(This story has been updated to reflect that MD Industries does not owe Ingham County $110,260.62 in 2021 property taxes. MD Industries paid the tax debt in 2022, records show.)
Michael Doherty stood on the roof of Lansing’s iconic John Bean building, a 460,000 square-foot brick fortress on South Cedar Street, in July 2020. A global pandemic had shut down much of the country and was killing Americans across the country. But the flamboyant Doherty was excited to share his plans to create the “Jack Daniels” brand of marijuana.
“It was mission impossible to take on a project this size, but I knew it would be an awesome business move if I could actually pull it all off,” he declared. “This building used to be a real powerhouse back in the day, and a big part of this is bringing it back up to its former glory.”
To back up his braggadocio, he had slapped Rehbel branding everywhere he could in the city. The Rehbel billboard became a part of the visual landscape of Lansing. But those billboards are gone now. Some were replaced by billboards advertising God.
Nearly three years later, Doherty, 44, no longer controls the operations he had hoped would generate an iconic brand of marijuana. The financial collapse of his business and its takeover by creditors is detailed in thousands of pages of court filings in Ingham County 30th Circuit Court, all of which escaped public attention until now.
In March 2022, two creditors, the Jonathan and Mary Kay Borisch Family Foundation and JLB Monarch Holdings LLC, sought an emergency order to place in receivership Doherty’s buinesses, MD Industries and Rehbel Industries, both limited liability companies. The foundation is a charitable organization in Grand Rapids. Jonathan Borisch is listed with the state as the agent for JLB Monarch Holdings, a limited liability company.
The next day, Judge Joyce Draganchuk issued the emergency order.
A receivership appoints a receiver, a neutral third party, to take control of a business, distribute assets and income and dispose of property to address financially struggling operations in the state. The Michigan Appeals Court has called the appointment of a receivership “a harsh remedy which should only be resorted to in extreme cases.”
Court records show Doherty signed promissory notes adding up to $10,527,968.18 with the original creditors. Additionally, Lansing-based Access BIDCO, a business and industrial development company, and Nicholas Freund Building LLC, a Royal Oak construction management firm, were allowed to intervene as creditors as well, raising the debt level by another $2 million.
All four lenders argued that Doherty and his businesses failed to meet the requirements of their loan agreements by failing to make payments on time. Both Monarch and the foundation argued there was a further violation of the agreement because property taxes had not been paid on time.
Ingham County property tax records show that MD Industries owed $110,260.62 for the Bean Building, 1305 S. Cedar, from 2021, but he paid off that debt in 2022. Another $14,268.75 is overdue on the property for winter 2022 taxes, according to the City of Lansing property database.
Doherty’s financial woes are only the latest in a shifting marijuana market in Michigan. Two weeks ago, Delta Township-based Green Peak Industries, which operates the Skymint brand, was placed into receivership when creditors said the company owed $127 million. Green Peak executives, in a statement to the Lansing State Journal, said the financial woes were the result of a price collapse in the marijuana market.
Doherty did not respond to inquiries.
But in a 614-page handwritten document filed in Circuit Court this month, he argued the creditors and receiver worked in tandem to usurp his businesses. He called it a “hostile takeover.” The screed is filled with printed copies of internet definitions, Wikipedia pages, move quotes, biblical quotes, and more. In the filing, he assailed the character of the creditors, accusing them of owning too much property, not understanding the marijuana business and of personal failings in marital relationships.
In the pleadings, he admitted that he failed to pay loan payments on time and put off tax payments. In his defense, Doherty argued that loan repayments were previously allowed to be paid late and that it was “no big deal.”
He claimed a business turnaround expert brought in by the foundation advised he put off till August a property tax payment payment that had been due in February. That delayed payment, he said, is what sent the foundation and Monarch to court seeking the receivership.
“This was a hostile takeover,” he wrote. “That was the whole plan from the beginning.”
Lawyers involved in the case did not respond to inquiries seeking comment. None have filed an answer yet to Doherty’s brief.
The pot grower was originally represented by Foster Swift, a law firm with offices in Lansing. But in September 2022, just six months into proceedings, the law firm requested the court to end the firm’s representation of Doherty, stating he had “substantially failed to fulfill obligation to the lawyer regarding the lawyer’s services.” The law firm argued that continued representation of Doherty would result in an undue financial burden to the firm. There had been, according to the filing, “a complete breakdown of the attorney-client relationship.” The court granted the withdrawal.
A second attorney, Phillip Hamilton, who is based in Kalamazoo, also cited a breakdown of the attorney-client relationship when seeking a February 2023 order from Draganchuk to remove himself from representing Doherty. That order was also granted, and Doherty was notified by the court in writing and in person that in acting to remove attorneys from the case, he could not argue on behalf of MD Industries or Rehbel Industries, only for himself.
He now represents himself in the proceedings.
The court-appointed receiver in the case, John Polderman of Simon PLLC, a Troy, Michigan-based firm, has from the beginning faced significant hurdles in attempting to return the business to financial stability. First among them was the deeply intertwined nature of Doherty’s business entities, such that they were not distinctly separated. Reh-bel ostensibly operated the marijuana business, while MD Industries oversaw the payments for buildings and creditors and the purchase of equipment. Polderman discovered that while Rehbel was, on paper, renting 100,000 square feet from MD Industries LLC for marijuana growing operations, there were no payments being made.
On May 31, 2022, Polderman alleged Doherty had sold a packaging machine valued at $190,000. Doherty admitted he had sold the machine for $60,000 and had not remitted the money to any of the business accounts. He argued that the receivership covered only MD Industries, not Rehbel, which owned the equipment. By early June, Rehbel was added to the receivership and the money was submitted to the accounts, according to court records. Doherty dodged a civil contempt finding by agreement with Polderman.
In addition, Doherty argued Polderman’s financial valuation of the business was far lower than reality. Doherty claimed that a previous assessment, conducted by an industry expert, valued the business and assets at $30 million in 2020, not Polderman’s $8 million. Polderman and lawyers representing the creditors argued the valuation provided by Doherty had been manipulated by selective provisions of information to the evaluator. They cited an unnamed employee for providing the information that bore that out. Draganchuk accepted the $8 million valuation and rejected Doherty’s.
But the motorcycle-riding entrepreneur continued to resist cooperation with Polderman and regularly violated requirements that clients represented by attorneys not communicate with the attorneys on the opposite side.
Attempts to move toward the renewal of the three growing licenses issued by the state to Rehbel Industries ran into the wall of the Lansing Building Safety Department. City numerous violations, inspectors refused to issue a certificate of occupancy, which prevented the city from approving a renewal of the licenses with the state.
Polderman sought and received an order on Nov. 30, 2022, requiring the city to issue a “punch list” of repairs required to be completed before a certificate of occupancy could be issued. The order further prohibited the city from intervening or stopping the license renewals. The court-ordered list was three pages long and included repairing electrical and plumbing issues. It also noted that while the work was being completed the building should remain unoccupied by anyone except contractors improving the building.
City records show the Bean Building has 72 open building issues.
Court orders show that Monarch and the foundation took control of buiness operations and the Bean Building, where the marijuana business is conducted.
A Grand Rapids real estate firm lists the Bean Building for sale for $7.75 million.
Three houses owned by Doherty on Christiancy Street, which borders on the 12-acre Bean Building property, were sold to unidentified buyers, according to court records.
Doherty’s personal home at 5 Locust Lane in Lansing was sold to an unidentified buyer. Eaton County property records show the property is owned by Simon PLLC, the firm that Polderman works for. The six-bedroom, six-bath house is in Eaton county overlooking the Grand River. It was previously owned by Saul Anuzis, the former chair of the Michigan Republican Party.
The receivership argued that Doherty was unable to prove his home was not an asset of MD Industries, showing in filings that the costs of the property were on the business’s ledger. Doherty argued he had paid for the home out of his own pocket, producing checks in a response. Property records show that when Doherty claims to have purchased the property, ownership was transferred from Anuzis to MD Industries, not Doherty.
(MD Industries sold another property, at 738 E. Kalamazoo St. in Lansing, for to the Okemos-based Cloud Real Estate LLC in 2021, before the receivership began, city property records show, but the sale price was recorded as $0.00. Doherty had purchased the property in 2015, then transferred it to MD Industries in 2018. Doherty raised eyebrows after he bought it when he painted it black, windows and all.)
Buried in the filings is an admission by Doherty that the business took an unexpected $500,000 hit in 2020 when excessive mercury contamination was found in marijuana plants and in the building. He had to destroy a crop and remediate the mercury.
A former employee filed a complaint with the Michigan Occupational Safety and Health Administration about the mercury contamination in April 2021, according to a spokesperson. No investigation was done because the complaint was not filed “timely” with the agency that oversees workplace safety and “therefore an inspection was not conducted,” the spokesperson said.
A spokesperson for the U.S. Environmental Protection Agency said the agency is reviewing records.
An EPA website on mercury contamination shows a spill or contamination of more than a pound of mercury (equal to about two tablespoons) requires notification to the National Response Center, run by the EPA.
Meanwhile in Draganchuk’s court, Doherty filed dozens of additional pages of documents on March 13. Among his motions, he is seeking criminal contempt charges against Lansing City Attorney Jim Smiertka and his deputy, Amanda O’Boyle, as well the receiver, Polderman. He alleged that O’Boyle and Smiertka were in contempt for refusing to release communications with Polderman about the Bean Building. He wants Draganchuk to recuse herself and find herself in civil contempt for allegedly failing to be impartial in administering his case.
Doherty himself faces an April 4 criminal contempt hearing over what Polderman called “a path of harassment and threats, all in violation of court orders.” Polderman asked for the criminal finding after it was discovered Doherty was allegedly texting threatening and harassing messages to his former employees. He added to the claims after Doherty showed up at the title office handling the transfer of the Locust Lane property and demanded to be notified of any title transfer meetings before their occurrence. He followed up with more emails to the title agent, including one with a photo of Doherty’s son. In the email, he said the title agent might meet his son at some point.
While receivership is supposed to assist in turning a property and business around while securing a creditor’s interest, Doherty argued that Polderman lacked any experience in marijuana growing operations. That lack of experience, he argued, has essentially killed his business.
But Polderman’s firm, Simon Law PLLC, is handling receiverships on other marijuana businesses in Michigan, including the sale of a marijuana dispensary in Ann Arbor.
The business, Doherty wrote, is “on life support only due to the court, 50 employees down to 17. The operation is done, and needs to be shut down properly. Cannabis is very complicated to do so.”
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