Popular pot brand Cookies lined up millions in kickbacks to self-dealing execs, lawsuits allege

The San Francisco-area rapper who founded Cookies is being accused of using strong-arm and bullying tactics to run the popular cannabis brand, and forcing other companies to pay him and top executives millions of dollars in kickbacks to do business.

Those who refuse to pay up, according to a pair of lawsuits filed in Los Angeles County court, face threats of physical violence or “slanderous blasts on social media,” as well as the inability to do business with Cookies, which has sprung up more than 30 stores across the U.S.

“Defendants’ pervasive wrongdoing has caused their own pockets to be lined while causing massive losses to Cookies and its shareholders,” lawyers for a group of investors allege in a lawsuit filed Feb. 8.

In one example, Berner, whose real name is Gilbert Milam Jr., took diamond jewelry valued at more than $1 million as a kickback from a third party in order for the company to do business with Cookies, according to the lawsuit.

Milam has denied the allegations, and said in an Instagram post addressing the lawsuits that a group of “predatory investors” were attempting to remove him and other top leadership from Cookies, which has quickly grown to a half-billion-dollar company, according to Forbes.

“These guys have made extremely false, damaging claims about myself that are completely just untrue, and I really look forward to the day in court that we can prove that these claims are false,” Milam said in the video. “They’re trying to remove me [and] current leadership from Cookies.”

Trouble for the brand began in January when Cookies Retail Products, or CRP, sued Milam’s company over a 2021 agreement for CRP to sell Cookies-branded products containing CBD, a non-psychoactive compound in cannabis.

According to the lawsuit, Cookies told CRP to use its suppliers and affiliates to get the products on the market faster. CRP alleged it was “shoehorned” into using Cookies’ suppliers and pressured by executives to repeatedly increase the number of orders despite manufacturing delays, defects and other problems.

After investing millions of dollars in the deal, CRP learned executives at Cookies “had been collecting ‘kickbacks’ and other additional ‘fees’ that were passed through as inflated costs to CRP,” according to the lawsuit.

“[Cookies] employees did not want to lose their kickbacks by operation of CRP using alternative suppliers,” the lawsuit claims.

According to the lawsuit, CRP was told the employees getting kickbacks had been fired, but Cookies still prohibited CRP from changing suppliers. The company also alleges that the high costs to manufacture never changed and that kickbacks remained, despite assurances from Cookies.

Cookies executives also delayed the release of vape cartridges, blunts, vaporizers, gummies and other products, making them spoil, CRP alleged.

A second lawsuit filed Feb. 8 repeated allegations that executives were receiving kickbacks for deals, including diamond jewelry, housing and cash that Milam allegedly accepted to fund a “lavish lifestyle,” even when the deals weren’t profitable for the company.

Investors also alleged Milam used company resources for personal reasons, such as using Cookies resources to promote his music career and using the company’s bus for personal travel.

Cookies President Parker Berling also used company resources for other ventures and promised contracts with Cookies in exchange for investments in his other companies, the lawsuit alleges.

“Often, third parties that refused were threatened,” the suit says. “In some instances, Defendants even threatened to, or did, cause property and bodily injury.”

The lawsuits did not provide specific examples of physical threats made by top executives but alleged the threats were used to steal cannabis strains and other intellectual property from third-party companies.

Investors asked Cookies to launch an investigation, including full disclosures of financial interests of top executives such as Milam and Berling, but no investigation has been launched so far, according to the suit.

The lawsuit alleges breach of fiduciary duty.

Attorneys for Cookies, Milam and Berling responded in court Wednesday, saying the investors had no legal right to sue on most of the claims, and that the suit was a legal tactic to circumvent a similar complaint that plaintiffs had already filed with the American Arbitration Assn. in December. The investors’ concerns, attorneys for Cookies argued, should be handled with the arbitrator instead of in a lawsuit.

Attorneys for the cannabis company in court records claimed that, despite allegations of “fraud” and “self-dealing,” the investors’ group declined to provide evidence to its board or arbitrators.

According to court records, Cookies told the group that it would respond to the investors’ concerns “consistent with its legal obligation” but that it would not conduct an investigation into the financial dealings of its top executives without proof. Lawyers called the allegations “vague” and said an investigation “would have required an undue use of company resources and been prohibitively expensive.”

Cookies also claimed that it had found “ample evidence” during its review that undermined the investors’ credibility, “including documents that appeared to disprove certain material allegations.”

A spokesperson for Cookies declined to comment for this article and referred to Wednesday’s court records filed by the company.

In his Instagram video, Milam said the investors were using the lawsuits as a means to take control of his company. The rapper alleged they tried to take advantage last year, when he was being treated for stage 3 colon cancer.

“I was literally fighting for my life,” Milam said in the video. “What made that fight a lot more difficult and challenging was the fact that I was forced to fight for my business at the same time.”

Milam did not address allegations of kickbacks in the video but said he planned to fight the lawsuits in court.

“These guys are throwing a fit and trying to put me and my company in a corner and starve us out,” he said. “Well, that’s not going to happen.”