Sonoma Co. cannabis entrepreneur Dennis Hunter bounces back from prison to become model CEO

Dennis Hunter discovered his remarkable entrepreneurial prowess in a land of illegal pot. His talent led him to flourishing success then prison. Released, he soared again then was arrested. Now he's back, bigger than ever.

More than a dozen years after his release, Hunter reigns as business leader of Santa Rosa's fast-greening CannaCom Valley, where legal cannabis commerce thrives under state and local law. Hunter's CannaCraft and related CBD Guild companies sell extracted medicinal products in 500 dispensaries statewide.

His businesses, already with revenue of nearly $50 million and 140 local employees, comprise the most potent cannabis enterprise in the North Bay. The business stands to more than triple when the city of Santa Rosa approves applications on a five-building Giffen Avenue site, which will house 70,000 square feet of indoor cultivation.

SELF-TAUGHT GROWER

As a youngster in Willits, some 20 miles north of Ukiah on Highway 101, Hunter taught himself cannabis agriculture. When his hidden outdoor pot plots needed irrigation, he taught himself plumbing. When his indoor plants needed grow lights, he taught himself electricity. When he sought to extract and refine cannabinoids to provide medicine for various maladies, he taught himself about machinery.

Initially he embarked on outdoor cultivation, “hiking in the woods, building a spring box to gather water, made tanks out of chain wire between trees and plastic liners, doing irrigation.” On indoor cultivation, he “learned about wiring, how to wire plugs and whole panels, plumbing and carpentry. I took to each one, figured out how to master it,” he said.

He “had to have all these skill sets,” he said. “Willits was an established cannabis culture. My friend's parents grew. I saw really large cultivation at a young age. I was mesmerized. I found remote timber property” where he could grow plants secretly, by himself, 20 or 30 plants at each site, “drip systems, timers, automated so I didn't have to go there very often.”

He sold cannabis wholesale to dealers, discovering before he finished high school that he could make plenty of money.

His own parents didn't grow, but they were entrepreneurs in trucking, storage and fixing up houses.

“My dad and mom threw projects at me at a young age. I didn't have a lot of things I couldn't do. I tore things apart to see how they worked, put them back together.”

BUST LEADS TO PRISON

But countervailing forces sabotaged his entrepreneurial trajectory.

In 1970 about two years before Hunter's birth, the Controlled Substances Act became federal law, listing marijuana as an illegal Schedule I drug. That same year, the Bank Secrecy Act passed, requiring banks to assist federal authorities by reporting cash transactions that might indicate money laundering, including drugs.

Hunter said his business was “fine” for years, “everybody” around him was into cannabis.

“Then one day, really not fine,” he said.

In 1998, Hunter got busted. Federal agents arrested him at his Humboldt County headquarters for indoor cultivation in two buildings. He also had outdoor cultivation.

Convicted on pot-related charges about four years later in 2002, he served 6.5 years in federal prison.

Hunter, then 25, went to medium-security prison, serving part of the time in Nevada and Oregon. While incarcerated, he took UC Berkeley Extension courses in real estate and appraisal.

Under current California law, after Prop. 64's passage last November, he would not have broken any laws, he said.

“It was lost time,” he said.

Now, he is highly motivated to make up that lost time in business.

“I look forward,” he said. “A lot of things in life build character. I don't look back too much. The industry has come full circle.”

POLICE RAID SANTA ROSA OFFICE

Hunter's personal and business roller coaster did not end after his release from prison. On June 15, 2016, nearly 100 police officers swarmed CannaCraft headquarters on Circadian Way and arrested him. Officers seized nearly $680,000 in cash during the raid, which occurred as the business prepared currency-filled envelopes for employees on payday, according to Hunter. Authorities also confiscated some $2 million worth of equipment used to manufacture medicinal gels and concentrates from raw weed, he said.

“They still have that as well,” he said, noting that assets were seized under county jurisdiction. “There's dialog going on with the District Attorney's Office” about how to get the assets returned.

“It was a shock,” he said. He assumed the police viewed him as an “ex-felon doing a hash lab. They tried to push it off as this clandestine hash lab.”

Police were concerned that CannaCraft might have been using butane in its processing, he said. The company had no butane.

“We actually make (carbon dioxide) extractors,” Hunter said.

Despite the raid, he sought legitimacy.

“We were trying to do everything right - in dialog with local and state government, doing tours” with government officials, he said, chuckling. “We were trying to set the model - get rid of the stigma of these little garages where people are blowing themselves up.”

“There were some pieces that weren't in place yet. They knew people were operating” medical-cannabis businesses, he said. “We had documentation of every sale going to legal dispensaries. We're trying to normalize our industry.”

Police held Hunter overnight in the Sonoma County jail on a $5 million bail then released him the next day. No charges were filed.

In December 2016, less than six months after the bust, state Treasurer John Chiang toured CannaCraft headquarters, joined by David Guhin, Santa Rosa's director of planning and economic development. Guhin oversees the city's welcoming stance toward the burgeoning cannabis industry. Chiang formed a Cannabis Banking Working Group, which held its fourth meeting in Santa Rosa in May in efforts to provide bank support for an industry still deemed illegal under federal law.

Hunter attended Chiang's banking-group meeting but left quickly when it didn't move fast enough for him. Five days later, he attended a cannabis-industry conference hosted by North Bay Business Journal but left when its pace didn't hold his attention.

Hunter, gifted with an agile and sometimes relentless intellect, suffers sometimes when his mind races and banishes sleep.

He wasn't only good at cannabis commerce. At Santa Rosa Junior College, he took vineyard-management classes and applied that knowledge to cannabis. He played in real estate. “I was buying, selling and flipping houses,” Hunter said. “I bought my first house when I was 17 or 16. My mom helped me fix it up. I put renters in there for a couple of years then sold it.”

BEYOND PRISON TO CANNACOM VALLEY

Upon release from prison, he started a couple of businesses, including an online store where people would drop off merchandise they wanted to sell. It had locations in Petaluma and San Rafael.

“It didn't make money,” he said. He closed the business after a couple of years.

In about 2009, ex-wife Khanhvi Dang started selling GeoPot containers of porous fabric that push plants to produce fibrous feeder roots, allowing air in.

In about 2012, Hunter bought his first commercial property - Santa Rosa Tropicals fern nursery at 4770 Occidental Road. Hunter and Dang went into garden-supplies distribution, co-founding Left Coast Garden Wholesale in 2014 at the site of Santa Rosa Tropicals.

They distributed hydroponic equipment to cannabis cultivators - pots, fertilizer, soil and netting.

“I was out of federal prison,” Hunter said. He was on probation until about 2014. “I wasn't cultivating, so I'll at least sell shovels, all the things they need. I made a business out of that. We got pretty large.”

Left Coast Garden Wholesale ships throughout the United States, Canada, Australia and the U.K. The company website shows Dang as CEO and notes her degree in business and computer science.

“We made a nutrient enhancer, for putting more resin on plants,” Hunter said.

That increases their terpene content. Terpenes, responsible for flavor and aroma of cannabis, develop in the resin glands of the plant where cannabinoids are produced. Cannabinoids account for medicinal and psychoactive effects of the plant, which contains dozens of both substances.

“I have a good understanding of how things work,” Hunter said, “the ability to break it down.”

Though outdoor cultivation works well in certain microclimates, indoor cultivation allows control, with micronutrients, lighting intensity and injection of carbon dioxide to spike plant growth. “You get more crystals on the flowers. The indoor flower looks covered in resin,” he said. “Outdoor doesn't quite get like that. The bag appeal of indoors looks beautiful, showing off this frosty bud. Typically indoor (cannabis) is more valuable and gets a higher price.”

CANNABIS COMPANIES PROLIFERATE

Hunter registered CannaCraft as a corporation in November 2014, listing 10 million shares, with himself as CEO, chief financial officer and secretary. In April 2017, he remained CEO, but Tiffany Devitt became secretary and Khanhvi Dang, his second ex-wife, was listed as CFO.

Dang, who worked previously as an accounting auditor, still works at CannaCraft, he said. From his first marriage, Hunter has a daughter and son, who lives with him.

In April, CBD Guild showed Edward Fussell as CEO, secretary and CFO, at the same address as CannaCraft.

Fussell is his business partner in Giffen Avenue Property, LLC, formed in September 2016.

They worked on Emerald Pharms, a medical dispensary in Hopland. Fussell was the initial managing member, and Khanhvi Dang was initially listed as a member. The manager was changed to Hunter in April, with Fussell as CEO.

Giffen Avenue Property, which plans cultivation as well as distribution and processing, already has preliminary permits, according to Hunter

“They're putting divider walls between units,” he said, about construction progress in the facility.

He leased space to four farmers with individual units inside two large buildings. He's not ready to disclose tenant names, but they're “some of the most renowned growers we know,” of special breeds and strains.

“They are hand-picked,” he said of tenants, because of “the professional business we have seen them run.”

MEDICAL CANNABIS ONLY - FOR NOW

Because regulations for adult-use cannabis have yet to be made, all Hunter's business operations remain with medical cannabis.

He sees CannaCraft and Giffen Avenue Property as sites that could incubate smaller manufacturers. He is designing a new kitchen to experiment with edibles.

“One of our plans is to have extra space. There are some great edible-makers. They're small, but they make amazing products,” he said. “We'd love to give them a platform. If you don't have volume, it's going to be hard to succeed.”

Along with about half his employees, he uses cannabinoid products personally.

“I have a busy mind - into the night,” he said.

The business ventures benefit from his mental intensity, yet he suffers from a kind of manic disorder and insomnia. Hunter habitually talks and thinks quickly, and his eyes move constantly.

GROWTH TOWARD 500 EMPLOYEES. COMPETITION RISES.

“To turn it off and get some relaxation, it helps me get to sleep,” he said.

He expects the companies' employee count to triple to nearly 500.

“We're going to get up there fairly quickly,” Hunter said. “Where does that max out? Not sure. We're moving faster than I had ever thought. I have a hard time knowing where the cap is going to be.”

Well-funded players are coming into the industry, competing businesses that will challenge his dominance.

“They can definitely outspend us. But we have a great base to go from, and a city that is supportive of the industry,” he said.

IRS COUNTS CASH FOR 3.5 HOURS

Chief executive of a large company is new to him.

It is “a big chore, a little scary at times - payroll and things get bigger, expenses. It's a challenge,” he said.

And running a business on cash, paying employees and bills is “a pain.” Some vendors don't want to take cash, calling for creativity in finding ways to work with them. Several employees are needed just to manage the cash.

“It puts you in the same boat for red flags to come up for money-laundering,” he said.

He opened six bank accounts in the past year.

“They don't like dealing with cash,” he said. He kept moving from bank to bank. “It's a big challenge for our industry. If you don't have a bank account, they have no idea what money you have.”

Cash payments include income taxes to the IRS.

“We go in there with a box of money,” he said. “For three and a half hours, they count it by hand. They have no money-counters.”

REGULATORS SEE CANNACRAFT AS A MODEL

Hunter and his staff have taken regulators on a lot of tours and had talks with city and county officials.

“We'd like to turn that negative situation into a positive situation,” he said about the raid last year. “We'd rather have Jill's staff coming through here.”

Jill Ravitch is Sonoma County district attorney. Hunter noted concerns from local officials.

Jointly figuring out how to improve safety is one concern to tackle.

“We'd love to have that kind of relationship,” he said. “This is a great opportunity, thousands of people coming above-board. If we can use this (business) to keep the dialogue going on both sides, helping the industry people figure out a pathway to come above board, creating dialogue with the DA's office, police and sheriff. If we can share their concerns with the rest of the industry, we can make this into a positive.”

Hunter said a lot can be learned about what has happened to his cannabis companies and what they have put in place.

“The fire marshal had never inspected a cannabis facility prior to that,” he said. “We were able to get those channels opened.”

These officials have been seeing how cannabis products are manufactured.

“The stigma is slowly being chipped away,” Hunter said. “The majority of people, even if they don't use it, know somebody who does. It's easy to look at stoners, potheads. But when faced with people (for whom) it really does benefit their lives, that changes people who were staunchly against it. One of their own family members gets cancer. They're willing to try some (cannabis). Mom is suffering, withering away. Where is that weed? Get it to her - whatever helps. When people encounter that in their lives, you see real change.”

James Dunn covers technology, biotech, law, the food industry, cannabis, and banking and finance. Reach him at: james.dunn@busjrnl.com or 707-521-4257