Oregon’s largest recreational marijuana company has been dogged from the time it started by turmoil at the top.
The company’s roots date to a real-estate scam that sent a Lake Oswego investment manager to prison for illegally diverting Oregon retirees’ savings into the marijuana company that became Cura Cannabis – often called Select Oil.
Its former CEO stepped down last year after social media posts highlighted a past rape allegation against him.
Now, the Portland company has quietly hired a president who comes with his own difficult backstory.
Nick Sarnicola, Select’s new president, has also long been a top executive and CEO of a Michigan company called ViSalus, which sells protein powder and vitamins for weight-loss shakes. ViSalus has been plagued for years by accusations that it operated a “pyramid scheme” and has reached legal settlements over allegations the company enriched Sarnicola and other executives at the expense of an army of distributors who paid to distribute its products.
ViSalus’ former director of security pleaded guilty in 2015 to hacking into competitors’ computers and ViSalus settled a related civil suit that accused Sarnicola of directing the attacks.
Earlier this year a federal jury in Oregon hit ViSalus with a whopping $925 million judgement for making nearly 2 million illegal robocalls peddling its products. ViSalus is contesting the judgement.
The Portland marijuana company appears to use the Cura and Select names interchangeably in corporate matters. It did not announce its decision to hire Sarnicola as president and it hasn’t been previously reported. An internal organizational chart obtained by The Oregonian/OregonLive shows his title and a Select executive confirmed Sarnicola has been with the company for about six months.
Public relations director Jordon Rahmil declined to comment on Sarnicola’s hiring and the company didn’t respond to requests for an interview with Sarnicola. Attorneys who represented ViSalus and Sarnicola in various lawsuits did not respond to repeated messages seeking their response to the litigation and settlements.
However, Rich Pala, Select’s senior director of business development, said Sarnicola joined the Portland company months ago. Pala describes himself online as a top ViSalus promoter and said he has known Sarnicola for two decades.
There are several overlapping connections between ViSalus and Select. In addition to Sarnicola and Pala, Select CEO Cameron Forni interned at the protein powder company and a Cura board member is a ViSalus director and financial backer.
At a company still trying to establish itself, in an industry beset by regulatory uncertainty, Select leaders are deepening their ties to ViSalus – a company with a history nearly as tortured as its own.
In a phone interview, though, Pala dismissed the years of litigation against ViSalus and Sarnicola, noting that nearly all those cases have been resolved. He said Select’s new president brings valuable experience in sales and internal business management.
“It’s all part of the show,” Pala said. “Name me a company that doesn’t have haters.”
Pivotal time for industry
Sarnicola arrives at a crucial moment for the Portland firm, which is in the process of selling its recreational marijuana business to a Massachusetts company called Curaleaf. The blockbuster all-stock deal, initially valued at roughly $1 billion, will create one of the world’s biggest companies in the legal marijuana industry.
Above: Nick Sarnicola at a ViSalus event in 2016.
Curaleaf is counting on the Select acquisition, and another pending deal, to help produce a massive leap in revenue. Curaleaf reported less than $80 million in sales last year but forecasts more than $1 billion in revenue during 2020.
Backed by a Russian billionaire and by an investment banker who made a fortune privatizing Soviet state-run industries, Curaleaf hopes to be one of the big winners as the cannabis market consolidates.
Regulatory uncertainty casts a cloud over the future of legal marijuana products and have helped drive down the value of Curaleaf’s all-stock acquisition of Select by more than $180 million since the companies announced their deal in May.
Though 11 states have legalized recreational marijuana, cannabis remains illegal on the federal level. Federal law allows sale of CBD, a marijuana product without psychoactive effects, but the Food and Drug Administration has warned it will act against Curaleaf and other companies that continue making unsubstantiated claims about the products’ medical benefits. Curaleaf said it will comply with the directive.
ViSalus and Select: The companies
Cura Cannabis (aka Select Oil): Portland-based company that sells recreational marijuana products in western states under the Select brand name. It’s in the process of selling its recreational marijuana business in an all-stock deal to a Massachusetts company with a similar name, Curaleaf. The transaction was initially valued at nearly $1 billion but the deal’s value has fallen nearly 20% since the beginning of May due to declines in Curaleaf’s stock price.
ViSalus: Michigan company sells protein powder for weight loss. A multi-level marketer, like Herbalife or Amway, ViSalus promotes its products through a network of distributors. The company settled two lawsuits this year that accuse it of being a pyramid scheme. It also faces a $925 million judgement in Oregon federal court for making 2 million illegal robocalls in search of distributors. ViSalus executives also hold top roles at Cura/Select.
Curaleaf: Backed by a Russian billionaire and an American investment banker who made his fortune privatizing Soviet industry, Massachusetts-based Curaleaf is in the process of buying the Select THC business. (THC is the psychoactive ingredient in marijuana.)
Amid those pressures, the legal marijuana market is increasingly competitive. Companies in states with legal marijuana markets are consolidating rapidly as the recreational market matures and the players jockey for a winning position.
Industry market data obtained by The Oregonian/OregonLive illustrates those pressures.
In its largest market, California, data from industry research firm BDS Analytics show sales of Select Oil rose sharply last year – from $3.5 million in January 2018 to $16.7 million in December.
But sales fell steeply beginning in January and the rate of decline compared to 2018 increased as the year went on.
ViSalus’ big promises
Against that landscape Select hired Sarnicola, among the most prominent figures in a field known as multilevel marketing. ViSalus, like Amway and Herbalife, sell their products through a network of distributors.
ViSalus’ distributors — “promoters,” in the company’s lingo — are everyday people who sign up to sell the company’s weight-loss shakes and nutritional supplements to friends, family members or guys they meet at the gym. Promoters pay hundreds of dollars apiece for a starter kit with shakes and similar products.
For years, ViSalus dangled the prospect of “generational” wealth, promising BMWs to its best-performing promoters. But the real opportunity didn’t come from selling the protein shakes, ViSalus told promoters – it came from signing up other people to sell them.
Those who did got a percentage of each sale by those they enlisted to sell, and the downstream sales of people those promoters signed up. That’s characteristic of this kind of network sales company, and it’s why critics call some of them pyramid schemes.
The problem is that even companies with popular products build layers of distributors so large they can quickly exhaust the pool of potential clients.
“You can look at it as too many middlemen,” said Stacie Bosley, an economics professor at Hamline University in Minnesota, who has studied multilevel marketing. “Everyone’s left with only a couple customers apiece.”
Multilevel marketing executives aren’t always natural fits at more conventional businesses, Bosley said, so she said the decision to make Sarnicola president of Select may represent a “calculated risk.”
“Credibility would be the primary concern,” she said. “They seem to think otherwise.”
Above: Nick Sarnicola in 2017.
You can find Sarnicola all over the internet pitching ViSalus at revival-style sales rallies in presentations uploaded to YouTube.
At a 2012 event at a packed arena in Miami, Sarnicola extolled the ViSalus lifestyle to thousands of eager acolytes in grandiose terms, dangling the prospect of riches, prosperity and a flood of respect that comes with business success. Attendees ate it up, cheering him on, but as the fever built Sarnicola asked them to close their eyes and take a deep breath.
“I want you guys to see yourself waking up and it’s your dream home. Who do you see next to you when you open your eyes? A smile. How does that feel inside your heart?” Sarnicola asked as a hush came over the arena. Then he asks them to imagine walking to the garage and choosing from an array of cars as they prepare to drive to an arena in the future and claim their place on stage.
The excitement returned as his sermon built to its climax amid thundering, pounding music. Sarnicola left the stage and strutted through the aisles, collecting high-fives from attendees and shouting “Do you believe? Do you believe? Do you believe?”
A mighty decline
This was ViSalus’ peak, seven years ago. The company announced plans for a $175 million initial public offering in August 2012 and was on track for annual revenue of more than $600 million, according to regulatory filings.
The fall was steep, and sudden.
The company’s IPO plans collapsed just one month after its IPO filing and tens of thousands of promoters walked away from ViSalus, according to publicly reported sales figures. Revenue fell by nearly half the next year.
This is also typical of some multilevel marketing companies, according to Bosley, if they can’t sustain their explosive initial growth and if opportunities for individual distributors evaporate as the market saturates.
“What’s behind it is always going to be a deep dive, a plummet,” she said, “unless they can continue to find a new base of recruitment, a new demographic or market.”
As its business cratered ViSalus faced a slew of lawsuits over the next few years. One accused the company, its security director and Sarnicola of orchestrating a hack into the email accounts and computers of a competitor.
ViSalus settled the suit in 2014 and a year later the company’s security director pleaded guilty to criminal charges for his role in the hack. Sarnicola himself was never charged and terms of the settlement weren’t disclosed.
Then, in 2017, ViSalus, Sarnicola and other executives faced multiple suits that they had run a pyramid scheme and that the promises of wealth and BMWs were illusory. Another suit alleged that ViSalus and Sarnicola committed securities fraud and conned members of an African-American church congregation in Denver into peddling weight-loss products with false promises of an ownership stake in ViSalus.
ViSalus denied being a pyramid scheme and denied the civil accusations but settled those lawsuits this year, agreeing to pay hundreds of thousands of dollars to the plaintiffs and their attorneys.
But the company’s legal troubles returned with the April judgement in Oregon, which found the company liable for nearly 2 million illegal robocalls, triggering damages of $925 million.
As Select’s president Sarnicola is overseeing sales, logistics and supply chain, according to Pala, the company’s director of business development. Pala also said Sarnicola has particular expertise in understanding a marketplace, opening new accounts and building a large sales force like the one he built at ViSalus.
Litigation simply comes with the territory, Pala said, especially for businesses in markets like ViSalus’. And he brushed off the years of litigation against ViSalus, noting that nearly all those cases have been resolved.
“If you’re not getting sued you’re not doing anything right,” Pala said. “The network marketing industry is a ruthless industry.”
He acknowledged the recent decline in California sales, which he attributed to growing competition and temporary issues created by the pending sale to Curaleaf. Sales will rebound whenever the deal closes, Pala said, and when new Select products hit the market in the coming weeks.
“We’re going to have massive momentum in the next 90 days,” Pala said.
Pala said Sarnicola is running various internal operations for Select and that both plan to remain with the company after its sale to Curaleaf.
“I think Curaleaf respects our understanding of how to build a sales team and how to launch a product in the marketplace,” Pala said.
Curaleaf did not respond to messages seeking comment.
Cura/Select and ViSalus: Cast of characters
Cameron Forni: CEO of Cura/Select and the son of a wealthy Oregon hotelier, Forni will be president of Curaleaf once it completes its acquisition of the Portland company. Forni has said his mentor is former ViSalus CEO Ryan Blair; Blair appears to no longer have a role at ViSalus.
Nitin Khanna: Cura’s executive chairman and former CEO. Khanna resigned as CEO last year after critics highlighted a prior rape allegation against him, which he has denied, but remained chairman.
Nick Sarnicola: Co-founder and CEO of ViSalus, Sarnicola has known Forni for many years and quietly became Select’s president earlier this year.
Rich Pala: A top ViSalus distributor, Pala is Select’s senior director of business development.
Todd Goergen: Has served as ViSalus’ chairman and chief operating officer, then served on Cura’s board of directors.
Even before hiring Sarnicola this year, Select’s leadership was already closely entwined with personnel from ViSalus. Pala, who lives in California, said he has been with the Portland company since 2017.
The Portland company’s current chief, Cameron Forni, says on his LinkedIn resume that he was an “apprentice” to former ViSalus CEO Ryan Blair for two years beginning in 2007. On social media, Forni describes Blair as his “mentor.”
Blair, who calls himself as a former gang member, has no apparent ties to Select and no longer appears to have a role at ViSalus.
Todd Goergen, whose father’s company was an early financial backer of ViSalus and who served on that company’s board, is also on Cura’s board, according to regulatory filings.
Neither Sarnicola nor his colleagues at Select appear to have deep roots in the marijuana market. Nitin Khanna, the company’s former CEO and executive chairman, was Portland’s most prominent technology investor until a 2014 civil suit accused him of rape. Khanna denied the accusation but reached a legal settlement in the case, then shifted to cannabis.
Khanna ran Cura from 2015 until 2018, when an onslaught of social media posts highlighted the past rape allegation. He stepped down as CEO but quietly continued overseeing the company as executive chairman.
Forni, Cura’s current CEO, is the son of a wealthy Oregon hospitality executive. He apprenticed at ViSalus from 2007 to 2009, graduated from the University of Oregon in 2010, then had a role at a succession of startups. Forni joined Select in 2015 as a sales manager, then stayed with the company after its sale to Cura.
Forni and Sarnicola have known each other for years; a social media post shows them drinking together in 2010. Forni’s social media feeds are suffused with years of lavish celebrations, including his extravagant wedding at the Vatican.
Roddy Boyd, founder of the Southern Investigative Reporting Foundation, wrote a 7,000 word investigative report on ViSalus in 2012. He called ViSalus “unambiguously” a pyramid scheme, but said Sarnicola demonstrated charisma, flair and an ability to build enormous enthusiasm among prospective clients.
“Sarnicola’s the guy that can absolutely run a borderline evangelical tent revival,” Boyd said.
Conspicuous consumption was a key to ViSalus’ appeal, according to Boyd.
“It’s like the Puff Daddy generation,” he said. “They really knew how to appeal to youth. They really got status.”
Indeed, Select’s heritage makes it unusual among Oregon cannabis companies, many of whom are mom-and-pop operations suffused in the history and culture of recreational marijuana. If Select is atypical, though, they’re still Oregon’s biggest players in cannabis and by far the most prominent names in the state.
In other fields, Boyd said, ViSalus’ legal tribulations and unorthodox business model might be disqualifying. But he said the recreational marijuana industry hasn’t demonstrated that kind of skepticism and presents a natural opportunity for members of the ViSalus crew to thrive.
“The legal marijuana market is not real hung up on people who have some nicks and scrapes in their background,” Boyd said.