Instagram Star Bilzerian Used Pot Biz As Piggybank, Suit Says

By Sam Reisman
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Law360 (July 8, 2020, 9:54 PM EDT) -- A former executive at Instagram personality Dan Bilzerian's cannabis brand Ignite says he was fired last month because he tried to call attention to a proposal to misclassify a government Paycheck Protection Program loan as income, among other alleged financial misdeeds at the company.

Curtis Heffernan also said in a whistleblower complaint filed Tuesday in Los Angeles state court that he refused to rubber-stamp Ignite International Ltd.'s funding of personal expenses for Bilzerian, including yacht rentals, trips to London and improvements to his house.

"He traveled the world with a harem of models that would make Hugh Hefner jealous, expecting that the company would cover it all," Tamara Freeze, an attorney for Heffernan, said in a statement Tuesday. 

Heffernan, a former executive vice president, claimed that company principals suggested a number of tactics for hiding Ignite's cash-flow problems, including overstating the company's revenue by reporting its PPP loan as "miscellaneous income."

Ignite received between $1 million and $2 million this year through the Small Business Administration's Paycheck Protection Program, according to data released Monday by the U.S. Department of the Treasury. The program is designed to help businesses impacted by the COVID-19 pandemic pay their employees.

Freeze told Law360 that she could not confirm whether the company actually pursued the idea of misreporting the income after the idea was suggested. 

Heffernan's complaint also alleges that he had been pressured to appease the company's auditors by approving more than $350,000 in total expenditures on Bilzerian's home, including a $75,000 paintball field, a $40,000 rock climbing wall, a $45,000 game room and a $15,000 pingpong table.

When the subject of the extensive costs maintaining Bilzerian's house came up during a June 6 budget call, the social media star allegedly justified the expenses by saying, "I'm going to be doing some summer pool parties and will utilize the house," according to the complaint.

Ignite positions itself as a leader in creative marketing for the cannabis industry, placing Bilzerian's reach on  Instagram, where he has over 30 million followers, at the center of its strategy. Blizerian "disrupts the market by illuminating the real faces and culture of the cannabis industry," the company's website says

Among the allegations in Heffernan's complaint is that the company spent $26,000 to juice Bilzerian's social media influence.

In total, the company's auditors raised concerns about over $800,000 in questionable expenses, writing in a draft report released in June that there were a "lack of internal controls and documented standard operating procedures around the review and approval of expenses," according to the complaint.

Given that the company had reported losses of $69 million in 2019, Heffernan said he "was extremely uncomfortable by the largely excessive and inappropriate 'business' expenses," the complaint said.

When he expressed reservations about approving them, Bilzerian accused him of "taking drugs" and "acting strange," according to the complaint, and he was fired on June 8.

Heffernan originally joined Ignite as a senior vice president of sales in March 2019 and was promoted to executive vice president, with the title of acting president, reporting directly to Bilzerian in November, according to the complaint.

He alleges whistleblower retaliation, defamation and wrongful termination, and is seeking unspecified damages, costs, fees and other relief.

Ignite was also hit with a a proposed Telephone Consumer Protection Act class action last month, a type of suit that has become a familiar headache for the cannabis industry. The suit, filed in Nevada federal court, alleges that Ignite sent a customer an unsolicited text message.

Linda Menzel, Ignite's general counsel, did not immediately respond to a request for comment Wednesday.

Heffernan is represented by Tamara S. Freeze and Shirin Forootan of Workplace Justice Advocates PLC and Preston Lim of Lim Law Group PC.

Counsel information for Bilzerian and Ignite was not immediately available Wednesday.

The case is Curtis Heffernan v. Ignite International Ltd., et al., case number 20STCV25549, in Superior Court for the State of California, County of Los Angeles.

--Editing by Jill Coffey.

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