Quales, LLC, an independent cannabis testing laboratory in Frederick, Maryland, has entered into a consent order with the Maryland Cannabis Administration (MCA) following an investigationn that revealed potential conflicts of interest with a nearby cannabis processing facility, Ceres Naturals LLC.

The MCA’s investigation, conducted between October and November 2023, found that Quales shared several employees and consultants with processor Ceres Naturals, raising concerns about the laboratory’s independence. Specifically, the investigation revealed that:

• Several individuals held agent registrations and were employed by both Quales and Ceres Naturals.
• Consultants providing services to Quales also had significant involvement in the operations of Ceres Naturals.
• Manoj Adusumilli, who had sold Quales to Naveen Gogineni, continued to provide consulting services and also had involvement with Ceres Naturals through CIAN Diagnostics, the landlord of Ceres.
• Sombabu Mullapudi, a consultant for Quales, also had a cannabis agent card and was working for Ceres Naturals.

Maryland law mandates that independent testing laboratories remain independent from other entities in the cannabis industry to ensure unbiased testing results. The MCA found that the overlap in personnel between Quales and Ceres Naturals violated this requirement.

While Quales cooperated with the investigation and took steps to address the issues, the MCA determined that the company was vicariously liable for the actions of its consultants and employees.

Under the terms of the consent order, Quales has agreed to:

• Refrain from employing individuals who are also registered agents for other cannabis licensees, with the exception of cleaning personnel.
• Acknowledge the authority of the MCA.
• Waive their right to a formal hearing.

The consent order emphasizes that Quales is responsible for the costs associated with complying with the order. The MCA has also made the consent order a public document. This agreement resolves the violations without proceeding to a formal evidentiary hearing.