Interview with Steve Kubby

Steve Kubby ran for Governor of California as a Libertarian in 1998, was the runner up for the LP VP nomination in 2000 and 2008, and was a candidate for the party’s presidential nomination in 2008. I worked on that last campaign. Since then, he started a cannabis medicinal company with Libertarian National Committee member and fellow 2008 LP Presidential nomination candidate Mary Ruwart, her husband Ray Carr, and LNC member Lee Wrights. More recently, there was a falling out with some of the financial officers of the company. Their side of the story is here.

-Paulie



From his home earlier today, Cannabis Science, Inc. founder Steve Kubby talked about his most recent foray into the business world. While some would certainly view what he has been through the last couple of weeks as a series of horrible setbacks, Kubby says he has no regrets. He expects the same fortitude which allowed him to triumph over the deadly adrenal cancer doctors predicted would take his life thirty-five years ago to sustain him through his enterprise’s crisis. “The potential to save countless lives is too precious to relinquish,” he says.

Paulie: Can you give me a quick synopsis of what the controversy over the management of Cannabis Science Inc. was about?

Steve: A month ago I was CEO of my own pharmaceutical company. Today, I’m the victim of a hostile corporate takeover which has left that company in the hands of individuals whom I believe are putting quick profits ahead of building a viable company which can bring a valuable product to market. After receiving legal counsel concerning the “appearance of fraud” by CSI board members, I had no choice but to tender my resignation from the company I founded more than a year ago. Within hours of my resignation, CSI Chief Operating Officer Ray Carr, VP of Research & Development Mary Ruwart, and Director of Communications Lee Wrights, also resigned.

P: What was the reaction of other board members to your resignation?

S: Following these departures, CSI filed a libelous SEC 8-K report which alleged improper behavior by the former CEO and failed to include my letter of resignation. An accurate 8-K must, by law, be filed with the Securities and Exchange Commission whenever any major change occurs in the structure of a publicly traded company. I notified CSI of their failure to abide by the SEC regulations, but was ignored. The deliberately deceptive and incomplete 8-K filing is yet another example of the type of apparent SEC rules violations which my staff and I could no longer abide.

P: Several CSI officers have made counter-claims about alleged improprieties that you were involved in with the company. Can you address those?

S: In response to the new CSI regime’s claims of impropriety — the 8-K alleges that a personal loan to me from Carr and Ruwart constituted a violation of my fiduciary duties — I would point out that neither Ruwart nor Carr were associated with CSI when they loaned me the money; that repayment of the loan was personally guaranteed by me, not the company; and that the lenders’ option of transforming their loan into stock involved only my own personal portfolio of shares. None of my actions in any way compromised my ethics nor anyone else’s, nor did they expose or endanger the company in any way. The current directors of CSI are attempting to cover up their own malfeasance by turning an aboveboard personal loan into some sort of nefarious corporate deal. What they allege simply never happened. These kinds of baseless allegations are typical of the goings on which ultimately left me no choice except to dissociate myself from the firm.

P: What was the deciding factor in your leaving the company?

S: The straws that broke the camel’s back, were two attempts by CSI directors to divert investor money to a private, rather than corporate account. In response, I directed the funds into the appropriate corporate account and began to pay the company’s outstanding bills, leading to the battle which resulted in my departure from the company. My obligation to the investors is to see that their money is either properly handled or returned. The first step in achieving that goal has been to segregrate myself and CSI’s honest personnel from the cannibals who are devouring the company’s operating capital. Now that that’s been achieved, we’ll be going to war to protect the shareholder’ interests.

P: What is your reaction to the increase in Cannabis Science stock since you left to 80 cents a share?

S: The explanation is simple. The deal that created the increase in stock
price was closed and signed by me, shortly before my resignation. In
addition, a story and video that included me and mentioned Cannabis
Science, appeared last week in the Wall Street Journal. That is the
only reason that the stock went up after I left.

P: Will you be able to resurrect a new version of the company to bring your product to market?

S: I’m confident in my product and in the core company personnel with whom I’m still working to bring that product to market. Sometimes you have to do what you have to do, I started CSI to help people, to save lives and improve the quality of lives. That’s still my goal, and I don’t plan on stopping until it’s achieved. It’s not in my nature to give up, I don’t know the details right now but I won’t let a little thing like this get me down.

44 thoughts on “Interview with Steve Kubby

  1. Jeremy Young

    I hate to say this because I really like Steve Kubby, but it sounds like at the very least he’s a poor judge of character. Even if we believe his story, which I’m inclined to do, his own campaign manager Richard Cowan is among the malefactors at the company. He introduced this disease into the company through his own most trusted friends and allies. I’d say Kubby really needs to be more cautious in whom he trusts.

  2. Rachel

    I make no attempts to judge what happened or speculate, but I admit that even in his own words it still sounds like they were justified in wanting him out. “In response, I directed the funds into the appropriate corporate account and began to pay the company’s outstanding bills” … perhaps I’m wrong but that strikes me as not the duty of a CEO to do.
    Maybe there was no CFO, or other personnel in charge of finances; but it would seem there was, and it wasn’t him. Bottom line is with a company dealing with sensitive materials such as this one it’s crucial to do everything on the up-and-up because if you look shady, and your product is still only kind of legal… where does that leave you? Whatever the case is I decided to buy the stock based on the actions of the new CEO, before ever having heard anything about the company’s past or Mr. Kubby, and I’m glad I did because I might have been discouraged.

  3. Sam Smith

    High,
    So, the founders call each other crooks, the SEC filing is SNAFU and it’s all about peace and love. May I hear a resounding chorus of “BULLSHIT” from the choir? Egos and money, when they grow out of proportion to reality, this is what happens. May I see an audit? Is this not like ALL the other “high” finance scandals? Can you say “fraud”? Shame it gets in the way of what is really important, like bringing medicine to the people. How much would it cost to buy ALL THE STOCK? I got a big curious over this as you can see.

    Sam

  4. Cory

    All the stock as of when Mr Kerby was running things and seemingly using his business and personal accounts interchangably, 1.02M

  5. Jeremy Young

    Rachel, I’m not entirely sure I agree with you. If you read Kubby’s earlier statement, he felt the CFO was violating federal regulations and was in on the shady deals. Probably he should have formally removed the CFO before taking over his duties, but in an emergency situation where the CFO is incapable of carrying out his duties, it makes perfect sense for the CEO to operate as acting CFO until the crisis is resolved, so long as the board doesn’t step in and remove him. In this case the board did remove him, but I still don’t think he did anything wrong in trying to save the situation.

    The fault, in my view, was in bringing in people like Richard Cowan in the first place.

  6. Samuel Janovici

    Even though Steve Kubby’s says he wants the company to succeed, he understands his comments are poison pills meant to tank the company’s stock and stop it from rallying even higher. The content of his comments were weak tea and unnecessary. The net effect is clear . . . hurt the company.

  7. Robert Thomas

    Cannabis Sciences is a sound company with a great future. It’s one of a handful of companies that is able to access a $113 billion untapped market. Cannabis has become big business.

    Mr. Kubby explanation was sour-grapes and it was an attack on the company he says still supports. Huh?

    I cannot believe he was not aware of the damage he was doing to the value of the company’s stock and to the people who had invested in it. Nice work Mr. Kubby. Going Republican on us? What’s next . . . narcing on friends? Stomping kittens?

  8. paulie Post author

    Thanks to (all) the troll(s) for the IP anonymizers and multiple comments under different names per IP address. Good luck with that.

  9. Rachel

    I see your point Jeremy, and if I were in his position I likely would have done the same thing he did. Assuming of course it was a typical business. I think with a company like this though it would be pressing to do everything by the rules because its already going to have antagonists waiting to catch any screw ups just out of a personal hatred for the product. It is unfortunate that someone had to be made into the bad guy and I’m sure the title of Dr. makes their new CEO more valuable to them. It seems safe to say it could have been handled more civilly by both parties

  10. Thomas L. Knapp

    Why did the 8-K filing by the new regime at CSI omit Kubby’s letter of resignation when the 8-K rules clearly required that it be filed as an exhibit?

    Why has the new regime subsequently ignored (despite having been notified by Kubby) its obligation under the 8-K rules to solicit a written response from Kubby to the allegations in the report and to file that response as an exhibit in an amended report?

    Untangling the facts of this whole thing is certainly difficult, but there’s one reasonable standard to start with: If one side seems not to want all the cards on the table, there’s probably a reason.

  11. Susan Hogarth

    Different Susan, Paul, in case you’re confused. I actually read your article 🙂

  12. Jeremy Young

    Tom, I agree with you that Kubby’s antagonists seem in the wrong here. But you have to admit that your friend effed up big-time here. He is responsible for bringing these people into the company; at least one of them was one of his most trusted friends and associates. He didn’t commit the fraud, but he is indirectly responsible for it because of the people he brought in to run his company. These people weren’t forced on him by outsiders; they were hand-picked by him.

    I appreciate Kubby’s efforts to clear his name, but what I am waiting for is an apology from Kubby to his investors for introducing the cancer that sunk their company. Ordinarily I wouldn’t care, not even being a Libertarian, but I have really liked Kubby from day one because he impressed me as one of the most honest and ethical people in politics. I would argue that honesty and ethics would require him to admit his bad judgment at the same time he’s blaming the problems on others.

    I think if you, Tom, were in his shoes, you would be much more forthcoming in admitting that you erred in bringing unethical people into the company.

  13. Thomas L. Knapp

    Jeremy,

    I don’t think Kubby believes that the company is “sunk.” He obviously intends to fight for its future, or at least for the future of the product, and in doing so to redeem and safeguard the investors’ interests. I wouldn’t bet against him in that fight, either.

    At this point, I’m not sure whether Kubby was too trusting from the beginning, or whether an opportunity to make a quick but dishonest buck turned the heads of previously trustworthy people.

    I do have to reiterate, though, that I’m biased. On one side of this fight is a group of people to whom I would entrust, and in some cases have entrusted, my life or livelihood without hesitation. On the other side are some people whom I barely know, and whom I came to know only through Kubby in the first place.

    That bias aside, the facts I’ve been able to establish so far tend to support the case of the former, rather than the latter, group.

  14. Jeremy Young

    It seems irrelevant to me at what point these guys went bad. The point is that as CEO, the buck stops with Kubby. If his CFO is embezzling money from the company, Kubby bears some responsibility for that.

    This is a man who became CEO of a company, who wanted to become titular head of the Libertarian Party and even President of the United States. I do think he’s in the right, and I still like him very much, but I’d like to see some evidence that he’s reevaluating his own judgment as far as other people’s character goes. He hired this CFO on Cowan’s say-so without doing a full background check. That says something about the way he does business — absolute trust, without verification, in the judgment of his friends. It’s a noble sentiment, but fatal in the worlds of business and politics. If Kubby can’t figure out how to second-guess his friends, then he needs to find someone else to do it for him.

    I’m beginning to think that a Kubby presidency would have been a lot like U.S. Grant’s. “My private secretary says you’re on the up and up? Fine then, go steal all the world’s gold with my blessing.”

  15. Susan Hogarth

    The talk of ’embezzlement’, on both sides, seems a little wild. after all, the company really has very little money at this point, I thought.

  16. Joe

    after reading this and having 2000 shares, it sounds like a soap opera and truthfully if kubby is all about the success of the drug and CSIB, well one would think he would keep the drama under the table and play the backgrounds as positive PR and take along some serious stock options as payment for keeping his mouth shut. How do you get puched out by the board members “unless” your the fraudelant one.
    Man, I want to see the weed business succeeed, is this what happens when hippies get greedy. So new new to capitalism, like a kid in the candy shop with their money.

  17. Samuel Janovici

    I agree with Joe . . . I want to see the weed business succeed.

    I’m a cannabis activist and one of the shareholders in Cannabis Sciences, and I am furious at Steve Kubby for airing his private laundry in public. His poor judgment and petty bickering cost me some good faith money, too.

    There’s a hard and fast rule in our industry . . . we don’t talk about others, EVER. Kubby broke with that tradition and I feel betrayed. Some wrote to say that he was trustworthy, but his actions say otherwise.

    The Wall Street Journal opened the window and shined a light on the cannabis industry and this is how Mr. Kubby wants the world to see us.

    I usually have an open mind, but to change my opinion on this one will take some `splaining.

    Thanks for nothing . . . wanna make this right, Mr. Kubby? Make peace, now. Then, fade away.

  18. Thomas L. Knapp

    Samuel,

    CSI filed an 8-K report accusing Kubby of malfeasance, and portraying him as having been removed when he claims to have in fact resigned. I don’t recall you piping up about “private laundry” then, only when he responded.

  19. paulie Post author

    if kubby is all about the success of the drug and CSIB, well one would think he would keep the drama under the table and play the backgrounds as positive PR and take along some serious stock options as payment for keeping his mouth shut.

    You obviously don’t really know Steve Kubby. If keeping his mouth shut so that he could be rich was his style, his life would have gone a lot differently.

    http://en.wikipedia.org/wiki/Steve_Kubby

    http://www.kubby.com/00-about.html

    How do you get puched out by the board members “unless” your the fraudelant one.

    By having fraudulent people in control of the board, maybe?

  20. Jim Davidson

    I have great respect for Ray Carr, Mary Ruwart, and R. Lee Wrights. Given their solidarity with Kubby, I would be biased in favor of his version of events, as well.

  21. Samuel Janovici

    Mr. Knapp is right, I responded only when Mr. Kubby went negative–that was the whole point. He wasn’t just defending himself, he was in fact airing a public fight, when other people had money on the table. It hurt the industry, the company and the shareholders faith in Cannabis Sciences. As a result the stock continues to drop. No one wins these kinds of pissing contests. A note to his supporters: Beyond personal loyalty, please explain the nature of your support for this man. I’m a shareholder who got burned yesterday. I just want to understand the guy and his motives. Can you guys help me out?

  22. libertariangirl

    Samuel , IPR is largely comprised of LPers and YES , there is a ton of personal loyalty to Steve.

    you might say your in Kubby-land

    beyond personal loyalty w/i the LP , where I come from , the Drug War movement , the man is an Icon and a hero .

    theres probably nothing you could say that would change peoples feelings on him

  23. Samuel Janovici

    Libertariangirl,

    Thanks for the heads-up, but please know i don’t want to change anyone’s opinion of Mr. Kubby. i don’t know the man . . . I’m looking for someone to explain the man’s actions.

    Please understand I am a cannabis activist and we publicly support each other. My only goal is to seek answers.

    Why did he choose this particular time to go after those he claims wronged him? Why do it at a time the public is vested in his company’s stock? Why punish us and the movement he clearly has worked to support?

    Anyone out there wanna answer some of these questions? I’m really asking these questions in good faith.

  24. Joe

    I agree with Sam on his last one….put politics aside and perhaps not tell the world whats going on and keep it staright to business.

    If kubby believes in the “cause” why bash the people apart of it because of what ever reason.

    Seems a bit zealous.

    but you know, I have know I idea, i dont care about his life resume and him running for california governer.

    I care about progression and i care about making sound investments. and after doing some research cbis @.69 per share seemed pretty sold if for a chance at short or long.

    Maybe they all need to reconcile their differences and get back aboard the gravy train instead of protecting political egos.

    I mean when this kubby guy dies: is he going to look back and say, I really stuck it to the cbis guys and 40 years later, fucking cannibis is back to felony status for seeds.

  25. Samuel Janovici

    Thank you Ms. Hogarth for Mr. Kubby’s e-mail address. I will be writing to him today and asking these questions, directly.

    To libertariangirl:
    I like the fact that sometimes the truth is inconvenient and painful.

    Those questions I asked are tough ones. Does anyone else have an opinion they’d like to share?

    Thanks . . .

  26. Susan Hogarth

    @34
    From someone who expresses the idea that the MJ community should not be divisive, asking for third-party opinions on someone else’s motives seems a really bad idea.

  27. Donald R Lake

    Hmmmmmmmmm:

    IPR=Kubbyland? Oh. I thought it was the world according to paulie ……
    and
    29 libertariangirl // Jul 29, 2009 at 1:52 pm
    LPers are KubbyLand , IPR is largely comprised of LP bloggers ……

    and if theses zealous Libs do not want long term back lash from other alternative political types, then they’d better identify them selves and their issues. It is not Libertarian Party Watch [like TPW quickly became, and gone!] it is INDEPENDENT Political Report and we need to save most of our energies to fight the evil Establishment Duopoly and the Dems and GOP!

    Things are much better than TPW and even IPR 2008, but it is still IPR not LPW!

  28. Jeremy Young

    Samuel, I’ll share my own ininformed opinion. You’ve seen me criticize Kubby’s actions quite strongly earlier in this thread. That said, I think his actions in terms of going public with all this are correct, both in terms of his cause and for the health of the investors. Kubby believes the company is in the hands of fraudulent individuals whose stewardship will result in its being dismantled and discredited by the FEC. As such, he’s giving investors a chance to get out now before that outcome comes to pass, as he believes it will. Further, he’s trying to save the cause from going down with the company by dissociating it from the few allegedly fraudulent individuals he believes are running the company.

    I think he bears some responsibility for getting the company into this mess. But if he stayed quiet and kept the stock price stable, as you advise, he’d be guilty of leading investors even further down the primrose path by his silence. You may be unhappy that the stock price has tanked now, but if Kubby’s right it’s going to go down to zero very soon. He’s warning you to get out for your own good.

  29. joe

    nice response jeremy. If hes telling us to get out,lets allpump and dump this thing one more time.

    Great news released FDA approval on the weed cough drops

  30. Jim Davidson

    It seems clear to me that Steve knows a great deal about publicity and marketing. And has worked closely in the past with Tom Knapp who knows an enormous amount on these topics.

    It also seems clear that Steve believes he has been unfairly cheated of his role in the company. The solidarity of his associates Mary Ruwart, Ray Carr, and R. Lee Wrights leaving at the same time strongly reinforces this view. It is also evident from Steve’s comments that he was expecting his resignation to be indicated in the company’s filings, and feels that there is an element of fraud in the company’s failure to file statements properly – if I understand the controversy correctly.

    Although I am not a lawyer, I have been involved in many companies, including ones that have had public offerings, or were refused them. Filing statements are very important. Failure to disclose material facts can be a very bad thing, and lead to civil and even criminal penalties.

    For Steve to fail to disclose material facts, even though he has either resigned or been forced out, or even if he were fired, would be a difficulty for Steve. Given his inability to do so through the company and using its filings as a mechanism, it seems intelligent and perhaps legally essential that he do so through a press release.

    Mary Ruwart is extremely well qualified in matters pharmacology. I think the other people involved are also quite gifted, including Steve. I have direct experience to indicate that Ray Carr is extremely intelligent and talented. I suspect that the stock price has tanked because all these key people left the company, or were forced out depending on whose story you want to buy.

    When you are trying to convince people to buy stock, which is the task of every public company, you have to prove certain things. You have to show that you have a plan to make money, that you have a team competent to implement that plan, and that there is a relationship of trust between those with the money and those with the power to use it to implement the plan.

    When four key people leave the company all at once, that says there may not be a team competent to implement the plan any longer. It also certainly says that the people who were trusted with the money aren’t there, now. So, those who trusted Steve, Ray, Mary, and Lee would likely be selling their stock right at that time.

    Therefore to say “the stock price tanked” and blame it on Steve Kubby is just idiocy. Yes, the stock price tanked, but not because Steve spoke out about the situation. Four key people left the company or were forced out. Of course the stock price tanked.

  31. Thomas L. Knapp

    Jim,

    You write:

    “It is also evident from Steve’s comments that he was expecting his resignation to be indicated in the company’s filings, and feels that there is an element of fraud in the company’s failure to file statements properly – if I understand the controversy correctly.”

    You do indeed appear to understand the controversy correctly.

    Kubby claims to have resigned. The current principals of CSI claim to have fired him.

    If he quit, CSI should, under the SEC’s rules, have included his letter of resignation as an exhibit in the 8-K. They did not.

    Whether he quit or was fired, the SEC’s rules require the company to afford him the opportunity to respond to any allegations in the 8-K and file an amended report including his responses as exhibits. My understanding is that his request to them to follow this rule remains unanswered, and that that’s the main reason for his decision to press his case in public.

    As for me, my role in any and all of this continues to be “personal friend of Steve Kubby” (and Mary Ruwart, Ray Carr and Lee Wrights).

    I own no stock in the company, nor do I owe any fiduciary duty to it. I was offered, but declined, a formal position (Chief Communications Officer or the equivalent) with the company at its birth primarily because I didn’t think my resume was shiny enough to constitute the kind of asset a startup would want to show potential investors.

    I did a little free work helping with the business plan, and when that work became time-consuming, set a low rate and stipulated that I wouldn’t accept payment on it until the company was in better financial shape (that was my requirement, not theirs). I’m owed a small sum for that work, but I’d be hard put at this time to determine who owes me that money and I’m not particularly worried about it.

    I believe in Steve, Mary, Ray and Lee. I believe in the product. The company, I could care less about except as it relates to those people and things.

  32. Steve Kubby

    Running a publicly traded company is a lot like holding a public office. Whether you are a CEO or elected government official, you are subject to specific laws about disclosure and reporting. Once my COO told me that millions of shares had been issued to bogus companies, without my knowledge or consent, my actions were dictated by the law and by the advice of counsel. Remaining silent was never an option.

  33. Samuel Janovici

    I owe a debt of gratitude to Jeremy Young, Jim Davidson, Thomas L. Knapp and Steve Kubby himself for answering my questions. Thank you for taking the time to answer them so well and so thoroughly.

    Our world is fraught with rumors and innuendo. It usually takes a village to dispel them. You’ve done that well.

    Thank you

    Good luck Mr. Kubby. May you find peace and justice . . .

  34. Pingback: Tom Knapp on Cannabis Science, Inc. controversy: ‘Depends on what the meaning of “owns” is’ | Independent Political Report

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