan was confident the court battle would end in his favor.
“I don’t believe that their allegations will be substantiated by the facts and evidence,” Bret Narayan says.
St. Louis County Judge Stanley Wallach heard arguments from plaintiffs Ruden and Joudeh’s lawyer for a temporary restraining order on Thursday. Wallach denied the plaintiffs’ motion.
Ruden and Joudeh allege the Narayan brothers’ “scheme” started when Missouri voters legalized medical marijuana in 2018 and the Narayans decided to apply for licenses to enter the cannabis industry. The Narayans convinced Ruden and Joudeh to invest in and operate a Missouri cannabis company as they “lacked the capital and experience” to finance such a business, the suit states.
The suit claims all parties struck a deal whereby Ruden and Joudeh agreed to provide the Star Buds brand name and contribute 49 percent of necessary capital to establish the operation. In return, the suit alleges the Narayans agreed to provide Ruden and Joudeh with 49 percent ownership in the operation.
Ultimately, the plaintiffs contributed $324,000 to Occidental Group Inc., and an additional $400,000 to 75Olive LLC, a related entity created by the company to purchase real estate where one of the two dispensaries would operate. According to the suit, Ruden and Joudeh also provided intellectual property, technology, branding, supplies and employees.
After Ruden and Joudeh contributed their capital and expertise, OGI opened two dispensaries operated under the management of the Narayans and other co-defendants. Revenues from both dispensaries were “weak,” the suit alleges, and their financial management “reckless,” but the dispensaries began to improve after the Star Buds management and financial team was brought in from Colorado.
However, the suit claims the Narayan brothers and other defendants started to terminate Star-Buds-affiliated personnel and refused to issue Occidental Group Inc. shares to reflect the 49 percent ownership they were “promised.”
In court on Thursday, Dawn Johnson, a lawyer representing Occidental Group, said current management of the company is “stable and thriving” Since the “Missouri folks” took over, she said, “they’ve acquired competent legal counsel.”
Nevertheless, the Narayans’ alleged behavior “disturbed” another investor, Edward Throop, and caused him to resign from his position as an Occidental Group Inc. director, the suit claims. Throop is also a plaintiff.
When Throop and another investor expressed concerns over the Narayans’ alleged behavior, the Narayans “began a campaign to cut each of the plaintiffs out of the profits and eliminate visibility into the internal operations of the business.”
The suit claims the Narayans also started “impermissibly paying themselves salaries and otherwise wasting corporate assets.”
The suit continues: “The actions taken by the defendants, including the Narayans, reveal that the Narayans never intended to make Messrs. Ruden and Joudeh part of the business or grant them the equity in OGI to which they had agreed. The Narayans instead intended to use the capital provided by Messrs. Ruden and Joudeh, along with the substantial intellectual property and branding power of Star Buds and Star Brands, to start an operation that the Narayans eventually would control.”
I am reviewing the claims made against me with counsel. The allegations are outlandish and without merit. I will be putting forward a vigorous defense and counterclaims. These allegations have already been thrown out of one court and I look forward to the same happening here.
— Bret Narayan (@STL4Ward) May 17, 2023
On Twitter, Bret Narayan called the lawsuit’s allegations “outlandish and without merit.”
“I will be putting forward a vigorous defense and counterclaims,” Bret Narayan wrote. “These allegations have already been thrown out of one court, and I look forward to the same happening here.”
In 2021, Bret Narayan sponsored a bill that allowed city residents to possess up to two ounces of cannabis or grow six cannabis plants.
City charter requires aldermen to declare conflicts of interest on a form provided to the Board of Aldermen’s clerk. It also bars aldermen from using their position to personally or financially benefit themselves.
In an interview with the Post-Dispatch, Bret Narayan said the Board of Aldermen’s attorney told him Occidental Group’s operations were not a conflict of interest as they took place outside of city boundaries.
Most elected or appointed public officials must declare possible conflicts of interest to the Missouri Elections Commission if they own more than 10 percent of closely-held corporations.
Bret Narayan says he does not own more than 10 percent of Occidental Group.
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