A prominent cannabis cultivator in Palm Springs has collapsed into a complex web of fraud allegations and lawsuits.
The Kings Garden cultivation facility no longer operates after the breakup of its senior leadership team. The site had been scheduled to expand to over 200,000 square feet, more than five times its original size.
But allegations of financial fraud and extortion have stalled its development, and what was once called California’s predominant cannabis cultivator is now locked in a contentious legal dispute.
Multiple parties involved in the financing, operation and construction of the property have hurled accusations against each other, including the two brothers who helped start the company.
Property owner Innovative Industrial Properties Inc. sued both Kings Garden and a local subcontractor hired to build cannabis cultivation facilities for millions of dollars, alleging its investment funds had been fraudulently spent.
Innovative Industrial Properties, a publicly traded company known as IIP, was also the subject of a class-action lawsuit from investors upset over its oversight of the project.
A judge dismissed the class action case, and IIP settled with Kings Garden, which agreed to pay IIP $8.5 million. But IIP’s lawsuit against the local subcontractor, Palm Desert-based Orr Builders, remains ongoing. In the lawsuit, IIP claims Orr Builders provided inaccurate information about the work that had been done on the property.
This included falsely claiming to have purchased $9.5 million worth of steel while actually only purchasing less than $1 million, according to the lawsuit.
Other allegedly fraudulent expenses totaling millions more are also included in the suit.
“The evidence at trial will show that Orr Builders worked with its subcontractors to intentionally inflate construction invoices and wrongfully presented them to the property owner IIP for payment along with other subcontractor invoices that Orr Builders did not properly verify for accuracy,” Andrew A. Howell, an attorney representing IIP said in an email to The Desert Sun.
Citing an impending trial next month, Orr Builders declined to comment in detail on the lawsuit.
“Orr Builders, a well-respected and local commercial general contractor, has never had any business relationship or dealings with IIP. Recent claims suggesting otherwise are entirely false,” attorney Robert Gilliland said in an email, referring to claims in the lawsuit. “Orr Builders looks forward to its day in court, where we are confident these baseless accusations by IIP will be fully addressed and refuted in their entirety.”
Representatives for Kings Garden did not return a request for comment.
King of Cannabis
Kings Garden first began to operate in Palm Springs in 2017 after it received a permit to convert a 37,787-square-foot building on 19th Avenue previously occupied by FedEx into a cannabis cultivation site.
That land was part of a section of the city that the city council had designated for cannabis cultivation in the hopes of luring in businesses that would bring tax revenue.
Kings Garden sought to expand in 2021, when it applied for a permit to build two more cultivation buildings on property around its original building, each totaling 87,120 square feet in addition to a 5,650-square-foot office building. That expanded the footprint of the business to around 9.4 acres.
The Planning Commission approved the expansion amid discussion of requirements for solar power.
The seeming success of the business attracted attention. Even prior to its planned expansion, cannabis media outlets had released glowing stories.
CannaCribs, a cannabis YouTube channel with around 327,000 subscribers, made two videos about Kings Garden, including on profiling its CEO, Michael King.
In the video, CannaCribs said King emigrated with his parents from the Soviet Union as a child before becoming a real estate investor in Miami. Once cannabis became legalized in California, he sought to enter the market, eventually ending up in Palm Springs.
Business disruption
In May of 2021, King and other Kings Garden investors sued Paul King, Michael’s brother. At the time, Paul was the CEO of Cannafornia, another large cannabis cultivator.
The lawsuit contains explosive allegations that Paul “turned on his family” by falsifying records, filing a false police report, hacking email accounts of Kings Garden Investors and extorting his brother Michael for millions of dollars.
The lawsuit followed another from 2020 in which other investors of Paul’s company sued him, claiming he stole nearly $2 million from the company to personally invest in Miami real estate, according to the plaintiff’s law firm.
Paul King could not be reached for comment.
The lawsuit by Kings Garden against Paul King remains open in Florida court, but has been stalled since 2024.
Since 2022, Kings Garden appears to be defunct, and other investors have continued to search for what happened to their funds.
A deal gone wrong
IIP, a real estate investment trust based out of San Diego, purchased the Palm Springs property in 2020 for around $17.5 million and entered into a triple-net lease with Kings Garden.
A triple net lease is one in which the tenant pays all property expenses.
As part of the lease, IIP agreed to reimburse Kings Garden for approved improvement costs up to $51.4 million, according to the company’s lawsuit against Orr Builders. Kings Garden then entered into a subcontract with Orr Builders to construct its major expansion, which was expected to cost around $36.7 million.
The construction costs would then go on to become the centerpiece of the legal battle between Orr and IIP, which is seeking to recoup some of its investment into the property.
The two parties have met in court multiple times over the past few weeks to discuss aspects of the case. Recently, Orr Builders lost an attempt to throw out the lawsuit over the claim IIP did not have a contract directly with it.
As recently as Tuesday, Feb. 17, a hearing was held in Riverside County court. No other hearings had been added to the docket as of Wednesday, Feb. 18, although the case remains ongoing.
Sam Morgen covers the city of Palm Springs for The Desert Sun. Reach him at smorgen@gannett.com.
This article originally appeared on Palm Springs Desert Sun: Collapse of Palm Springs cannabis grow sparks fraud, extortion claims
Reporting by Sam Morgen, Palm Springs Desert Sun / Palm Springs Desert Sun
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