Medbox Inc. (MDBX) , a provider of dispensing machines used by the cannabis industry to secure its product, said that a former employee wrote to the Securities and Exchange Commission alleging wrongdoing by a former officer, and that the company's accountants received a federal grand jury subpoena.
In a Friday, Oct. 31, filing, Medbox revealed that its accountants had received a subpoena from a federal grand jury in August. The filing also said that a former employee had sent a letter to the SEC making allegations about a former company officer who is a current consultant to Medbox. Medbox did not identify the former officer in the filing.
The company said in a subsequent press release on Monday, Nov. 3, that the letter was sent to the SEC in May, apparently in retribution for Medbox's refusal to pay the unidentified employee a cash settlement.
"The former employee vowed to retaliate against the Company in any way he could after his illegal cash demands of the company were ignored," Medbox founder Vincent Mehdizadeh said in the statement. "It now appears that writing a letter to government agencies filled with factual inaccuracies and blatant falsehoods was the most effective way to facilitate that goal."
The company said it's formed a special committee of its board to investigate the allegations in the letter to the SEC and the implications of the federal grand jury subpoena.
Shares of Los Angeles-based Medbox fell $1.50, or 10.8%, to $12.45 on Nov. 3.
The SEC did not respond to a request for comment. A Justice Department representative would neither confirm nor deny the existence of an investigation into Medbox.
Questions have been raised about Medbox's finances in the past. A Feb. 18 report by investment research firm Citron Research alleged that Medbox was a fraud, citing press releases and financial filings by the company.
Following the Citron report, the company issued a statement acknowledging that there had previously been errors in its accounting but said that those errors had been corrected in its latest financials filed with the SEC.
While Medbox did not identify the former officer who is the subject of the letter to the SEC, the company's own filings show that three officers resigned this year and stayed on as consultants.
Mehdizadeh resigned as COO and director in April, but was then appointed as a senior strategist. He resigned again last month, retaining a relationship as a consultant.
Bruce Bedrick resigned as CEO in July and resigned from the board in August, remaining as a consultant.
CFO Thomas Iwanski resigned last month, but agreed to stay on as a consultant.
Mehdizadeh, Bedrick and Iwanski could not be reached for comment.
On the same day the company filed notice of the investigations, it announced the appointment of Jennifer Love to its board. Love is a 27-year veteran of the FBI and was an assistant director of its security division.
The company appointed a special board committee composed of Love and two other independent directors, as well as CEO Guy Marsala, to investigate the allegations made in the letter to the SEC by the unidentified former employee and the federal grand jury document subpoena served on the accountants.